Good afternoon, ladies and gentlemen. Welcome to the Petra Diamonds Limited investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions at any time and press Send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and if you give that your kind of attention, I'm sure the company would be most grateful. I'd now like to hand over to the management team from Petra Diamonds, Richard Duffy. Good afternoon.
Good afternoon, and thank you for joining us today for a discussion of our third-quarter operating update for financial year 2024 for the period ending 31 March, as well as an update on our outlook and the diamond market. I'm Richard Duffy, CEO of Petra Diamonds, and joining me is Jacques Breytenbach, our CFO, who will cover the key financial metrics a little later. After taking you through our presentation, we'll open up for questions. Moving to slide three, and starting with safety as always being our number one priority, our ongoing focus on remedial actions and behavior-based intervention programs have supported a stabilization in our lost-time injuries, which remained at three for the quarter, with a small increase in our lost-time injury frequency rate.
Turning now to our operations, total run-of-mine tons treated were largely flat on the previous two quarters, reducing marginally to 2.9 million tons from three million tons in the second quarter and up slightly from 2.8 million tons in the first quarter. This reflects a continued ramp-up of production at Williamson and a steady quarter at Cullinan Mine, offset by lower volumes at Finsch due to the previously announced winder issues, which have since been fully resolved. The 18% improvement in grades at Finsch is ascribed to draw control measures and first production tons from 78-Level Phase two, with the first tunnel commissioned in March 2024. Work is ongoing on the remaining six tunnels, all of which are expected to be commissioned by June of this year. At Cullinan Mine, lower production is mainly attributable to reduced tailings volume and grade, with some variation in the run-of-mine ore grade.
Across the group, diamond production reduced 9% to 666,000 carats, which is in line with expectations. Guidance is reaffirmed at 2.75-2.85 million carats for this financial year. Turning now to the diamond market and the results of Tender five of financial year 2024, which were also announced this morning. Can you turn to the next slide, please? Our fifth tender cycle yielded $49 million from the sale of 362,000 carats. Average received prices per carat were 22% higher than Tender four, supported by the sale of a 14.76-carat blue diamond from Cullinan Mine for $8.2 million. Like-for-like prices, which exclude our single stones, were relatively flat through the seasonally weaker period, being 0.8% lower than Tender four, affirming some market stabilization.
An increased focus on provenance continues following a strengthening of import restrictions from the G7 that came into effect on the 1st of March of this year, requiring certification of non-Russian origin for rough and polished diamonds of more than a carat. This is a clear differentiator for us at Petra, given we have always marketed our diamonds on a mine-by-mine basis and have established a reputable pedigree as a result. We are trialing traceability and provenance technologies to enable us to meet more robust import restrictions that will impact diamonds of more than 0.5 carats from the 1st of September this year. I will now hand over to Jacques, who will run through some of the key financial metrics. Jacques.
Thank you, Richard, and good afternoon all. Revenue for the quarter totaled $66 million, a 27% decrease on the previous quarter, largely due to the timing of our fifth tender cycle straddling the quarter end, with some $32 million of sales recorded in quarter four of fiscal year 2024. Pricing remained strong due to product mix, benefiting in particular from the sale of the 14.76 exceptional color and clarity blue diamond recovered from the Cullinan Mine, which the company sold into a partnership agreement for sale proceeds of $8.2 million. Average like-for-like prices for the first five tenders of fiscal year 2024 were down 8.5% year to date compared to the equivalent five tenders of fiscal year 2023. Pricing assumptions for the remainder of the year revised at our interims in February remained unchanged.
Moving to our balance sheet, gross debt decreased to $280 million at the end of March 2024, down from some $296 million at the end of December 2023, following repayment of around $23 million of the revolving credit facility with Absa Bank to reduce interest costs. This leaves Petra with around $69 million of headroom from the facility, which, together with unrestricted cash balances of some $24 million and diamond debtors received shortly after period end of $11 million, means we have $104 million of available liquidity at the end of March. As a result of the timing of our fifth tender cycle, net debt increased to $232 million at the end of March. Since the end of the quarter, final proceeds are of around $52 million from the recently closed Tender five and more than offset this increase in net debt.
I will now hand back to Richard to discuss outlook and continued focus on the business resilience.
