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 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 will review all questions sent today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Richard Duffy, CEO. Good afternoon, sir.
Good afternoon, everyone, and thank you for joining us today for a presentation of our first quarter operating update for financial year 2024 for the period ending 30 September 2023, as well as a brief update on the rough diamond market. I'm Richard Duffy, CEO, and with me is Jacques Breytenbach, our CFO, who will cover the key financial metrics a little later. After taking you through our announcement, we'll open up for any questions. Please note that we have recorded an earlier webcast, which is also available on our website. As always, let's begin with safety, which remains our number one priority. Following our renewed safety focus, I'm pleased to report that our lost time injury frequency rate was unchanged from 0.12 in the previous quarter, and lost time injuries also remained the same at 2.
This consolidated the improved trend that we saw in the last quarter of financial year 2023. In striving to achieve a zero-harm workplace, we continue to ensure that we maintain our focus on remedial actions and behavior-based intervention programs across our operations. Turning now to operations, run-of-mine tonnes treated increased 49% from quarter four, mainly driven by the earlier restart of operations at Williamson, along with a small uptick in tonnes treated at Cullinan Mine. This was partly offset by a 23% decline at Finsch, linked to tunnel availability. The tonnage shortfall at Finsch was largely offset by a 26% increase in grades achieved. Total diamond production in the first quarter increased by 12% on the previous quarter to just under 700,000 carats, due to stabilizing production at Cullinan Mine and Finsch, with Williamson successfully resuming operations in July ahead of schedule.
With remediation steps now taking effect at both our underground mines, diamond production has reverted to planned levels, although ongoing volatility is to be expected at Finsch over the next few quarters as the upper Block 5 sublevel cave matures. As a result, we are reiterating our guidance for between 2.9-3.2 million carats in the current financial year. Turning now to the market. The rough diamond market continues to see subdued demand. This is attributed to high levels of polished inventory on the back of low demand for diamond jewelry, driven by global economic and geopolitical events and uncertainties exacerbated by the slower recovery in China.
We believe the actions taken by the major producers to curb supply and the two-month Indian diamond import moratorium to 15 December 2023, will assist in bringing stability and support to the market and prices as inventory levels normalize. While we anticipate that prices will remain volatile through the remainder of this calendar year and possibly into calendar year 2024, we continue to expect prices to benefit in the medium to longer term as a result of the prevailing structural supply deficit. I will now hand over to Jacques, who will run through some of the key financial metrics, as well as the mitigating steps we are taking to ensure our resilience, in trading through this period of pricing weakness. Jacques.
Thank you, Richard. Revenue for our first quarter totaled $97.6 million, a 96% increase from the previous quarter, following deferral of sales from fiscal year 2023 to our fiscal year 2024. Quarter 1 revenue includes Tender 1 sales of $79 million, and a portion of Tender 2 sales, which were finalized prior to the close of the period, with the balance of Tender 2 adding a further $22.2 million post-period end. Achieved prices for the quarter increased to $105 per carat, up 18% from $89 per carat in the comparative quarter, reflecting the higher value goods deferred to this period, while like-for-like prices were down 8% quarter-on-quarter.
This was largely driven by prices achieved in Tender 2, being down some 16.9% on a like-for-like basis compared to Tender 1, as announced earlier this month after the conclusion of the second tender cycle. In terms of our balance sheet, gross debt increased to $295 million at the end of September, up from $247 million at 30 June, largely reflecting a $45 million drawdown on the company's revolving credit facility. At the time of the drawdown, the intention was to repay the facility during our H1 fiscal year 2024. However, given our prudent approach to managing the current period of uncertainty, we elected to maintain the drawdown and retain cash within the business.
Consolidated net debt stood at $192.4 million, an increase from $176.8 million at the end of June. This is due to the timing of closing the company's sales tenders, the continued lower demand pricing environment, working capital funding for the resumption of mining at Williamson, and the increasing CapEx spend profile. While we continue to see support for the market in the medium to longer term as a result of the structural supply deficit... We are taking steps to enhance our business resilience in light of the current market challenges and uncertainties that are expected to continue over the coming months. We brought forward the closing of our second tender, and are currently in discussions with our first-tier lender to upsize our existing revolving credit facility.
These discussions are progressing well, although the final outcome remains subject to our lender's credit approval processes. We expect to receive an in-principle decision in the coming months. In addition, the company is scrutinizing its operating cost base to optimize costs and operations in this period. We are also actively increasing our foreign currency hedging program, which gives us the flexibility to hedge up to 50% of expected twelve-month revenues as a means of locking in weaker rand compared to our base case forecast. As a reminder, a one rand move against the dollar equates to circa $20 million of operational free cash flow impact. Capital optimization work streams are also on the go to evaluate opportunities to reduce and/or defer certain capital programs. We will continue to update the market on these steps as and when appropriate.
