Petra Diamonds Regulatory News (PDL)

Petra Diamonds Ltd - Market Update

PR Newswire

London, April 30

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

Petra Diamonds Limited

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

Market Update

Further to the announcements on 27 March and 9 April 2020, Petra Diamonds Limited announces an additional market update with regards to the impact on the Company of the global COVID-19 pandemic.

Petra remains focused on taking all actions necessary to support the measures to limit the outbreak of COVID-19 in the countries in which the Company operates and to decrease the threat to our employees, contractors and other local stakeholders. 

The Company is also providing a further update in relation to liquidity, its capital structure and its discussions with relevant financial stakeholders.

Operations

South Africa

On 16 April 2020 the Minister of Minerals and Energy in South Africa announced that mining companies that have been restricted to care and maintenance or scaled down activities are now able to ramp up to a 50% labour capacity during the period of the nationwide lockdown. All of the Company’s South African operations have now ramped up to this level. In addition, on 23 April 2020, President Ramaphosa announced a phased, risk-based approach to lifting restrictions that would commence today, 1 May 2020 – the address to the nation can be accessed here: https://www.gov.za/speeches/president-cyril-ramaphosa-south-africas-response-coronavirus-covid-19-pandemic-23-apr-2020. Details on the impact of this on the Company are still being discussed with the Department of Mineral Resources and Energy (“DMRE”).

Prior to ramping up production, companies were required to demonstrate that they have Standard Operating Procedures (“SOPs”) in place that comply with the Mineral Council South Africa’s COVID-19 guidelines. In addition, the DMRE has applied a number of conditions to the increase in capacity, relating to health screening and testing, the provision of quarantine facilities for employees who have tested positive for COVID-19, as well as arrangements for transporting employees from their homes to their respective areas of operations. These conditions and the announcement referenced above can be found on the DMRE website: https://www.dmr.gov.za/news-room/post/1853/remarks-by-the-minister-mr-gwede-mantashe-on-the-amended-regulations-16-april-2020.

Prior to ramping up, Petra therefore adopted SOPs and measures that are in compliance with both the directive and the conditions referred to above, in consultation with the representative labour unions and mine-based DMRE officials.

Tanzania

As announced in the Market Update on 9 April 2020, the Williamson mine has been placed on care and maintenance, with only essential services being carried out in order to protect the mine’s assets and resources.

Group Production Guidance

FY 2020 production guidance of 3.8 million carats remains suspended until the Company is in a better position to quantify the full impact of this ongoing period of reduced production capacity.

Management Remuneration Cuts to fund Petra Hardship Fund

In support of President Ramaphosa’s request for senior executives to follow his lead in surrendering a portion of their income to assist those in need during the COVID-19 crisis, it has been agreed that over the next three months (being April to June 2020), the salaries of the Company’s Chief Executive and Finance Director will be reduced by one third, the salaries of the Company’s Non-Executive Directors and other members of the Executive Committee will be reduced by 25%, and senior managers reporting to the Executive Committee members (including the mine Operations Committees) can also participate in this initiative with a reduction of up to 20% of their salaries, at their discretion.

The funds raised from the salary reductions will be utilised for the Petra Hardship Fund, which has been newly established to provide targeted assistance to distressed communities and qualifying employees to mitigate the impact of COVID-19. A committee has been established to oversee the management and disbursement of these funds, which will be awarded on the basis of greatest need.

Liquidity and Capital Structure

As noted in its previous market updates on 27 March 2020 and 9 April 2020, the Company has been in discussions with its South African lender group (being Absa Bank Limited (acting through its Corporate and Investment Banking division), FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited) in relation to the likelihood that it will need to draw on its ZAR1 billion revolving credit facility (“RCF”) in order to manage near-term liquidity risks arising from the unprecedented operating and trading environment.

Petra's South African lender group remains supportive and has confirmed that, in principle and subject to certain conditions (the “RCF Drawdown Conditions”), up to ZAR400 million of the RCF will remain available for these purposes on a committed basis. These RCF Drawdown Conditions are likely to include a restriction on the Group making interest payments on the Company's outstanding US$650 million 7.25% Senior Secured Second Lien Notes due 2022 (the “Notes”) and the deferral of the May 2020 and November 2020 capital repayments on the outstanding bank financing of its Black Economic Empowerment partners (the “BEE Facilities”). The maturity of the RCF and the BEE Facilities is also likely to be reset to 31 July 2021 (from 20 October 2021 and 20 November 2021 respectively).

