Good afternoon, and welcome to the Petra Diamonds Limited investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated in the right-hand corner of your screen. Just simply type in your questions and press Send. The company may not be in a position to answer every question it receives during the meeting itself, however, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Richard Duffy. Good afternoon to you, sir.
Hello, everybody, and thank you for joining us today for a discussion on our first quarter operating update for financial year 2025, as well as the final sales results for our tender one and two cycles. I have with me Johan Snyman, CFO, who will take you through the financials. After taking you through this announcement, we'll open up for Q&A. This will be at the end of the presentation. If we could move to the next slide, please. I will start with safety, and as you can see, we had a regrettable increase in lost time injuries during the period, resulting in our lost time injury frequency rate increasing to 0.28 from 0.13 in the last quarter of financial year 2024, which is unacceptable.
Safety is our number one priority, and we continue to focus on delivering a zero-harm workplace. We have reviewed our practices and implemented a number of behavior-based interventions aimed at improving our health and safety performance. Turning to our operations, in terms of production, we saw a 7% increase from 637,000 carats in the previous quarter to 680,000 carats this quarter, with Cullinan Mine continuing to perform well with higher grades, as well as Williamson delivering higher tonnes and grade improvements. Finsch continues to transition from a continuous to a two-shift operation, with tonnes increasing 7% and run-of-mine grades declining 14% due to mining in the remaining areas of the sublevel cave. We expect the grades to improve as a result of enhanced grade control and a higher proportion of less diluted ore from 78 Level Phase II.
It is worth noting that we have completed the sale of Koffiefontein to Starg ems Group, which will enable economic activity to continue under new ownership. As a result, Petra will avoid closure-related costs of between $15 million-$18 million. I would like to take this opportunity to extend my thanks to all employees, community members, and regulatory bodies for their support, and I wish the new owners every success going forward. Turning to the next slide, I will start with our tender results. As per our previous announcements, we have the ability to respond flexibly to the market, which we exercised in postponing the sale of the majority of our South African goods from tender one in FY 2025, which was initially scheduled for end August, early September to October, to coincide with our tender two.
We also chose to withdraw around 88,000 carats of brown goods, valued at around $3 million, given subdued demand for this specific category. We continue to see some weakness in the rough diamond market, but we're able to offset this through our product mix. Overall, average prices increased 13% compared to the previous tender, with product mix contributing 22%, partially offset by a 9% decrease in like-for-like prices. Moving to the next slide.
We saw some interesting and unique stones in the mix, with an 18.85 carat blue diamond of exceptional quality in terms of color and clarity from the Cullinan Mine, which we sold in quarter one for $8.5 million into a partnership agreement, and a top light brown 405 carat diamond of exceptional clarity, also from Cullinan Mine, that was sold for $4.7 million. Product mix movements partly benefited from the withdrawal of the circa 88,000 carats of brown goods from the Cullinan Mine, as mentioned earlier. Excluding these, Cullinan Mine's average price for the quarter would have been around a $123 a carat, rather than a $146 a carat, as we've reported for tenders one and two.
Despite the continued lower pricing, we are retaining our pricing assumptions for financial year 2025, provided on the Investor Day in June. With the major players limiting supply in the run-up to Diwali, Thanksgiving, and Christmas, we continue to expect some improvement in pricing next calendar year, supported by provenance becoming increasingly important with customers. Given our product mix, we are well positioned to benefit from this recovery. I will now hand over to Johan, who will run through some of the key financial metrics. Johan?
Thank you, Richard. Revenue amounted to $23 million, consisting of $8.5 million for the 18.85-carat blue diamond at Cullinan Mine, and $14 million for Williamson sales. The deferral of our quarter one sales to quarter two is reflected in the revenue decline of $89 million compared to the preceding quarter. The deferral also increased the consolidated net debt to $285 million as of September 30. During the quarter, a $48 million drawdown was made under the $101 million revolving credit facility, which will be reduced once the proceeds from the recently closed tenders are received.
We continued with the open market repurchase of our 2026 loan notes, cancelling a further $8 million during the quarter, bringing the total of second lien notes canceled to $13 million as at 30 September. We continue to explore options to further reduce the outstanding loan notes through the open market repurchase program, and are currently focused on a pathway to refinance the second lien notes ahead of their maturity in March 2026. Cash at bank, including restricted cash balances, was $13 million at the end of the quarter. I'll now hand back to Richard for closing remarks.