With that, with that, let me hand back to Richard to wrap up with the outlook. Richard?
Thanks, Jacques. In conclusion, the resilience of our operating model has supported the ongoing stabilization of operations at Finsch Mine and Cullinan Mine, while Williamson Mine has restarted ahead of schedule and is performing well. This has been accompanied by ongoing improvements to our safety performance. The weaker pricing environment has led to actions taken by the major producers, as mentioned, to curb supply, and also the two-month Indian diamond import moratorium, which we believe will both assist in stabilizing the market and supporting prices as inventory levels reduce. Internally, as Jacques outlined, we are taking steps to enhance the resilience of our business in light of the market challenges and uncertainties that are expected to continue over the coming months. We are confident these actions will enable us to navigate this period of market weakness, whilst limiting the impact on our value-led growth strategy.
In the medium to longer term, as previously mentioned, we continue to see support for the market as a result of the structural supply deficit, which we are well-placed to benefit from. That concludes our overview of the quarter, and we will hand back for any questions.
Perfect. Richard, Jacques, thank you very much for your presentation. What I'll do now is I'll just bring your cameras up. Ladies and gentlemen, please do continue to submit your questions 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 review those 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've received a number of questions throughout today's presentation, and Patrick, if I could just ask you to read out the questions and delegate them to the team where appropriate to do so. I'll pick up from you at the end.
Thank you very much, moderator. The first question is from Simon. It's an operating question: Are there any issues with supply chains impacting the business? Are you reliant on particular suppliers?
Thanks, Simon. It's Jacques here. We haven't seen any impact on supply chains. We are able to continue to source what we require, both from a consumables perspective, as well as some capital machinery that's still being procured. So no impact has been seen. And from a supply concentration perspective, the second part of the question, there's not specific suppliers that we are absolutely reliant upon. We've got a well-diversified supplier base.
Thank you, Jacques. Another operating question, this one from Colin: What operating efficiencies have been achieved during the period?
Yeah, I think, you know, in response to that, we're busy with the operating teams in going through opportunities to improve operating efficiencies, to mitigate the impact of the weaker market. You know, we've. Our operating model is fairly well entrenched, so that will support us. But the work we referred to is really ongoing work now, specifically in response to where the market is currently. And we'll provide updates on how we do there, in our, you know, quarterly market updates.
Thank you, Richard. I have a second question from Simon: How well-funded are you for the short to medium term?
Thanks, Simon. In that respect, cash balances at the end of the quarter, unrestricted, was some $56 million. $33 million of diamond debtors, outstanding, which has since been received. And then we also concluded further sales amounting to $22 million. So, decent cash balance to see us through this period, and currently just analyzing our position towards a next tender and when to hold that, as well as what the route to market will be. But adequately funded through at least throughout this calendar year.
Thanks, Jacques. I have a question from Ian. In the release, you mentioned optimizing operational expenditure and deferring capital spend. Can you please give more detail what the quantum of these OpEx and CapEx cuts could be, and what potential impact might have on future ramp-up of diamond production?
... Thanks, Ian. It's Richard. Similar to my earlier answer, this is work that we currently undertaking, and it's really in the event that we see protracted market weaknesses. Jacques has outlined, we do have liquidity and cash and access to facilities. But in the event we see protracted weakness, we're looking at levers we can pull on, both in terms of optimizing OpEx and also CapEx. So we haven't completed that work. As and when we do and if we decide we need to exercise those levers, then we'll obviously provide an update.
But perhaps just to give you a sense, you know, we do have, or we did provide, details around our total capital spend in Q1, which amounted to some $30 million, $10 stay in business and $20 expansion or life extension. Which means that in terms of our guidance, there's a $120 million-$140 million of CapEx for the remainder of the year. So that gives you... And of that, a $100 million-$150 million would be our extension or expansion CapEx. So if you like, that's effectively our discretionary CapEx, and we're looking at that to assess what we are able to potentially defer. Obviously, we're looking at savings, as well, but that's in the event of extended or protracted market weakness. So, slightly longer than answer, but as and when, you know, we look at exercising any of those levers, we'll provide, the necessary updates.
Thank you, Richard. I have several questions from Tom. I'll just read them out one by one, and let you answer them as I go along. When is the next tender planned?
