Good afternoon, ladies and gentlemen, and 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 via the Q&A tab that's just situated on the right-hand corner of your screen. Please 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 submitted today and publish responses where it is appropriate to do so, and these will be available via your Investor Meet Company dashboard. Before we begin, if I may, I would like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand you over to CEO Richard Duffy.
Good afternoon, sir.
Good afternoon and good morning, everybody, thank you for joining us today for a discussion on Petra's third quarter operating update for the three months ending March 31 2023. I'm Richard Duffy, CEO, and with me is Jacques Breytenbach, our CFO, who will cover the key financial metrics. After taking you through our announcement, we'll open up for Q&A. Moving through to safety. As always, let's begin with safety, our number one priority. Our lost time injury frequency rate increased significantly from 0.22 in the previous quarter 2 to 0.47 in this third quarter, and our lost time injuries increased from 4- 8. This increase was largely due to a single blasting-related incident, Cullinan Mine, in which four employees were regrettably injured. All employees have since fully recovered. The subsequent investigation identified a number of areas for improvement.
These are being communicated across the group to ensure that similar incidents are avoided in the future. In striving for a zero-harm environment, we continue to ensure that we maintain our focus on remedial actions and behavior-based intervention programs across our operations to address the deterioration in our safety performance. Turning now to our operations. Notwithstanding ore process decreasing 25% to 1.65 million tons on the previous quarter, largely due to the suspension of production at Williamson on the 7th of November last year, diamond production increased 3% from quarter two to 654,000 carats. This was due to a 7% grade improvement at the Cullinan Mine, supported by a doubling of diamond production from tailings. At Finsch, production improved 14% following the introduction of new equipment underground, despite some ground handling challenges which have largely been dealt with.
At Williamson, activities focused on continuing the remedial steps following the tailings storage facility failure in the preceding quarter. Construction of the new TSF and critical maintenance work continued to target production resuming in Q1 of our financial year of 2024, which starts in July this year. At Koffiefontein, following the cessation of operations in December, a Section 189 labor reduction process has been completed, resulting in the retrenchment of 382 employees at a cost of just under ZAR 100 million, with 80-90 employees being retained for care and maintenance activities in the run-up to a responsible closure. Our consultation with the mine's key stakeholders remains constructive as we continue our inclusive and responsible mine closure process. Turning now to the market.
As you will have seen from recent announcements, the diamond market has seen some improvement, which we largely attribute to Chinese demand having picked up following an easing of COVID-related restrictions, while consumer demand has remained resilient. At our most recent tender for sale, we saw a 12.5% increase in like-for-like prices against tender three, which affirmed the improving trend observed in the last tender. Stronger demand from major jewelry brands has also supported prices for smaller goods. Solid demand for colored stones across all size ranges was also evident in this cycle, leading to improved pricing. The supply deficit that has become apparent in recent years is expected to provide underlying support, although we expect some short-term volatility given the uncertain macroeconomic backdrop. I will now hand over to Jacques, who will run through some of our key financial metrics.
Thank you, Richard. I'll start with our revenue. The sales results from our fourth tender cycle for fiscal year 2023, which were finalized during the third quarter, yielded $67.8 million in rough diamond sales from some 465,000 carats sold during the quarter. In addition to the $4.3 million of sales from Finsch Diamond Mine sold during our H1 fiscal year 2023 as part of this cycle. The lower volume sold in quarter three relative to the previous quarter was driven by lower production from the South African operations and no production from Williamson, as well as there having been two tenders in the previous quarter compared to just one in the most recent quarter.
We expect two further sales cycles during fiscal year 2023, with the first one closing in May, followed by the last tender for the fiscal year closing towards the end of June. This should also see the level of diamond inventory at year-end reducing to levels comparable to that recorded in 30 June 2022. In terms of the balance sheet, gross debt increased modestly to $248.5 million at the end of March compared to $241 million at the end of December, reflecting the accrued interest charges for the 3 months to the end of March 2023.
Consolidated net debt stood at $124.7 million, an increase of $34 million, from the end of December and in line with our expectations, given our tender cycles and the resultant inventory build-up during the period, coupled with the expected step-up in capital expenditure at both Cullinan Mine and Finsch. Petra's ZAR 1 billion revolving credit facility with Absa Bank remains fully undrawn, with an available balance equivalent to some $56 million at the end of March, with the difference from the December reflecting the impact of the rand weakening against the U.S. dollar. Cost inflation continues to impact the mining industry globally and not just our operations in SA and Tanzania.