Thanks, Johan. If we could move to the next slide. In closing, I would like to provide a reminder of the resilience we are building into our business. We continue our focus on improving our safety performance and reversing the recent uptick in LTIs and the lost time injury frequency rate that I referred to at the start of the presentation. With Cullinan Mine and Williamson performing well, our focus at Finsch is on optimizing operations following the rebasing to 2.2 million tons per annum, with run-of-mine grades expected to recover as a result of enhanced grade control measures and a higher proportion of less diluted ore from 78 level phase two.
Notwithstanding some ongoing market weakness, we continue to believe market fundamentals will be supportive in the medium to longer term, owing to the scarcity and uniqueness of natural diamonds against the backdrop of an improving global economy, with interest and inflation rates on a downward trajectory. Provenance continues to be an increasing focus for our clients, and Petra remains well positioned to benefit from this trend as we roll out our traceability technology through to the end of the calendar year. In building greater business resilience, we have rebased costs by $44 million in FY 2025, as we have reported previously, and we are undertaking a review of incremental cash generation opportunities in light of the subdued market and in response to a recent strengthening of the rand.
As Johan mentioned, open market purchases of our 2026 second lien notes continues, with $13 million canceled as at the end of September of this year. Our engagement with lending banks in South Africa is ongoing as we continue to consider options to refinance our loan notes ahead of maturity in March 2026. Finally, our guidance, as shared at our Investor Day, remains unchanged, and we continue to target net cash generation for the full year FY 2025. That concludes our presentation, and we'll now hand back for Q&A.
Richard, Johan, thank you very much for the presentation. What I'll do is I'll just bring up your cameras for the Q&A now. Ladies and gentlemen, please do continue to submit your questions. You can do that just by using the Q&A tab, which is situated on the top right-hand corner of your screen. But just while the company take a few moments to read the questions that have been submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you can see, we have received questions throughout today's presentation, and Patrick, at this point, if I could hand over to you to read out those questions, that'd be great, and then I'll pick up from you at the end.
Thank you, moderator. The first questions are pre-submitted ones. I'll read those now. Is Petra a viable company with a viable future? If there is doubt about it as a going concern, should Petra merge with another company or possibly wind up?
It's Richard. I think, with reference to our Investor Day back in June, I think we set out a view of the business, which certainly shows it to be a viable company with world-class long-life assets. So we certainly see Petra as being viable. You would have seen that we also released our annual report, and there's a great amount of detail in that annual report around our going concern.
I would refer you to the annual report if you have any questions in that regard, but the short answer is, we're both viable in the long term, and we don't have any going concern issues. Highlighting, of course, that we do have the 2026 loan notes maturing in March 2026, which we are currently looking to refinance.
Thanks, Richard. Another pre-submitted question: Some companies, such as Gem Diamonds, report each diamond mine that is above a certain number of carats, in their case, usually a hundred carats. Can Petra do this kind of regular reporting please, so shareholders can be kept up to date?
Thanks. Yeah. In our case, what we do is we report on the back of each of our sales, and we typically have seven in a year, and we provide a fair amount of detail, as we've just done today, around some of the higher value stones. In addition to that, we have set ourselves a threshold of $15 million for what we refer to as exceptional diamonds, and should we recover a diamond that is valued at $15 million or higher, we would put out an RNS or an announcement detailing that. So we provide regular updates on the diamonds we sell through our seven tender sales a year. And then if we do recover an exceptional diamond, which would be over $15 million, then we would highlight that at the time of recovering that stone.
Thanks, Richard. A somewhat related question. Cullinan Mine's production benefited from the sale of two high-value diamonds. Can Petra expect more high-value stones or product mix improvements to boost profitability soon?
Yeah, so one of the features of Cullinan Mine, which makes it such an attractive asset, is it does produce high-value stones from time to time. And it's difficult for us to predict exactly when these higher value stones are produced, because we track what we call large stone frequency distribution. So we know we should recover X number of larger stones, you know, as part of the product mix, but it's very hard to be able to determine exactly when you recover specific high-value stones. So the short answer is that we would expect Cullinan to continue to produce high-value stones. Unfortunately, we can't give you any particular insight into the exact timing of that.
