Petra Diamonds Regulatory News (PDL)

28 Feb 2007 07:02

Petra Diamonds Ld28 February 2007 Petra Diamonds Limited ("Petra", "the Group" or "the Company") Interim Results for the Six Months to 31 December 2006 (unaudited) Highlights to 27 February 2007 • Trading update - for January 2007 Petra is pleased to report that, in line with management expectations, the South African mines recorded a significant uplift in performance as below: (i) a 30% increase in US$ per carat prices received for January 2007 (US$166 per carat) compared to the average for the 6 months to December 2006 (US$127 per carat) (ii) Diamond sales for January of 13,904 carats, up 28% on the average monthly sales for the 6 months to December 2006 (iii) a 9% improvement in grade at Star, mainly due to plant refurbishment, coupled with improved grade control at both Sedibeng and Helam, led to an average grade of 34.0 carats per hundred tonnes ("cpht") for January 2007 compared to an average of 31.1 cpht for the 6 months to December 2006 • The Group - on 27th November 2006, Petra acquired Calibrated Diamonds Investment Holdings (Pty) Limited ("CDIH"), giving the Company the ability to cut and polish (beneficiate) its own production • Angola - large diameter drilling operations at Alto Cuilo continue alongside plant treatment; 73 kimberlites now identified; drill core sent for external specialist analysis has given encouraging microdiamond counts; analysis of drill core continues to give encouraging diamond indicator mineral chemistry ("minchem") results • Botswana - a 600 metre diameter negative gravity anomaly has been revealed by gravity data in the Kukama project area over a previously identified kimberlite proven to be diamondiferous • Sierra Leone - encouraging diamond recoveries from mini samples at the Kono project of 638 diamonds totaling 58.78 carats • South Africa - Petra announces acquisition of Koffiefontein mining and associated assets from De Beers; production from the other South African mines of 71,928 carats for the six months (6 months to 30 June 2006: 86,371 carats) Adonis Pouroulis, Chairman, said; "It has been another formative period for the Company as the acquisition of CDIHhas transformed us into a vertically integrated business. Alongside this keydevelopment, we have continued to make great strides in our exploration effortsas well as significantly boosting our production portfolio through theacquisition of the Koffiefontein mine and the achievement of improvedperformance at our other South African assets. "We believe that the diamond market is heading into a period of major deficit,given the lack of new discoveries, as supplies of diamonds won't keep pace withthe growth in forecast demand. With our diversified asset base of qualityexploration and development projects and producing assets, we believe we are ina very strong position from which to capitalise on a strengthening diamondmarket." Summary of Results (unaudited) 6 months to 6 months to 6 months to 31 December 2006 30 June 2006 31 December 2005 Revenue US$8.2m US$11.1m US$9.7m Production (carats) 71,928 86,371 88,640 Loss before depreciation, amortisation and foreign exchange movements US$3.7m US3.0m US$2.1m Loss for the period US$9.5m US16.9m US$1.9m Loss per share 6.33 cents 11.7 cents 1.40 cents Cash at bank (period end) US$19.2m US$7.0m US$12.2m Chairman's Statement It is with great pleasure that I present the December 2006 interim financialstatements for a period that saw Petra Diamonds further consolidate its positionas a significant player in the diamond mining industry. As I write this, newdiamond companies are being listed and others are advancing plans to do thesame. I believe there to be investor appetite for exposure to the growing worldof diamonds and although the industry has recently attracted some negativepublicity, diamonds are a force for good, as has been shown many times over onthe African continent. As we have grown the business, the Company's attention, effort and strategyremain Africa focused. Petra's operations across the African continent nowemploy over 2,500 people and through our various exploration and mininginitiatives, communities are being sustained, jobs are being created, investmentis going into various infrastructure