Fissure mines

The fissure mines – Helam, Sedibeng and Star – were acquired when Petra merged with ASX quoted Crown Diamonds NL in May 2005. The reduction in combined fissure production to 71,274 carats in the 2009 financial year from 110,685 carats in the previous year, and therefore in sales from US$26.3 million to US$15.3 million, is in line with Petra’s decision to operate the Helam and Star mines at lower levels of production due to market conditions. The average price per carat in the 2009 financial year – down from US$211 to US$186 – was not as severely affected due to the higher value of diamonds from Sedibeng, which makes up a larger proportion of the total fissure production.

Fissure mines vital statistics

Commencement of mining

Helam: 1933

Sedibeng: 1952

Star: 1952

Acquisition by Petra Diamonds

May 2005 (further to merger with Crown Diamonds NL)

Ownership

Helam: 100% Petra Diamonds

Sedibeng: 74.5% Petra Diamonds, 25.5% Sedibeng Mining (Pty) Ltd

Star: 100% Petra Diamonds

Operator

Petra Diamonds

Type of mining

Helam: Full shrinkage overhand stoping

Sedibeng: Full shrinkage overhand stoping

Star: Open stope underhand

Total resources

4.7 million carats

Type of mining

Underground fissure mining

Depth of mining
(metres underground)

Helam: 750

Sedibeng: 750

Star: 600

Status

Full production

Operating review

At the three fissure mines - Helam, Sedibeng and Star - Petra's focus for the 2009 financial year shifted from volume of carats produced to optimisation of revenues by placing emphasis on grade and final recovery. This ensured that the average value per carat of US$186 achieved for the period was relatively unaffected by the slump in the market, in comparison to the US$211 average value achieved in the 2008 financial year, and the fissure mines remain high value producers in comparison to the world average. A number of exceptional diamonds were recovered in the Period, including a 126.69 carat diamond which sold for US$5.25 million.

Production for the year was lower at 71,274 carats, in line with Petra's decision to operate the Helam and Star mines at decreased levels of production due to the difficult diamond market conditions experienced in the 2009 financial year. Staff reductions at all three fissure mines were undertaken during the year. At Helam and Star this was achieved via a retrenchment programme, with a concomitant reduction of approximately 50% in staff levels. At the Sedibeng mine, no retrenchments were necessary but strict application of non replacement due to attrition has resulted in a decrease of staff levels, whilst maintaining full production. A significant number of employees at the fissure operations also availed themselves of the voluntary separation packages offered.

At the Star and Helam mines, the restructuring processes carried out in the 2009 financial year were appropriate given that several years of capital investment have laid the platform for the mines to become less labour intensive. As a result, at the Star mine the main shaft has been commissioned to 16 level and the existing sub-vertical shaft has been decommissioned. Similarly, at Helam, the main John shaft has been commissioned to 23 level and the east and west sub-shafts have been decommissioned. Also, at Helam the existing Edward sub-shaft has undergone an upgrade and is now capable of hoisting ore from 26 level. The abovementioned alterations have assisted both these mines to be able to run as cash positive operations in the future, even though initially at reduced tonnages.

At the Sedibeng mine, the major emphasis (amongst many other alterations) has been the deepening of the Dancarl shaft. Here, the pilot hole drilling and reaming of the shaft from 16 to 21 level has been completed. The slyping of the shaft to full dimensions has progressed well and is approximately 20% complete.

On-mine costs for the 2009 financial year were adversely affected by the separation packages paid to employees. The cash operating unit cost across the fissure mines amounted to R550 per tonne (US$61 per tonne). Management is confident that the unit cost will be improved upon in 2010 as a result of savings due to the reduction of staff, as well as improved production performances from these mines.

Outlook

Our current life of mine plans incorporate Sedibeng at 13 years, Star at 18 years and Helam at 22 years. Diamond production is estimated at 126,000 carats for 2010 and increasing to 165,000 carats by 2015. Thereafter it will remain stable until 2022 when Sedibeng is depleted, with production gradually dropping off. The Sedibeng life of mine is based on the current resource statement which only accounts for six levels and can be increased once new levels are added on.

Fissure mines combined production

	Unit	Year ended 30 June 2009	Year ended 30 June 2008	Change
Production
Diamonds produced	Carats	71,274	110,665	-35.6%
Grade	Cpht	37.7	41.9	-10.0%
Sales
Revenue	US$M	15.3	26.3	-42.0%
Diamonds sold	Carats	82,126	124,693	-34.1%
Average price per carat	US$	186	211	-11.9%

Petra has a 100% interest in the Helam and Star mines, and a 74.5% interest in the Sedibeng mine (BEE partners: Sedibeng Mining (Pty) Ltd, Bokone Properties (Pty) Ltd 25.5%).

Reserves and Resources (as at September 2009 Resource statement)

Fissure Mines combined (Helam, Sedibeng, Star)

Category	Gross			Net attributable
	Tonnes (millions)	Grade (cpht)	Contained Diamonds (millions)	Tonnes (millions)	Grade (cpht)	Contained Diamonds (Mcts)
Diamond reserves per assets
Proven	1.606	47.70	0.766	1.457	50.02	0.729
Probable	2.235	59.76	1.335	2.137	61.35	1.311
Sub-total	3.840	54.72	2.101	3.594	56.76	2.040
Diamond resources per asset
Measured	–	–	–	–	–	–
Indicated	–	–	–	–	–	–
Inferred	1.488	173.57	2.583	1.421	178.50	2.536
Sub-total	1.488	173.57	2.583	1.421	178.50	2.536
Total			4.684			4.575

Notes:

1. Resource bottom cut-off: 1mm
2. Reserve bottom cut-off: 1.2mm
3. Measured resources are classified as 1 level below current workings, or where a block is bounded above and below by current workings
4. Indicated resources are classified as 2 levels below measured resources
5. Inferred resources are classified as 3 levels below indicated resources
6. Measured and indicated resources have been converted to reserves by applying historically derived external dilution and in-stope loss factors to resource tonnages and grades.