The Notes require interest payments, payable semi-annually, on 1 May and 1 November of each year. Under the terms of the indenture governing the Notes, it is an event of default if the Company defaults in any payment of interest when such payment becomes due and payable and such default continues beyond the allotted grace period of 30 days. Consequently, if the Company fails to make the required interest payment on or before 30 May 2020, then an event of default will arise under the Note indenture and, among other things, the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare the Notes to be immediately due and payable in the principal amount of all the Notes then outstanding, plus accrued and unpaid interest to the date of acceleration.

The Company has been informed that an ad-hoc group of holders of the Notes, who together hold more than 50% of the outstanding aggregate principal amount of the Notes, has retained Houlihan Lokey EMEA LLP as financial adviser and White & Case LLP as legal adviser (the “Holder Advisers”).

Currently, the Company has sufficient cash available to make the interest payment on the Notes that is due today and the interest and capital payments on the BEE Facilities but would prefer to preserve liquidity for the business in the short term, especially given the unprecedented operating and trading environment as a result of COVID-19. Given the desire to preserve liquidity and the need to draw on the RCF (and the corresponding need to satisfy the RCF Drawdown Conditions), the Company has decided not to make the interest payment due on the Notes today and instead to utilise the 30-day grace period provided for under the Note indenture to continue active discussions with the Holder Advisers, and the South African lender group, to agree a forbearance agreement in relation to the May coupon and to finalise and document the RCF Drawdown Conditions.

The Company has also submitted a formal request to the South African BEE lender group (being Absa Corporate and Investment Banking, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Ninety One SA Proprietary Limited (acting as agent for and on behalf of its clients), (previously known as Investec Asset Management Proprietary Limited) to reschedule the capital payment under the BEE Facilities which falls due 20 May 2020. The Company has the support of its BEE partners, Kago Diamonds (Pty) Ltd and the trustees of its employee trust (the Itumeleng Petra Diamonds Employee Trust), for this request and it is expected to be approved as part of the RCF Drawdown Conditions.

Discussions with the South African lender group and the Holder Advisers are progressing well and the Board is confident that, subject to the agreement of definitive legal documents, the Company will be able to manage its near-term liquidity risks while continuing discussions with various stakeholders regarding strategic alternatives to improve the Company's long-term capital structure.

Further updates in relation to the outcome of discussions with the Group's South African lender group, the Holder Advisers and the Group's wider engagement with financial stakeholders will be provided in due course.

Richard Duffy, Chief Executive of Petra Diamonds, commented:

“Our overriding priority remains the health, safety and wellbeing of our people, and we are therefore following all relevant guidelines to ensure that we can minimise the risk to our operations and support the control of the spread of COVID-19 in our countries of operation. We are also very mindful of the huge economic toll that this pandemic will place upon our countries and local stakeholders. The reduction in management salaries provides the basis for our newly established Petra Hardship Fund, which will contribute to addressing the needs of the most distressed amongst our employees and the wider communities.

“We are also addressing the capital structure of the Group, which is necessary in order to provide a stable long-term foundation for the business, and are pleased to be having constructive discussions with both our South African lender group and the advisers to the ad-hoc group of bondholders, who represent over 50% of the Company’s US$650 million Notes by value. We will provide further information to the market on these discussions and our strategic options with regards to capitalisation of the business in due course.”

For further information, please contact:

Petra Diamonds, London Telephone: +44 20 7494 8203

Cathy Malins investorrelations@petradiamonds.com

Marianna Bowes Des Kilalea

Rothschild & Co

Giles Douglas giles.douglas@rothschildandco.com

Glen Cronin glen.cronin@rothschildandco.com

Mahir Quraishi mahir.quraishi@rothschildandco.com

The information contained within this announcement is considered by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of the Company is Jacques Breytenbach, Finance Director.

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.

Important Notice

This announcement contains statements about Petra that are or may be forward looking statements. All statements other than statements of historical facts included in this announcement may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "goals", "should", "would", "could", "continue", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "hopes", "projects" or words or terms of similar substance or the negative thereof, are forward looking statements.

Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. Petra disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law or regulation.

N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Petra and no one else in connection with the contents of this announcement and will not be responsible to anyone other than Petra for providing the protections offered to clients of Rothschild & Co nor for providing advice in relation to the subject matter of this announcement or any other matters referred to in this announcement.