and social projects and above allsustainable value is being created in the countries in which we operate.Further, through the recent acquisition of Calibrated Diamonds, Petra now hasthe ability to cut and polish its own diamonds, giving the Company the abilityto trace its diamonds from "mine to finger" and guaranteeing the end user aproduct that has been ethically mined, processed and beneficiated. Although the half year under review saw a softening of diamond prices, themarket in early 2007 is seeing prices firming up. The fundamentals of theindustry remain robust as continued demand is set to outpace production supply,with the forecast deficit further exacerbated by the lack of any significant newdiamond discoveries. Petra's flagship exploration project is Alto Cuilo inAngola; the first bulk sampling results are expected shortly and should theresults be in line with our expectations, Alto Cuilo has the potential to be amajor source of diamonds for years to come. Petra's producing mines have also developed during the period, with the capitalexpenditure invested at the Sedibeng and Star mines now seen to be bearingfruit. Results for the month of January 2007 show an increase in the grade, asforecast in the December quarterly statement, and the January tender results sawhigher vales being paid for our production than in any month during the 2006calendar year. These developments, combined with the addition of the recentlyacquired Koffiefontein mine to Petra's production portfolio, puts Petra in aposition to report a significant growth in production and revenues for the 6month period to June 2007. The Company's goal is to achieve 500,000 carats totalproduction per annum by the financial year 2009/10, and the Board is confidentof achieving that goal over the next three years. Results A summary of the trading results for the period is set out below: 6 months to 6 months to 6 months to 31 December 30 June 2006 31 December 2005 2006 US$ US$ US$ Revenue 8,268,611 11,151,607 9,717,150EBITDA on mine - South African operations 583,204 933,825 1,300,241Care and maintenance - Koffiefontein (1,253,926) - -Exploration expenses * (416,303) (1,621,295) (435,100)Administration expenses * (2,184,543) (2,231,564) (2,968,617)Net finance costs (489,730) (128,008) (26,086)Loss before depreciation, amortisation and (3,761,298) (3,047,042) (2,129,562)foreign exchange movementsTaxation 864,681 692,807 427,547Loss for the period ** (9,469,559) (16,915,709) (1,948,747)CAPEX 1,971,552 884,503 3,268,245 * Expenses before depreciation, amortisation, interest and foreign exchange movements. ** Loss after non-cash flow items; unrealised foreign exchange loss of US$1.7m, depreciation and amortisation of US$4.8m EBITDA on-mine was adversely impacted by declining diamond prices during the sixmonths under review, with $484,355 negative impact on revenue compared to pricesachieved during the six months to 30 June 2006. As mentioned earlier, Januarytender results indicated a return to higher prices, and management is confidentthat better prices will be achieved during the following six month period. The loss for the period amounted to US$9,469,559 (6 months to 30 June 2006:US$16,915,709), stated after foreign exchange losses of US$1,747,930 (6 monthsto 30 June 2006: US$10,219,913), amortisation of intangibles of US$1,995,688 (6months to 30 June 2006: US$1,808,526), and depreciation of US$2,829,324 (6months to 30 June 2006: US$2,369,359). Group net cash inflow for the period is stated after taking account of miningdevelopment cash outflows in Sierra Leone of US$1,522,980 (6 months to 30 June2006: US$1,648,838), other capital expenditure for the period of US$1,971,552 (6months to 30 June 2006: US$884,503), CDIH acquisition of US$2,334,665, cashinflows from the US$20 million convertible bond and US$2,075,106 from the issueof new shares. A charge of US$1,995,688 (6 months to 30 June 2006: US$1,808,526) is includedwithin operating expenditure in respect of the amortisation of prospectinglicences held by Sekaka Diamonds (Pty) Limited, the Group's Botswana operatingcompany. IFRS require that the cost of the licences be written off over theirestimated life, which the Board has estimated to be four years. Alto Cuilo - Angola Exploration