Thanks, Jacques. Moving to our final slide six. Our ongoing focus of our operations remains to ensure zero harm while delivering on our production guidance, completing the development of 78-Level Phase two at Finsch, and continuing development of CC1 East at Cullinan Mine. In terms of building business resilience, we are on track to meet our target of saving $10 million in operating costs in this financial year 2024, and we recently announced an increase to our annual cost savings target, to more than $30 million, for financial year 2025, to be sustained on a go-forward basis. Around half of these savings relate to rebasing our Finsch's throughput and the balance to reducing our group overheads and Cullinan Mine costs. We also remain on track in respect of the deferral of $65 million of CapEx, in this financial year 2024.
As Jacques mentioned, we have reduced our interest costs in repaying $23 million of our revolving credit facility during the quarter and have sufficient liquidity at $104 million. We recently updated the market on the sale of Koffiefontein to Stargems Group for a nominal cash consideration, which will lead to the avoidance of $15-$18 million in closure-related expenses. In addition to the Tender five results we've discussed, we're seeing some price stabilization in the diamond market, which we expect to continue through much of the calendar year. Despite a slower-than-expected price recovery, we continue to see a supportive diamond market in the mid to longer term. In closing, production guidance is maintained for financial year 2024. Together with the cost savings measures outlined, we expect to be cash-generative from financial year 2025 onwards.
We are currently finalizing our new life-of-mine plans that will support the transition to a more smoothed capital profile and incorporate the replanned ramp-up of the deferred capital projects from the beginning of financial year 2025. That concludes our presentation, and I'll hand back to our host, here with you for the questions.
That's great. Richard Duffy, thank you very much indeed for updating investors. I will just bring your camera back up. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right-hand corner of the screen. Please allow the company to take a couple of moments to review your questions submitted already. I'd just like to remind you that recording this presentation, along with a copy of the slides and the published Q&A, can be accessed via your Investor Meet Company dashboard. Patrick, if I may, just hand back to you to moderate through the Q&A. Thank you to everybody for your engagement this afternoon. If I could ask you to read out the questions, and then I'll pick up from you at the end.
Thank you very much, moderator. The first question is a pre-submitted one. Any update on how you intend to sort out your balance sheet and any timeline in terms of potential debt refinancing?
Thank you, Patrick. Good afternoon. It's Jacques speaking. In terms of the balance sheet, the key focus for us is to finalize our life-of-mine planning, to then overlay that with an optimal capital structure based on the revised outlook, with reference to the planning. As a reminder, we have recently repaid the $23 million in our RCF, and we'll continue to look at opportunities to further reduce gross debt, in the lead-up to any refinancing. I think, importantly, it's not a restructuring we are planning for, but rather a refinancing of our loan notes, which becomes due in March 2026. The window we are looking at, in terms of timing would be second half of this year, shortly after the release of our annual financial statements, or if the market is not supportive, or it could be delayed until early calendar year 2025.
Thank you, Jacques. The next question comes from Gary B. How will the cost refinancing at Finsch and the group-level savings impact operational efficiency?
Thanks, Gary. I think, essentially what we're looking to do at Finsch is to take the current throughput levels from around 2.8 million tons to around 2.2 million tons. As a result, we do not require to continue to mine on under a continuous operations shift configuration, so we would be looking at a two-shift configuration. And we don't expect that to have an impact on the operating efficiency at all. It's simply matching the cost base with the level of throughput at Finsch. And as is usual with all of our operations, our business improvement focus would hopefully see efficiencies and productivity improve. So no consequence around efficiency as a result of matching the costs to the planned lower throughput.
Thank you, Richard. I have two questions on grades, which are very similar. The first from Steve Y, which is concerning the grades at all three of our mines and what our expectations are for this year. Ian R. has asked a similar question but specifically on Cullinan, and why the grade has been lower in this current quarter and what our expectations are there going forward.
Thanks, on both. Yeah, on grade, I think the simple answer is, you know, what do we expect from grade? You know, the reason that we're holding our production guidance unchanged is, you know, factors in our expectations around grade. There is, obviously, some variability in grade in these mines we operate. We do bulk mining, and so there is some variability in grade. If you look at Cullinan, as we said, for this quarter, we didn't process the same volume of tailings material as we did in the previous quarter. And so both the volume and grade of the tailings we did process had an impact on the carats produced at Cullinan in particular.