But if you go back and look at Cullinan, you know, over the last few years, you will see that there is a regular discovery of higher value stones, whether they're larger white or top brown stones, like the four or five carat that we announced in this quarter, or blue diamonds, like the 18.85 carat that we sold for $8.5 million. It is a feature of the run-of-mine production from Cullinan that we do produce these higher value stones from time to time. But I can't be particularly helpful on the timing specifically.
Thank you, Richard. A question from Kevin: What exactly do you see in the market that makes you think that provenance will become more important, as mentioned during the presentation?
Yeah, Kevin, I think what we're seeing increasingly is largely as a result of two factors: one, lab-grown diamonds, and two, sanctioned diamonds. That customers are requiring that they are given some verification or proof that the diamond they're buying is neither lab-grown nor a sanctioned stone. And what we mean by provenance is, it's really just where the diamond was recovered from. And together with the traceability technology, we're able to verify that our diamonds are traceable from the time they are recovered, and processed through the midstream, all the way to the end consumer's finger, that we can provide certification that that diamond came from one of our operations. And therefore, by definition, it, it's not a lab-grown diamond, and it's not a sanctioned diamond.
And retail, in particular, are requiring, if not, traceability certification, certainly provenance certification, in all of their goods as a result of the demand from the end consumer. So we see that as becoming more and more important. You may have seen that De Beers has just announced that they will be now, as part of their traceability, providing provenance by country. Previously, they only certified that they were De Beers diamonds, now they will provide, you know, country of origin as well. So it clearly is an increasingly important requirement from end consumers.
Thank you, Richard. We have a question from Steve. Any thoughts on what the first of September 2024 E.U. ban on Alrosa diamonds may mean for the overall diamond market and Petra Diamonds' prospects?
Yeah, I think that's been an ongoing question that is quite difficult to answer. You know, initially, we certainly saw most of those diamonds reaching the market. There's still a fair amount of them coming through to the market as well. But in the event that we see sanctions and these bans being more effective, as time goes on, what we would expect to see is some sort of bifurcation in the market...
...where you would see Russian goods supplying the eastern geography and then the rest of us, more the western geography. So we don't see any significant impact on us and the overall diamond market as a result of those sanctions, other than perhaps, you know, we might see some preference or premium associated with diamonds produced from, you know, the likes of our mines.
Thank you, Richard. Turning now to our balance sheet. Our first question comes from Nicholas: Is refinancing the bond with South African banks the first option that we have explored in the refinancing process?
I'll start, and Johan, you can come in. I think, you know, as you would expect, we've looked at a range of options around refinancing. We haven't simply looked at the South African lending market. But in our view, that is a good fit for our requirements, and being able to borrow in rands, with most of our costs in rands, is also a good idea for us.
So we have a number of options that we have looked at, and that we can and will continue to explore, but we, as I've mentioned, remain in discussions with the South African banks around a term loan, which we would see as providing at least part of the solution to the refinancing of the 2026 loan that I don't know, Johan, if you want to add to that?
No, Richard, nothing to add, other than just supporting that we're considering multiple options at this stage.
Thanks, Richard, Johan. Nicholas has a follow-up question: Are we able to say specifically what net debt EBITDA level the South African banks would accept as part of any sort of refinancing solution?
The banks aren't necessarily looking at net debt to EBITDA when evaluating the refinancing of the bonds. It's really looking at delivery of our business plans, as we've communicated previously, as well as the savings that we've targeted, as well as the general diamond market. So there's a wide range of factors that are being taken into consideration and not necessarily net debt to EBITDA, and we haven't landed on any specific target for the refinancing.
Thank you. There are currently no further questions on the chat.
Perfect, Richard, Johan, Patrick, let me just come in. Thank you for answering those questions from investors. Of course, the company can review all the questions that have been submitted today. We will publish out those responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to the company, Richard, could I just ask you for a few closing comments?
Thanks very much. Really, just to thank participants for joining us in our presentation today, and we look forward to the next presentation in our next quarter. So thank you very much.
Perfect, Richard, Johan, Patrick, thank you once again for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Petra Diamonds Limited, we'd like to thank you for attending today's presentation, and good afternoon to you all.