developments at Alto Cuilo continue to exceed our expectations. Todate, 73 kimberlites have been discovered from 91 drill targets, againconfirming the effectiveness of the exploration programme, where the successratio of kimberlite discoveries stands at 80% of all targets drilled. There arein excess of 100 targets that remain to be drilled, from which we expect thereto be further kimberlite discoveries. As the large diameter drill rig arrived on site, bulk sampling commenced onpre-selected kimberlites according to a ranking system. The purpose ofundertaking these bulk samples is that, after they have been processed, theresults will give a clearer indication of diamond quality and grade. Themicro-diamond and mineral chemistry results (associated with diamond discovery)obtained thus far from the core drilling campaign have been very encouraging.AC16 is currently being processed through a dedicated 10 tonne per hour DenseMedia Separation ("DMS") kimberlite sampling plant and AC63 is being bulksampled and stockpiled awaiting processing. We expect initial results from thebulk sampling campaign in April 2007. The alluvial exploration programme continues alongside the kimberlite programmewith bulk sampling resulting in over 1130 observation test pits and 7 bulksampling trenches being excavated so far. The costs of exploration and associated activities on Alto Cuilo for the sixmonths to 31 December 2006 amounted to US$10.1 million, all such expenditurebeing funded by BHP Billiton in accordance with the Alto Cuilo JV agreement. BHPBilliton's cumulative spend as at 31 December 2006 amounted to US$32.9 million. Kalahari Diamonds - Botswana Petra is the largest holder of diamond exploration licences in Botswana, withapproximately 52,000 km(2) of diamond ground under exploration. This portfolioincludes five kimberlites in the Gope area and sixteen kimberlites in the Kukamaarea. Gravity data in the Kukama project area has revealed a 600 metre diameternegative gravity anomaly located over the Go173 S kimberlite; previous test workover this kimberlite returned a grade of 9.6 cpht from one drill hole, whilstanother kimberlite, Go234 returned a sample grade of 11.9 cpht, also from onedrill hole. Petra will focus on the Kukama and Gope areas this year as they areknown to host diamondiferous pipes. Drilling will also be conducted in the OrapaSouth area. We are nearing completion of our drilling programme in the Gope areaand further news will follow in the near future. Production - South Africa The South African mines recorded revenue of US$8.2 million for the six monthperiod and Petra continues to be South Africa's second largest producer of roughdiamonds by volume after De Beers. Production for the six months was 71,928carats, and the board is confident that with the engineering and productionchanges that are currently being implemented, we are on track for recordproduction, including Koffiefontein, of around 200,000 carats for the full yearto June 2007. The commissioning of the refurbished plant at Star towards the end of theDecember quarter and the construction of the new plant at Sedibeng, expected tobe completed in the quarter to March, are expected to yield improved recoveriesand further enhance cost efficiencies. Koffiefontein In December Petra entered into a conditional agreement with De BeersConsolidated Mines Limited ("De Beers") to acquire the mining and associatedcapital assets ("the Assets") previously used by De Beers in the operation ofthe Koffiefontein diamond mine ("Koffiefontein") in South Africa. The additionof the Koffiefontein mine to Petra's South African portfolio will serve tosignificantly increase production and will also augment revenue by increasingthe average price per carat received; the diamonds are of exceptional qualityand we expect to achieve an average price of US$190 per carat. The mine is wellestablished and we believe there to be at least another 15 years of undergroundmine life. In addition there are in excess of 50 million tonnes of untreatedprimary tailings. The addition of Koffiefontein to the South African portfolioillustrates Petra's ability to operate larger mines and management will activelylook to acquire similar operations. The consideration for the Assets is R81.9 