Annual Report and Accounts 2013
Petra Diamonds Limited 107
Overview
Performance Review
Strategic Review
Sustainability
Corporate Governance
Group Accounts
3. Acquisitions
continued
30 June 2012
Acquisition of Finsch
On 21 January 2011, the Company announced that the Group had entered into an agreement, (together with its Finsch BEE partners
(“BEE partners”)), to acquire 100% of the trade and assets of the Finsch mine in South Africa from De Beers for a cash consideration
of R1.425 billion.
The acquisition was completed on 14 September 2011 when the Group took control of the mine and was made by Finsch Diamond
Mine (Pty) Ltd (“FDM”) (formerly Afropean Diamonds (Pty) Ltd), a subsidiary of the Company in which the Group has a 74% interest.
The other 26% of FDM is owned by the BEE partners.
Prior to the acquisition, the Company and its BEE partners agreed to advance debt funding to FDM, (in proportion to their respective
equity interests), so that FDM could finance the purchase of Finsch from De Beers. As part of the transaction, the Company advanced
the BEE partners’ share of the R1.425 billion funds directly to FDM so that it could complete the acquisition. The loan advanced by
the Company to the BEE partners and the loan from the BEE partners to FDM were therefore non-cash transactions (see note 29).
Using the loans it had received to fund the acquisition, FDM’s net assets were unchanged on the transaction and, therefore,
there was no change in the non-controlling interest in the Group.
In US$, the final cash consideration paid was US$192 million, reflecting the benefit of an effective hedge of the foreign exchange
risk on the firm commitment to acquire Finsch.
Costs of US$0.4 million associated with the acquisition were expensed in full in the Consolidated Income Statement.
It was not practical to obtain the turnover and operating results for the Finsch mine for the period from 1 July 2011 to the date of
acquisition, as the Finsch turnover and operating results were treated as a branch within a larger corporate by the vendor and were
not available to the Group. The Finsch mine generated revenue from the date of acquisition to 30 June 2012 of US$136.9 million.
Effect of the acquisition
The acquisition had the following effect on the Group’s assets and liabilities:
Finsch net assets at acquisition date
Fair value
US$ million
Book values
adjustments
Fair values
Mining property, plant and equipment
235.3
(13.2)
222.1
Land
0.7
0.7
Inventory consumables and stores
4.1
(0.7)
3.4
Trade and other receivables
1.6
(1.6)
Environmental liabilities
(16.2)
(7.5)
(23.7)
Medical aid and provisions
(5.1)
(0.2)
(5.3)
Employee-related payables
(2.7)
0.6
(2.1)
Trade and other payables
(3.2)
0.1
(3.1)
Net assets acquired
214.5
(22.5)
192.0
Satisfied as follows:
Cash consideration paid by the Group
192.0
Judgement was applied in determining the fair value adjustments in respect of the Finsch acquisition. The fair value adjustments
to property, plant and equipment, trade and other receivables, inventory and consumable stores, environmental liabilities and
medical aid provisions were to ensure these amounts were reflected at fair value.
4. Mining and processing costs
US$ million
2013
2012
Raw materials and consumables used
149.7
138.0
Employee expenses
134.5
103.2
Depreciation of mining assets
42.4
40.7
Diamond royalty
3.7
1.4
Changes in inventory of finished goods and stockpiles
(13.6)
(19.4)
316.7
263.9
1...,99,100,101,102,103,104,105,106,107,108 110,111,112,113,114,115,116,117,118,119,...142