So we don't expect any significant change in grade at Cullinan until we get into CC1 East, and we'll start to be producing some of our carats from CC1 East going into next financial year, and that comes at a much higher grade. At Finsch, we have just opened the first tunnel in 78-Level Phase two, and that should also support grade at Finsch through to the end of the year. For a view on what the production profiles, grade, etc., look like over the medium to longer term, we are planning to share that with the market before the end of June of this year, and we'll be in a better position then to have a discussion on production profiles, grade, costs, capital, etc., in the medium to longer term.
Thanks, Richard. Next question is from Alex C. Given the volatility in commodity markets (and I'll extend that to currency markets as well) what hedging strategies do you employ?
Thanks, Alex. Again, Jacques here. Hedging the diamond price is difficult and actually is well, we don't have a product to hedge diamond pricing. But we do lock in commodity weakness when there's an opportunity given our bulk of our cost exposures are in rand while our revenue is earned in dollars. So that exposure, we do try to hedge from the finance team side. As I mentioned, limited opportunity, if any, on the diamond commodity side.
Thanks, Jacques. Next question is from Martin C. Has the diamond industry been giving sufficient attention to developing its markets, and what does Petra do to develop the market? What do you expect De Beers' campaign to contribute, and do we contribute ourselves as well?
Yeah, so this is a question of, you know, many parts and not particularly simple to answer. I think that, you know, if you look at the diamond market and what's going into the diamond market in terms of support, the Natural Diamond Council does effectively promote natural diamonds. We are founding members of the NDC, and we contribute to the NDC. Obviously, the NDC spend has reduced in terms of its budget on the withdrawal of ALROSA, the Russian diamond producer, on the back of sanctions. And so, De Beers is the largest contributor, and they also run their own campaigns as, you know, as highlighted. So our promotion of natural diamonds is through the Natural Diamond Council, the NDC.
you know, we are also, through the NDC, looking to expand the contribution across the value chain. So we've seen some of the midstream come in and contribute, and I think that we're seeing some collaboration with the larger retailers in terms of promoting natural diamonds. I think all of us would agree that there is not yet sufficient spend going into that promotion, but I think we've made really good strides. I think also to note the growing emphasis on provenance and origin in terms of traceability. We did mention that we are busy trialing technologies around traceability, which become important, not just in the context of potential sanctions but also in the context of linking our sustainability initiatives, which we believe enhance the marketability of our commodities.
Thank you, Richard. Next question is from Matt H. How do you expect liquidity to be over the next six-12 months? If a straight refinancing cannot be done, is there a plan B?
Matt, Jacques again. So we are obviously considering absolutely all options available to us. And it includes a range of options, including a vanilla refi, a combination of further bank accounts, and a different debt structure. So at this point in time, the key for us is just to finalize the life-of-mine planning and have a firm view on our cash generation going forward to then decide on the optimal debt structure. So it's at this point in time quite dynamic, and we haven't made any decisions on that front, but you can absolutely know that we are looking at all options that may be considered.
Thanks, Jacques. A follow-up question from Ian R. on Finsch. At Finsch, with the reduction in throughput to 2.2 million tons, what is the expectation on cost reduction? Will Finsch EBITDA margins go up or down, assuming there is no change in prices?
So Ian and I can help you with part of that question, and we'll provide more detail on the rest of that at our investor day at the end of June. But on the first part, we said that we're looking at delivering in excess of $30 million in annualized sustainable savings, and we said that roughly half of that is attributable to the rebase costs at Finsch on the back of the lower volume. So roughly half of that $15 million is attributable to Finsch, and we will then obviously revert once we've shared details of our revised mine plans to give a sense of and visibility around the medium to longer term, not just for Finsch but obviously for our other operations too.
I think if I can just add there, Patrick, apologies, the Finsch grades will also benefit from fresh ore. So the carat reduction is not expected to,
ROM tons.
To more ROM tons reduction, and will also possibly offset the reduction on the tonnage front.
That's great, Jacques, Richard, Patrick. Thank you once again for updating investors. Thank you to everybody for your engagement, this afternoon. Richard, Jacques, I will surely redirect investors on the call to give you their feedback, which I know will be important to you both. But before doing so, I wonder if I may, Richard, just come back to you for just a couple of closing comments, and then I'll send investors to give you their feedback.
Thanks very much, yeah. Just from my side, to thank you all for your participation again, and we look forward to chatting in the near future. Thank you.
That's great. Richard, Jacques, Patrick, thank you once again for updating investors this afternoon. Can I please ask investors not to close these sessions? We're now automatically redirecting you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a couple of moments to complete, but I'm sure it'll 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 all.