million ($11.61 million), to besettled by Petra assuming De Beers' rehabilitation obligations at Koffiefontein,which amount to R80 million ($11.34 million), plus the payment in cash by BlueDiamond Mines (Petra's operating subsidiary in South Africa) to De Beers of R1.9million ($269,000). Petra plans to produce around 100,000 carats per annum from the mine, with 70%attributable, the balance being allocated to our Koffiefontein Black EconomicEmpowerment partners. Petra has been, with permission from the Department of Minerals and Energy inSouth Africa, maintaining the cave at Koffiefontein since July 2006 and thecosts of this maintenance and drawing the corresponding ore has been expensed inthe period. When production commences at the mine, which is expected to beshortly, and this stockpiled ore is processed through the plant, gross profitwill be enhanced as a significant portion of the mining costs have already beenexpensed as care and maintenance costs (6 months December 2006: US$1,25m). Kono Project - Sierra Leone Petra is very pleased to have delivered on its goal of first diamond recovery atthe Kono project in June 2006. Trenching continues on the various fissuresystems with the objective of establishing the continuity, width and grade ofeach of these deposits. Two bulk sample shafts are down 30 metres and testshafts are being excavated elsewhere on the concession areas. These bulk shaftsallow trial mining to take place thus getting a realistic sense of miningconditions, grade, deposit continuity and costs. Fissure widths of up to 1.7metres have been discovered and work is in progress to find and determine aparticular fissure or set of fissures that could be economic to mine. Mano RiverResources continues to co-fund the project, with Petra being the majority 51%partner. Calibrated Diamonds In November 2006, Petra acquired Calibrated Diamonds Integrated Holdings ("CDIH"), a business focused on the cutting and polishing of rough diamondsutilising a unique process developed by CDIH which allows the company to cutdiamonds to a very high and consistent standard. The deal was significant for Petra as it is not only an avenue for Petra toincrease its revenues but also vertically integrates the company. Thepossibility exists to significantly increase revenues by beneficiating theproduct as by world wide standards around 50% gross value uplift can be achievedby cutting and polishing a stone. The next step will see Petra set up a fullyfledged polishing and cutting business and operate this as a stand alonebusiness. The move is also important as it consistent with Petra's commitment to operatingethically in Africa. By beneficiating our rough diamond production in itscountry of origin, we will be able to eventually bring further employmentopportunities, revenues and taxes directly to those African producer nations, aswell as helping to develop further skills base as part of a more sustainableeconomy. ASX Listing Notice was given during the period that Petra would cease to trade on theAustralian Stock Exchange in March 2007. As less than 10% of Petra's shareholder base is in Australia we felt that due to the size of the company and thecomplexities involved in working with two exchanges, a single listing would bepreferable. Conclusion The Company continues to grow rapidly and the coming six months will see thefirst bulk sample results coming out of Alto Cuilo. Production will increasefrom South Africa as Koffiefontein starts to add its product to the mix.Botswana and Sierra Leone will be aggressively explored with the aim of gettingfurther production onto the table. We also hope to see the establishment ofPetra's first cutting and polishing factory in South Africa. The Company has a strong treasury with nearly US$20 million in the bank andincreasing revenues from operations in South Africa. Underpinning all of theabove is a buoyant diamond market responding to the fundamentals of asupply-demand market. The future for diamonds as an investment looks promising. Adonis Pouroulis, Chairman28 February 2007 For further information, please contact: Cathy Malins / Annabel Leather Telephone: +44 (0) 20 7851 7480Parkgreen Communications, London PETRA DIAMONDS LIMITED CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2006 