With some 80%-90% of our OpEx and 90%-95% of our CapEx denominated in ZAR across our SA operations, the strengthening U.S. dollar has largely mitigated the impact of rising local inflation, supported by our disciplined approach to cost management. We saw the ZAR closing at ZAR 17.78 against the US dollar, compared to ZAR 17 at 31 December, while an average rate of ZAR 17.46 to the U.S. dollar was recorded over the nine-month period year to date. As a reminder, our most recent guidance was based on ZAR 17 to the U.S. dollar. With that, let me hand back to Richard to wrap up with our outlook.
Thanks, Jacques. In conclusion then, the improvements to production seen at Cullinan Mine and Finsch, as well as the mitigating actions we are taking at Williamson, demonstrate the resilience of our operating model. I'm pleased to be able to reaffirm our production guidance for the remainder of this financial year, which positions us well to meet our target of increasing production by around 1 million carats in our financial year 2025. It is, however, disappointing that these results have been overshadowed by the deterioration of our safety performance in the quarter, and we are making every effort to identify and mitigate safety risks in line with our stated goal of achieving zero harm. We continue to focus on ongoing business improvement, cash flow generation, and capital discipline that enables us to continue to internally fund our projects at Cullinan Mine and Finsch.
Under the current mine plan, these projects will see production continue through to 2033 and 2031 respectively, with significant potential to extend mine plans well beyond them. These projects remain on track and on budget. We continue to see support provided by the underlying structural supply deficit in the diamond market, and are encouraged by the resilience of U.S. luxury goods spending and improved demand from China as lockdown restrictions have eased. The weaker performance of the South African rand, as highlighted by Jacques, provides some benefit in mitigating the impact of inflation in the mining industry. That concludes our overview, and we'll hand back to our host for the Q&A session.
Richard, Jacques, that's great. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the top right-hand corner of your screen. Just while the team take a few moments to review those questions that were submitted already, I would 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. Richard, Jacques, as you can see there in the Q&A tab, we have received a number of questions throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions.
Patrick, perhaps if I may hand back to you to chair the Q&A session with the team, then I'll pick up from you at the end. Thank you.
Thank you, operator. The first question comes from James. Are there any outstanding actions required by the company to comply with their health and safety obligations?
Thanks, James. I'm not entirely sure what you are specifically referring to in that question, but I can say that from a group perspective, there are no particular actions required to comply with any health and safety obligations. If you're specifically referring to the blasting incident, we've addressed some of the shortcomings identified. We have shared that across the group, and we're compliant with all of the regulatory, you know, requirements, as well as our own internal safety and health procedures.
Thank you, Richard. We have two questions from Sam. The first is, could you confirm what you define as an Exceptional Stone? Also, I've read about the blocked diamond parcel and framework agreement, and wondered if you could briefly explain this further, please.
Sam, it's Jacques. In terms of the first question, the exceptional stones, we have an internal definition of any stone that sells for more than $5 million each or per stone is classified as an exceptional and reported on separately. That's done in an attempt to give some insight for users of our financials and results, as these stones' frequency are unpredictable and is not sold on a regular basis. A $5 million threshold has been set internally. We will review this threshold going forward, but that's the current definition.
Thanks, Jacques. On the second, yes, we entered into a framework agreement with the Government of Tanzania in December 2021. That agreement is not yet effective. There are some elements in that agreement that still need to be finalized. Some a few regulatory Things that need to be checked off with the Government. Also as part of that framework agreement, it records that the proceeds from the sale of the blocked diamond parcel would be applied to Williamson mine. We had previously reported that we believe that a portion of the parcel or all of the parcel had been sold. We're engaging with the Government of Tanzania around applying those proceeds to Williamson. It remains a work in progress.
We continue to engage with the government of Tanzania, and I would expect to see some resolution, in the coming months. It's been a while, but I think we will get to the end of that road in the coming months.
Thank you, Richard. We have a question from Joe. Are there any imminent plans to draw from the revolving credit facility or to raise new debt financing?
