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122Petra Diamonds Limited Annual Report and Accounts 2012Company AccountsGroup AccountsCorporate GovernanceOperational ReviewBusiness ReviewDiscover Petra Diamonds34. Post-retirement medical fund continued%per annum%per annumPrincipal actuarial assumptionsDiscount rate at 30 June8.75%9.25%Health care cost inflation7.25%6.75%Future salary increases6.25%5.75%Net replacement ratio75.00%60.00%Net discount rate1.40%2.34%Normal retirement age (years)60.0 60.0Fully accrued age (years)60.0 60.0 US$ million20122011Determination of estimated post-retirement medical fund expense for the year ended 30 June 2013Current service cost0.4 0.2 Finance expense0.9 0.6 Benefit payments(0.1) (0.1) US$ million2012201120102009Actuarial accrued liabilityFunded status11.87.35.22.0Sensitivity analysis Health care inflation rateThe effect of a 1% increase or decrease in the health care inflation rate on the post-retirement medical fund accrued liability is as follows:US$ million30 June 20121% increase1% decreaseAccrued liability11.814.39.8% difference-21.3%(16.8%)US$ million30 June 20111% increase1% decreaseAccrued liability7.38.74.9% difference-19.2%(32.8%)Average retirement ageThe table below shows the impact of a one year change in the expected average retirement age:US$ million30 June 2012Retirementone yearearlierRetirementone yearlaterAccrued liability11.812.511.2% difference-5.8%(5.5%)US$ million30 June 2011Retirementone yearearlierRetirementone yearlaterAccrued liability7.37.56.8% difference-2.7%(6.8%)Notes to the Annual Financial StatementsFor the year ended 30 June 2012 continued

"AGM" annual general meeting"alluvial" deposits of diamonds which have been removed from the primary source by natural erosive action over millions of years, and eventually deposited in a new environment such as a river bed, an ocean floor or a shoreline"BEE" black economic empowerment"Block caving" a method of mining in which large blocks of ore are undercut so that the ore breaks and caves under its own weight. The undercut zone is initially drilled and blasted and some broken ore is drawn down to create a void into which initial caving of the overlying ore can take place. As more broken ore is drawn progressively following cave initiation, the cave propagates upwards through the orebody or block until the overlying rock also caves and surface subsidence occurs. The broken ore is removed through the production or extraction level developed below the undercut level. Once the caves have been propagated, it is a low cost mining method which is capable of automation to produce an underground "rock factory""Bulk sample" a large sample for the purpose of estimating the grade of a diamond deposit and to produce a large enough quantity of diamonds to enable an evaluation of diamond quality"Capex" capital expenditure"carat" or "ct" a measure of weight used for diamonds, equivalent to 0.2 grams"Cpht" carats per hundred tonnes"Craton" a part of the Earth's crust which has been relatively stable for a very long period"ctpa" carats per annum"cut-off grade" the lowest grade of mineralised material considered economic to extract; used in the calculation of the ore reserves in a given deposit"diamondiferous" containing diamonds"drawpoint" openings on the sides of the drift going up into a block cave"EBITDA" earnings before interest, tax, depreciation and amortisation"EPS" earnings per share"feasibility study" a definitive engineering estimate of all costs, revenues, equipment requirements and production levels likely to be achieved if a mine is developed; the study is used to define the economic viability of a project and to support the search for project financing"fissure" informal term for a narrow, vertical, vein-like kimberlite dyke"FY" financial year (1 July to 30 June)"grade" the content of diamonds, measured in carats, within a volume or mass of rock"H1" or "H2" first half, or second half, of the financial year"hypabyssal rock" an igneous rock that originates at medium to shallow depths within the crust and contains intermediate grain size and often porphyritic texture"iNED" independent non-executive director"Indicated Resource" that part of a diamond resource for which tonnage, densities, shape, physical characteristics, grade and average diamond value can be estimated with a reasonable level of confidence. It is based on exploration sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed and sufficient diamonds have been recovered to allow a confident estimate of average diamond value (SAMREC Code)"Inferred Resource" that part of a diamond resource for which tonnage, grade and average diamond value can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified by geological and/or grade continuity and a sufficiently large diamond parcel is not available to ensure reasonable representation of the diamond assortment. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited or of uncertain quality and reliability (SAMREC Code)"kimberlite" a brecciated ultrabasic igneous rock containing phlogopite mica, bronzite pyroxene and ilmenite; kimberlites may or may not contain diamonds"kimberlite minerals that can help locate the presence and indicator minerals" establish the diamond-bearing potential of kimberlite"ktpa" thousand tonnes per annum"LHD" load haul dumper"LOM" life of mine"LTIFR" lost time injury frequency rate"Mctpa" million carats per annum"Mcts" million carats"Measured Resource" that part of a diamond resource for which tonnage, densities, shape, physical characteristics, grade and average diamond value can be estimated with a high level of confidence. It is based on detailed and reliable exploration sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity and sufficient diamonds have been recovered to allow a confident estimate of average diamond value"Mini bulk-sample" a large sample, commonly in the order of 50 tonnes to 100 tonnes, for the purpose of determining the exploration potential of a diamond prospect"Mt" million tonnes"Mtpa" million tonnes per annum"NED" non-executive director"NGOs" non-governmental organisations"open pit" mining in which ore that occurs close to the Earth's surface is extracted from a pit or quarry"orebody" a continuous well-defined mass of material of sufficient ore content to make extraction feasible"Overburden" material of little or no value, which overlies rock formations of economic interest"pa" per annum"Probable Reserves" the economically mineable material derived from a measured and/or indicated diamond resource. It is estimated with a lower level of confidence than a proven reserve. It is inclusive of diluting materials and allows for losses that may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction is reasonably justified"Proved Reserves" the economically mineable material derived from a measured diamond resource. It is estimated with a high level of confidence. It is inclusive of diluting materials and allows for losses that may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction is reasonably justified"rehabilitation" the process of restoring mined land to a condition approximating to a greater or lesser degree its original state"Re-crush system" processes oversized material from the Primary crushers, further reducing it in size"ROM" run-of-mine"RSA" Republic of South Africa"shaft" an underground vertical or inclined passageway "SLC" sub level cave"slimes" the fine fraction of tailings discharged from a processing plant without being treated; in the case of diamonds, usually that fraction which is less than 1mm in size"stockpile" a store of unprocessed ore"Sub-level caving" follows the same basic principles as the Block Caving mining method, however work is carried out on intermediate levels; the caves are smaller in size and not as long lasting. This method of mining is quicker to bring into production than block caving, as the related infrastructure does not require the level of permanence needed for a long-term block cave. This method is used to supplement Block Caving in order to provide production flexibility"tailings" material left over after processing ore"tailings dump" dumps created of waste material from processed ore after the economically recoverable metal or mineral has been extracted"Tonnage" quantities where the tonne is an appropriate unit of measure; typically used to measure reserves of target commodity bearing material or quantities of ore and waste material mined, transported or milled"tpa" tonnes per annum"tpm" tonnes per month"Type II diamonds" Type II diamonds are defined by containing no detectable nitrogen and are often colourless or brownGlossary