Notes (Unaudited) (Unaudited) (Audited) 1 July 2006 - 1 July 2005 - 1 July 2005 - 31 December 2006 31 December 2005 30 June 2006 $ $ $ Revenue 8,268,611 9,717,150 20,868,757Cost of Sales (9,831,860) (10,602,922) (23,178,587) Gross (loss) (1,563,249) (885,772) (2,309,830)Exploration expenditure (2,440,798) (1,305,480) (4,924,437)Operating expenditure (5,840,463) (158,956) (12,596,449) Financial income 113,814 252,363 411,107Financial expense (300,784) (278,449) (565,201) Net financing (costs) 6 (489,730) (26,086) (154,094) Loss before tax (10,334,240) (2,376,294) (19,984,810) Income tax 864,681 427,547 1,120,354 Loss for the period (9,469,559) (1,948,747) (18,864,456) Basic and diluted loss per share - pence 7 (6.33) (1.40) (13.11) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSEFOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2006 (Unaudited) (Unaudited) (Audited) 1 July 2006 - 1 July 2005 - 1 July 2005 - 31 December 2006 31 December 2005 30 June 2006 $ $ $ Loss for the period (9,469,559) (1,948,747) (18,864,456) Exchange adjustments on translation of subsidiary and branch undertakings recognised directly in equity 8,283,906 1,791,775 1,561,653 Total recognised income and expenses (1,185,653) (156,972) (17,302,803) PETRA DIAMONDS LIMITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 Notes (Unaudited) (Unaudited) (Audited) 31 December 31 December 30 June 2006 2005 2006 $ $ $ ASSETSProperty, plant and equipment 68,644,181 78,049,279 66,045,627Intangible assets 5 14,308,597 16,227,462 13,105,561Investments - available for sale 1,371,372 1,204,560 1,271,410Investments - other 4,785,697 - 4,785,697Trade and other receivables 200,576 187,349 164,402 Total non-current assets 89,310,423 95,668,650 85,372,697 Inventories 4,653,190 2,513,834 2,197,605Trade and other receivables 4,030,737 2,953,251 2,760,378Cash and cash equivalents 19,215,929 12,166,586 7,019,644 Total current assets 27,899,856 17,633,671 11,977,627 Total assets 117,210,279 113,302,321 97,350,324 EQUITY AND LIABILITIESEquityShare capital 9 29,522,189 25,524,177 27,031,103Share premium account 10 134,654,784 116,341,557 123,189,903Foreign currency translation reserve 10 (5,742,819) 5,678,357 2,541,087Share based payment reserve 10 1,196,715 787,579 972,962Other reserve 10 4,003,682 - -Accumulated loss 10 (91,078,226) (62,277,053) (81,608,667) Total equity 72,556,325 86,054,617 72,126,388 LiabilitiesInterest-bearing loans and borrowings 3,115,295 6,061,774 2,914,960Convertible bond 8 16,299,078 - -Trade and other payables 2,021,556 816,231 867,823Provisions 1,824,427 1,871,012 1,697,756Deferred tax liabilities 9,713,898 12,073,847 9,932,634 Total non-current liabilities 32,974,254 20,822,864 15,413,173 Interest-bearing loans and borrowings 3,264,394 911,152 1,149,646Trade and other payables 6,560,671 4,185,058 6,658,735Provisions 1,854,635 1,328,630 2,002,382 Total current liabilities 11,679,700 6,424,840 9,810,763 Total liabilities 44,653,954 27,247,704 25,223,936 Total equity and liabilities 117,210,279 113,302,321 97,350,324 PETRA DIAMONDS LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2006 Notes (Unaudited) (Unaudited) (Audited) 1 July 2006- 1 July 2005- 1 July 2005 - 31 December 2006 31 December 2005 30 June 2006 $ $ $ Loss after taxation for the period (9,469,559) (1,948,747) (18,864,456)Depreciation of property plant and equipment 28,807 538,120 35,687- explorationDepreciation of property plant and equipment 2,784,064 2,745,547 5,630,717- miningDepreciation of property plant and equipment 16,453 18,265 40,573- otherAmortisation of intangible assets 5 1,995,688 1,023,847 2,832,355Loss/(Profit) on sale of property plant and - (5,828) 26,717equipmentInterest received (113,814) (252,363) (411,107)Interest paid 300,784 278,449 565,201Deemed interest paid - Convertible bond 302,760 - -Foreign exchange (gain)/loss 1,747,930 (4,105,133) 6,114,780Share based payment provision 223,753 241,909 -Present value adjustment on rehabilitation 73,857 66,555 140,783provisionOperating loss before working capital changes (2,109,277) (1,399,379) (3,888,750)Decrease/(increase) in trade and other (1,334,699) (176,687) 140,515receivables(Decrease) / increase in trade and other 1,294,367 (2,588,474) (3,604,742)payables(Increase) in