Sustainable Development Report2010

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Economic performance

Petra Diamonds has followed a unique growth path which has established the company as one of the world's largest independent producers of rough diamonds, with over a million carats production in the 2010 financial year.

Financial performance

Corporate highlights during the 2010 financial year were:

• Raised US$120 million in an equity fund raising
• Increased ownership in Cullinan mine from 37% to 74%
• Fully financed capital expansion plans
  • Agreed new debt facilities of US$83 million with IFC and Rand Merchant Bank
• Completed acquisition of Kimberley Underground mine

Key features of the Company's financial performance as at 30 June 2010 were:

• Revenue generated was US$163.7 million (2009: US$69.3 million).
• Gross carat production for the year increased by 6% to 1,164,856 carats (2009: 1,099,367 carats).
• The 507 carat Cullinan Heritage diamond was sold for US$35.3 million.
• Profit from mining activity (before depreciation) achieved was US$67.2 million (2008: US$7.8 million).
• A net profit after tax of US$70.2 million was reported for the year (2008: US$88.9 million loss).

Further information on the Company’s financial performance for FY2010 may be found in Petra’s 2010 Annual Report.

Mining rights and licences

The South African minerals rights regime is guided by the Mineral and Petroleum Resources Development Act (MPRDA) that was promulgated in 2004, and the accompanying Broad-Based Socio Economic Empowerment Charter for the Mining Industry. In line with this legislation Petra has applied for and reports on an annual basis to the Department of Mineral Resources (DMR) in compliance with its licences. New order mining rights have been granted for Cullinan, Koffiefontein, Kimberly Underground and Star mines, and have been applied for at Helam and Sedibeng. All operations have in place Social and Labour Plans (SLPs) that have been developed in line with the Mining Charter and many of the elements of this charter are covered in this report.

In Tanzania, Petra (through its wholly owned subsidiary Williamson Diamond Limited - WDL) holds a 75% interest in the Mwadui Licence, granted pursuant to section 39 of the Mining Act No.5 of 1998. The Mwadui Licence was granted to WDL on 25 May 2005 and endures for a period of 25 years. The Mwadui Licence pertains specifically to diamonds that occur in and vertically under the area covered by the Mwadui Licence, including the Williamson mine.

In Botswana, Petra holds prospecting licences covering approximately 44,000km², the largest precious stone licence holdings in the country. In FY2010, Petra’s exploration activities in Botswana largely centred on desktop work such as the identification of ground holdings to be relinquished and new ground to be taken up following various prospectivity analyses and focused target generation exercises within both existing and newly identified prospecting areas. Petra carries out all its prospecting activities in Botswana in accordance with the local law as decreed by the Department of Minerals, Energy and Water Resources, and further to consultation with the Department of Wildlife and National Parks and the Botswana Geological Survey.

Black Economic Empowerment

Petra is committed to the tenets and objectives of black economic empowerment (BEE) legislation in South Africa. This is not legislated in Tanzania or Botswana.

The objectives of broad-based BEE are being met through equity ownership of Petra’s South African operations, changing the procurement base to include local and historically disadvantaged companies, and through the promotion of BEE recruitment, training and development programmes within the Company. The latter issue is dealt with under the Human Resources Development section.

BEE ownership

Petra’s intention is to adopt a proactive strategy to foster and encourage BBBEE and transformation at ownership and management level, through skills development training, employment equity, procurement and rural development. The South African operations are fully BBBEE compliant from an equity ownership perspective and our various partners are detailed below.

Empowerment partner	%
Cullinan: Thembinkosi Mining Investments (Pty) Ltd	14%
Cullinan: Petra Diamonds Employee Share Trust	12%
Koffiefontein: Re-Teng Diamonds (Pty) Ltd	30%*
Kimberley Underground: Sedibeng Mining (Pty) Ltd	26%
Sedibeng: Sedibeng Mining (Pty) Ltd	17.85%
Sedibeng: Bokone Properties (Pty) Ltd	7.65%
Star: Sedibeng Mining (Pty) Ltd	26%

* Petra has a further 4% interest in the Koffiefontein Mine Unincorporated JV via its 13.33% shareholding in Re Teng Diamonds (Pty) Ltd (held by Petra’s wholly owned subsidiary Blue diamond Mines (Pty) Ltd), taking its total interest in the Koffiefontein Mine Unincorporated JV to 74%