Petra Diamonds Regulatory News (PDL)

Petra Diamonds Ltd - Market Update

PR Newswire

London, March 27

Petra Diamonds Limited

(“Petra”, “the Company” or “the Group”)

Market Update

Petra Diamonds Limited announces the following market update with regards to the impact on the Company of the global COVID-19 pandemic.

Petra’s overriding priority is the health, safety and wellbeing of all its people. The guidance and advice we are providing employees follows World Health Organisation guidelines and is supplemented by local guidance where we operate. We have also established an Executive Committee sub-committee to regularly review and update our advice to employees, establish business continuity planning, and to ensure managerial oversight is effective and properly coordinated.

Operations

South Africa

On Tuesday 23 March the South African Government issued a Directive requiring a 21 day national lockdown, effective midnight Thursday 26 March 2020 to midnight Thursday 16 April 2020, in order to contain the spread of COVID-19 in the country (the “Lockdown Directive”). Subsequently, on Wednesday 25 March 2020 the Department of Mineral Resources and Energy (the “DMRE”) released a statement “unpacking mineral and energy industries’ response in preparation for a nationwide lockdown”. This statement can be found at: https://www.dmr.gov.za/news-room/post/1848

The statement notes that for “some mining operations and processing plants a complete shutdown will not be feasible, as a restart from scratch may be too costly” and further states that “mining operations will be scaled down significantly”.

Petra has notified the DMRE of the measures it has taken to contain the spread of the COVID-19 virus at its operations and that it will scale down operations to operate at a minimum level in order to maintain the underground block caves, in accordance with the DMRE statement.

The scaled back operations will be monitored and managed according to the new procedures put in place to protect the health and safety of all Petra people. These procedures cover employee communication and training, hygiene response, security controls, health monitoring, resilience and contingency plans. It is worth noting that all of Petra’s South African mines are highly mechanised underground operations, with limited human interaction.

Upon completion of the lockdown period, it will be possible to ramp the operations back up to steady state production levels within a relatively short timeframe.

Tanzania

The number of cases of COVID-19 in the country is currently low and the Government has taken fast action to put containment measures in place. The Company’s open-pit Williamson mine, which is in a remote location in the Shinyanga province, remains in full operation but is being managed in strict accordance with the new procedures outlined above.

However, in light of the depressed market environment, the mine’s liquidity position is being closely monitored, as constraints may impact its ability to continue to operate. Discussions with the Government in relation to various issues, including the overdue VAT receivables and the blocked diamond parcel, are ongoing but have been interrupted by the COVID-19 outbreak.

Diamond Sales

Petra’s fifth diamond sale of FY 2020, with tenders in both South Africa and Antwerp, commenced on Thursday 19 March and was due to close on Thursday 26 March. However, sensing the rapid deterioration of market conditions, particularly due to travel restrictions, factory and retail closures, and the spread of COVID-19 in South Africa, the Company brought forward the closure of its South African sale to Monday 23 March.

During this constrained sales period, the Company saw severely depressed and opportunistic bidding for its goods, particularly in the larger size and higher quality, greater value categories. As a result, Petra chose to sell a portion of its South African goods, representing ca. 75% by volume and ca. 50% by value. These goods saw price decreases of ca. 24% on a like-for-like basis in comparison to pricing achieved at the February 2020 sales cycle. The remaining goods were exported to Antwerp and will be offered for sale when market conditions allow.

The Antwerp tender of Tanzanian goods was also brought forward and closed on Tuesday 24 March. The vast majority of the goods were sold, with only a few strategic, higher-value parcels being withheld, and pricing achieved was on a similar level to that in South Africa.

Petra is due to hold two further sales in May and June before the end of the financial year, but the outlook for both sales is highly uncertain and will depend on travel and export conditions at the time, as well as activity levels in the key diamond buying centres, being India, Israel, China and the US.

Liquidity and Capital Structure

As at 31 December 2019, the Group had bank debt facilities undrawn and available of ZAR 1.5 billion (ca. US$107.2 million), in addition to diamond debtors of US$12.8 million and cash at bank of US$53.6 million. Petra is in close contact with its South African lender group, which remains supportive of the Company.

Petra continues to closely monitor and manage its liquidity risk. Cash forecasts are regularly produced and run for different scenarios, which now include the aforementioned potential impact of protracted production shutdowns and uncertainty around diamond sales in the short-term. The impact of weaker diamond prices is partially offset by a weakening South African Rand, currently trading at around ZAR17.45:USD1 compared to an average rate of ZAR14.69:USD1 for the six months to 31 December 2019 (H1 FY 2020).

In light of the above, Petra is in active discussions with its South African lender group, which remains supportive of the Company, in relation to the provision of near-term liquidity.

The Company will also be engaging with the Group's financial stakeholders in relation to the implications of the unprecedented operating and trading environment for its capital structure, including the strategic options open to the Company in relation to the maturity of its US$650 million loan notes in May 2022. For these purposes, the Company has engaged Rothschild & Co and Ashurst LLP as its financial and legal advisers respectively.

Outlook

Given the continued uncertainty around the outlook for control of the COVID-19 in South Africa, FY 2020 production guidance of 3.8 million carats is suspended until the Company is in a better position to quantify the full impact of the lockdown.

Richard Duffy, CEO of Petra Diamonds, commented:

“We are taking all actions necessary to support the measures to limit the outbreak of the COVID-19 in the countries in which we operate and to decrease the threat to our employees, contractors and other local stakeholders. While Petra has been running well operationally, with production ahead of guidance, the scaled down mining operations and sales disruptions will cause a negative impact in the short-term. However, we have the foundations in place to continue to deliver long-term, sustainable operations and we remain committed to protecting their ongoing viability, to the benefit of all our stakeholders.”

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

For further information, please contact:

Petra Diamonds, London Telephone: +44 20 7494 8203

Rothschild & Co

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and a consistent supplier of gem quality rough diamonds to the international market. The Company has a diversified portfolio incorporating interests in three underground producing mines in South Africa (Finsch, Cullinan and Koffiefontein) and one open pit producing mine in Tanzania (Williamson). Petra also conducts a limited exploration programme in Botswana and South Africa.

Petra's strategy is to focus on value rather than volume production by optimising recoveries from its high-quality asset base in order to maximise their efficiency and profitability. The Group has a significant resource base of ca. 250 million carats, which supports the potential for long-life operations.

Petra conducts all operations according to the highest ethical standards and will only operate in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities.

Petra is quoted with a premium listing on the Main Market of the London Stock Exchange under the ticker 'PDL' and is a constituent of the FTSE4Good Index. The Company’s US$650 million loan notes due in 2022 are listed on the Global Exchange market of the Irish Stock Exchange. For more information, visit www.petradiamonds.com.