inventories (2,801,123) (1,216,480) (792,440)Cash utilised in operations (4,950,732) (5,381,020) (8,145,417)Interest paid (300,784) (278,449) (565,201)Taxation movement (864,681) (427,547) (1,120,354)Net cash utilised by operating activities (6,116,197) (6,087,018) (9,830,972)Cash flows from investing activitiesProceeds from sale of property, plant and - 56,287 41,447equipmentAcquisition of subsidiary net of cash 4 (2,334,665) 5,560,464 5,560,464acquiredInterest received 113,814 252,363 411,107Increase in investments (99,960) (1,271,410) (1,271,410)Acquisition of property, plant and equipment (1,971,552) (3,268,245) (4,152,748)Development expenditure (1,522,980) (784,432) (4,069,863)Net cash from investing activities (5,815,343) 545,027 (3,481,003) Cash flows from financing activitiesNet proceeds from the issue of share capital 2,075,106 - 469,404Increase/(decrease) in long term borrowings 22,293,600 (9,781,066) (7,605,319)Net cash from financing activities 24,368,706 (9,781,066) (7,135,915) Net increase/(decrease) in cash and cash 12,437,166 (15,323,057) (20,477,890)equivalentsCash and cash equivalents at beginning of the 7,019,644 27,591,394 27,591,394periodEffect of exchange rate fluctuations on cash (240,881) (101,751) (123,860)heldCash and cash equivalents at end of the 19,215,929 12,166,586 7,019,644period PETRA DIAMONDS LIMITED NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2006 1. ACCOUNTING POLICIES The interim results, which are unaudited, have been prepared in accordance withInternational Financial Reporting Standards (IFRS) adopted by the InternationalAccounting Standards Board (IASB). The interim financial statements have beenprepared in accordance with the requirements of International AccountingStandard 34. This interim report does not include all the notes of the typenormally included in an annual financial report. Accordingly, this report is tobe read in conjunction with the Annual Report for the year ended 30 June 2006and any public announcements made by the Company during the interim reportingperiod. The unaudited interim financial statements for the six months ended 31 December2006 do not constitute statutory accounts and have been drawn up usingaccounting policies and presentation consistent with those applied in theaudited accounts for the year ended 30 June 2006 as adjusted for the adoption ofany new IFRS's which are applicable to the group for the year ended 30 June2007. The financial information for the year ended 30 June 2006 has been extractedfrom the statutory accounts for that period. The auditors report for the yearended 30 June 2006 was unqualified. The financial information for the 6 months ended 31 December 2005 has beenextracted from the interim results released to 31 December 2005 after theadjustment for the adoption of IFRS 2 and adopting the US Dollar as thefunctional currency. The interim results to 31 December 2005 were translated ata rate of US$1.72 to £1 for balance sheet items and average rate of US$1.76 to£1 for income statement items. 2. DIVIDENDS No dividends were proposed or paid during the period. 3. SEGMENTAL INFORMATION The Group comprises the following business segments: Mining - extraction and sale of rough diamonds from mining operations in SouthAfrica. Exploration - exploration operations carried out in Angola, Sierra Leone,Botswana and South Africa. Beneficiation - cutting and polishing of rough diamonds. Business segments Mining Exploration Beneficiation Consolidated 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 31 December 31 December 31 December 31 December 2006 2006 2006 2006 $ $ $ $Revenue from external customers 8,268,611 - - 8,268,611Gross loss (1,563,249) - - (1,563,249)Segment result (3,335,440) (6,424,202) (84,868) (9,844,510)Net financing income (447,074) (42,656) - (489,730)Income tax 864,681 - - 864,681Loss for the period (2,917,833) (6,466,858) (84,868) (9,469,559) Business segments Mining Exploration Beneficiation Consolidated 1 July 2005 - 1 July 2005 - 1 July 2005 - 1 July 2005 - 31 December 31 December 31 December 31 December 2005 2005 2005 2005 $ $ $ $Revenue from external customers 9,717,150 - - 9,717,150Gross loss (885,772) - - (885,772)Segment result 511,117 (2,861,325) - (2,350,208)Net