Joe, no. It's Jacques here. No plans or indications that we need to draw on the revolving credit facilities and also no plans to raise any new debt facility. Our existing working capital, including our cash balances, is sufficient based on our base case forecast to continue to both fund the CapEx and then obviously maintain the normal on the ongoing day-to-day operations with no need to draw on the facility for the length of time. If there may be a draw on the facility, which to date there have not been, it would purely be for working capital management purposes, and we don't see it as a permanent financing facility. It's really a short-term working cap facility.
Thank you, Jacques. A question from Tom. Any thoughts on dividends?
Thanks, Tom. Yeah, you would recall that we did announce a dividend policy, going back six months now. The reason for that was, we believe that Petra is in a position to start considering the payment of dividends. We didn't declare an interim dividend as you know, together with our interims, but the board will review Petra's position together with the full year results. We'll obviously come back to the market once the board has done that. Just in closing, though, obviously in announcing the dividend policy, the intention would be to commence with a dividend payment likely to be modest.
Thank you, Richard. We have a couple of questions on Williamson. The tailings breach from Steve and Joe. The first of these is can you give us a little more color on the Williamson mine remediation, what has been done and what needs to be completed in broad terms, please? Related to that from Joe, any update in determining the root cause of the subsidence that led to the breach in the first place?
Thanks very much. I'll deal with both together. Most of the remediation work has been completed specifically with regards to impacted community members. All of the affected individuals who were required to be accommodated elsewhere have been accommodated in new homes. There are a few families that are in rented accommodation in their villages ahead of permanent accommodation being finalized. The compensation for lost livelihoods in terms of crops lost, et cetera, is pretty much complete as well. I would say it's, sort of, 95% complete. In that sense, most of that remediation has now been dealt with.
In terms of the facility itself, we are continuing with the construction of the new tailings facility. We have all of the required permits from the government, the different departments, mining and water, to be able to recommence production once that facility is complete. As mentioned earlier, we are continuing to target completion in the first quarter of our next financial year. The root cause of the subsidence has not yet been determined. That, as we indicated earlier, will take a little more time. We need to do forensic drilling, and that will likely still take us another six months, and possibly a bit longer, but hopefully six months. That will help us to better understand what led to the subsidence.
At this stage, we're not able to provide an update on the root cause, but will once the drilling has been completed. Thanks, Patrick.
Thanks, Richard. I have two questions on power outages in South Africa from Anthony. The first is what impact do these power outages have on our operations? Going forward, how does Petra manage this and plan to manage this going forward? What contribution of solar energy are we currently using, and how might that change going forward?
Thanks very much, Anthony. At the moment, we just need to differentiate between the impact of the power outages on the domestic individual, consumer and industry. As individuals, there is regular load shedding, which means that for periods of the day, there is no power at all. That is cycled through the day, depending on the stage of load shedding. For industries like ourselves, we don't get load shed. We are required to curtail our power consumption, again, at different levels, depending on the needs of the grid.
To date, at both Finsch and Cullinan, we are in a position where we do have excess processing capacity, and so we're able to currently largely mitigate the impact of the load curtailment by slowing down our processing plant or turning off a crusher, if required, and continuing to mine at 100%. We then stockpile and catch up through the plant at a later stage. At the moment, we've managed that process. In terms of the future opportunities around what we're looking to do in terms of renewable energy, and the impact, or reducing the impact of that, we have adopted a renewables strategy. We are currently looking at our options around increasing.
We currently don't use any solar energy at Petra, so we're looking at increasing our % of offtake from renewable sources. We would hope to be in a position to start doing that within a period of about 18-24 months in terms of seeing some contribution from renewable energy sources. We'll provide you with an update on that as we move through that process internally. We are looking at options to de-risk our exposure to Eskom. Currently, we are managing to mitigate the impact of load curtailment, and we'll continue to keep you updated on all of that. Thanks, Patrick.
Thank you, Richard. There appears to be no further questions on the chat, so I will hand back to you, Richard, for closing. Thank you.
Patrick, Richard, Jacques, that's great. If I may just jump back in there. Thank you very much indeed for being so generous with your time there and addressing all of those questions that came in from investors this afternoon. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended, just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the Investor Meet Company platform. Richard, perhaps before just redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.
Thank you very much. Thanks to all of you for joining us again today. Please do get in touch with our team via email if you do have any additional queries. We'll be sure to follow up with you. Look forward to speaking to you all again soon. Thanks for your time.
Richard, that's great, and Jacques as well. Thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity 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 would like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.