Tom, the next tender usually takes place end of November, early December. As we've shown in the past, we would remain flexible during this period. The moratorium is due to come to an end mid-December, 15th of December. If it makes sense and if we are confident we'll get a successful tender off, we'll likely time it as close as possible to that tender. No firm decision has been made as yet, and we'll continue to assess market conditions.
Thank you. I think his second question's been answered already. His third question, our second quarter free cash flow, how do we see that sort of broken down, I assume, by operation?
Yeah, I think short answer there would be the work that we're currently busy with. We'll need to complete that to see what levers we pull around CapEx, OpEx savings, et cetera. We'll have better sight in due course. So difficult to say at this point. This quarter tends to be in a normal environment, which we're definitely not in at the moment. Tends to be a reasonably positive quarter with diamond inventories being unwound. But we'll just have to remain flexible on that space.
Thank you, Jacques. His last question: Have we looked at the potential returns we could get by buying back our bonds at the current discount versus investing it in our CapEx program?
I think a couple of things. In terms of investing in capital programs, that work's ongoing and we'll assess. The returns on those will also be assessed once we understand what the likely profile is gonna be after certain decisions is made. So not a clear answer on that at this point in time. Buying back bonds, yeah, at this point in time, we'll favor keeping cash in the business from a liquidity perspective, make sure that we service the bonds, pay coupons, et cetera, than aggressively buying back bonds. We have last year laid down some $145 million to buy back bonds. I don't see it as an immediate priority for us at this point in time.
Maybe just to add on the projects, you know, the current market we're experiencing, we certainly still see as being temporary. So what is uncertain is, you know, how long that weakness continues for. But we certainly expect to see prices pick up, you know, going into the next calendar year.
Mm.
And we'll just need to get some pricing points to see what that looks like. So, you know, we're not talking about a structural change, at least, you know, not in our view in terms of the market. And these projects, capital projects run, for a number of years. So, you know, just worth bearing in mind that the big projects at Cullinan and Finsch Mine were, you know, both generated returns well in excess of 30%. And, you know, we're talking about depressed prices for a relatively short period of time. So those projects, you know, will continue to show strong returns notwithstanding this, you know, relatively short-term disruption to the market as a result of, you know, excess inventory through the pipeline.
Thank you, Richard. Question from Paul. Will Finsch's performance remain volatile quarter-on-quarter for the remainder of fiscal year 2024?
Hi, Paul, it's Richard. Yeah, you know, what we just indicating is that at Finsch, we are coming to the end of the Block 5 three-level sub-level cave. So obviously there is more volatility, if you like, around the mining as a result of that. So what we're doing is really focusing on managing the value. So although we were down on tons, we were able to manage grade to stay ahead of plan. So we'll continue to do the same in terms of balancing, you know, tons and managing grade. But all we flagged is that given that it's, you know, near end of life in terms of a sub-level cave, there is a little bit of volatility, and it's less predictable than a sort of steady-state sub-level cave. So that's all we're indicating.
Thank you, Richard. Some follow-up questions from Tom. What is the current cash balance?
Yeah, the cash balance is. I think I've answered that in a previous one. As at the end of September, further bolstered by receipts post-period end. But we haven't disclosed an up-to-date cash balance, but, it's, I can confirm, it's, it's been bolstered by those receipts of the diamond debtors as post-period end.
Thanks, Jacques. A final question from Tom: What gives you comfort that prices will bounce back next year?
So, Tom, I think, you know, what we've seen in terms of actions taken by major producers is to restrict supply to the market, and the India's voluntary moratorium is also aimed at reducing supply of rough to the market. And that's in response to elevated inventory levels, particularly on the polished end of the value chain. So, in restricting supply, what we expect to see is some rebalancing across that inventory pipeline. We also would expect to see some pull-through through the festive period as we move through Thanksgiving and Christmas going into the Chinese New Year. Our expectation is that on the back of that rebalancing, with a little pull-through from demand, we should see an initial stabilization and then recovery in prices as we head into calendar year 2024.
Perfect. Richard, Jacques, Patrick, thank you very much for that. I think you've managed to address all those questions from investors. Of course, the company will review all the questions submitted today and will publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide their feedback, which is particularly important to the company, Richard, could I just ask you for a few closing comments?
Thanks very much. Yeah, just from our side, to say thanks to all of those for all of you for participating in our presentation. If you do have questions, you know how to get hold of Patrick and our investor relations team. And thanks for participating.
Perfect. 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 only take a few moments to complete, but shall 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.