financing income/(cost) (183,964) 157,878 - (26,086)Income tax 427,547 - - 427,547Loss for the period 754,700 (2,703,447) - (1,948,747) Business segments Mining Exploration Beneficiation Consolidated 1 July 2005 - 1 July 2005 - 1 July 2005 - 1 July 2005 - 30 June 30 June 30 June 30 June 2006 2006 2006 2006 $ $ $ $Revenue from external customers 20,868,757 - - 20,868,757Gross loss (2,309,829) - - (2,309,829)Segment result (4,862,172) (14,968,544) - (19,830,716)Net financing income/(cost) (1,178,884) 1,024,790 - (154,094)Income tax 1,120,354 - - 1,120,354Loss for the period (4,920,702) (13,943,754) - (18,864,456) 4. ACQUISITION OF SUBSIDIARY On 27 November 2006, the Company acquired the issued share capital in CalibratedDiamonds Investment Holdings (Pty) Limited ("CDIH"), for $2,334,665, satisfiedby a cash payment. CDIH is focused on the cutting and polishing('beneficiation') of rough diamonds utilising a unique process developed by theCDIH Group, which enables CDIH to produce polished diamonds of a very high andconsistent standard. In the one month to 31 December 2006, CDIH made a loss,before depreciation and amortisation, of $81,393. If the acquisition hadoccurred on 1 July 2006, the Group's loss for the period ending 31 December 2006would have increased by $551,960. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. CDIH's net assets at acquisition date: Book Values Fair value Carrying Values Adjustments $ $ $Consolidated fair value of net assets of entityacquired:-Intellectual property 362,689 2,447,300 2,809,989Plant and equipment 283,985 283,985Cash assets 9,185 9,185Receivables 30,446 30,446Inventory 345,537 345,537Accruals and payables (62,079) (62,079)Non interest bearing non-current liabilities (1,082,398) (1,082,398)Consideration settlement satisfied in cash (112,635) 2,447,300 2,334,665The fair value adjustment of $2,447,300 arose as a result of the premium attributable to theIntellectual Property purchased from Calibrated Diamonds Investment Holdings (Pty) Limited. Theallocation of the premium to intellectual property is deemed to be final. 5. INTANGIBLE ASSETS Goodwill Mineral Intellectual Prospecting Total rights Property licences $ $ $ $ $CostAt 1 July 2006 8,671,552 152,916 - 15,927,538 24,752,006Transfer to property plant - - - - -and equipmentExchange differences - - - 351,655 351,655Acquisition by business - - 2,809,989 - 2,809,989combination At 31 December 2006 8,671,552 152,916 2,809,989 16,279,193 27,913,650AmortisationAt 1 July 2006 (8,671,552) (152,916) - (2,821,977) (11,646,445)Exchange differences - - - 37,080 37,080Provided in the period - - (1,995,688) (1,995,688) -At 31 December 2006 (8,671,552) (152,916) - (4,780,585) (13,605,053)Net book amount 31 December - - 2,809,989 11,498,608 14,308,5972006Net book amount 30 June 2006 - - 13,105,561 13,105,561 - Goodwill Mineral Intellectual Prospecting Pre-production Total rights Property licences expenditure $ $ $ $ $ $CostAt 1 July 2005 - - - - 335,947 335,947Transfer to property - - - - (335,947) (335,947)plant and equipmentExchange differences - - - (368,949) - (368,949)Acquisition by business - - - 17,620,258 - 17,620,258combinationAt 31 December 2005 - - - 17,251,309 - 17,251,309Amortisation -At 1 July 2005 - - - - - -Exchange differences - - - - - -Provided in the period - - (1,023,847) - (1,023,847) -At 31 December 2005 - - - (1,023,847) - (1,023,847)Net book amount 31 - - - 16,227,462 - 16,227,462December 2005Net book amount 30 June - - - 335,947 335,9472005 - 1 July 2006 - 1 July 2005 - 1 July 2005 31 December 31 December - 30 June 2006 2005 2006 $ $ $6. NET FINANCING COSTSOn bank loans and overdrafts (263,795) (190,915) (412,485)On convertible bond (302,760) - -Other debt finance costs (36,989) (87,534) (152,716)Financial expense (603,544) (278,449) (565,201)Interest received 113,814 252,363 411,107 (489,730) (26,086) (154,094) 1 July 2006 - 1 July 2005 - 1 July 2005 - 31 December 31 December 30 June 2006 2005 2006 $ $ $7. LOSS PER SHARE Loss for the period (9,469,559) (1,948,747) (18,864,456) Shares Shares SharesBasic weighted average number of ordinary shares in 149,679,152 139,565,621 143,916,416issue Cents Cents CentsBasic loss per share - pence (6.33) (1.40) (13.11)Due to the Group's loss for the period, the dilutedloss per share is the same as the basic loss pershare. 8. CONVERTIBLE NOTES AND BOND On 19 September 2006 the Company issued a US$20 million unsecured interest freeconvertible bond ("the Convertible").The Convertible is convertible at anexercise price of 130 pence per Petra share. If not converted, the Convertibleis repayable in full on 18 September 2009. On 29 September 2006 the Company drewdown on the Convertible. The Convertible is exercisable at the election of theholder. 31 December 31 December 2006 2005 $ $Movements in convertible notes and bondBalance at beginning of period - 2,206,678Issue of convertible bond 20,000,000 -Equity portion (4,003,682) -Interest amortised for the period 302,760 -Exchange differences - (36,953)Redeemed during the period - (1,273,110)Converted to ordinary Shares - (896,615)Balance at the end of period 16,299,078 - 9. ISSUED CAPITAL Number of 31 December Number of shares 31 December shares 2006 2005 $ $ Authorised - ordinary shares of 10p eachAs at 31 December 2005 and 31 200,000,000 35,982,000 200,000,000 35,982,000December 2006Issued and fully paidAt 1 July 148,825,098 27,031,103 130,949,456 23,500,190Allotments during the period 1,867,509 2,491,086 16,365,939 1,840,179Conversion of convertible notes - - 1,011,993 183,808At 31 December 150,692,607 29,522,189 148,327,388 25,524,177 10. RESERVES Share premium Foreign currency Share based Other Accumulated account translation payment reserve reserve loss reserve $ $ $ $ $6 Month period ending 31 December2005:At 1 July 2005 101,775,127 4,102,740 354,670 - (62,550,955)Implementation of IFRS 2 - - 197,409 - (197,409)Restated balance at 1 July 2005 101,775,127 4,102,740 552,079 - (62,748,364)Loss for the period - - - - (1,948,747)Equity based share options - - 241,909 - -Exchange differences - adoption of (4,695,321) (216,158) (6,409) - 2,420,058US$ reporting currencyExchange differences - 1,791,775 - - -Premium allotments during the year 18,600,255 - - - -Share issue costs (56,238) - - - -Convertible notes issued 717,734 - - - -At 31 December 2005 116,341,557 5,678,357 787,579 - (62,277,053) 6 Month period ending 31 December2006:At 1 July 2006 123,189,903 2,541,087 972,962 - (81,608,667)Loss for the period - - - - (9,469,559)Equity portion of convertible bond - - - 4,003,682 -Equity based share options - - 223,753 - -Exchange differences 9,685,360 (8,283,906) - - -Premium allotments during the year 1,792,182 - - - -Share issue costs (12,661) - - - -At 31 December 2006 134,654,784 (5,742,819) 1,196,715 4,003,682 (91,078,226) 11. POST-BALANCE SHEET EVENTS Koffiefontein The South African Competition Commission has approved the acquisition of theassets associated with Koffiefontein diamond mine ('Koffiefontein') by theCompany's wholly owned subsidiary, Blue Diamond Mines (Pty) Limited ('BDM'),from De Beers Consolidated Mines Limited ('De Beers'). The approval was one ofthe conditions precedent for completion of the acquisition. 12. CONTINGENT LIABILITIES Acquisition of CDIH As part of the CDIH acquisition a deferred consideration is payable shouldagreed production threshold levels be achieved using the CDIH cuttingtechnology. The deferred consideration is triggered in four stages, when CDIH cuts roughinput of four threshold levels, being 2,500, 5,000, 7,500 and 10,000 carats permonth, for a consecutive period of two months in each case and will be settledby; (i) the issue of warrants over 750,000 Petra shares per threshold level at anexercise price of 114.5 pence per share (the closing mid market price on 2October 2006, the day prior to the signing of the heads for the transaction)(subject to the approval of the granting of such warrants by the South AfricanReserve Bank), or at Petra's election (or if Reserve Bank approval is notreceived), by way of a cash amount equivalent to the notional gain in the valueof the warrants had they been granted; and (ii) the payment of an amount based on the EBITDA of CDIH. This amount will becalculated as a three times multiple of 28.36% of the EBITDA of CDIH when eachof the above threshold levels is met, less any such EBITDA payments already madein respect of meeting earlier thresholds. This information is provided by RNS The company news service from the London Stock Exchange