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18Petra Diamonds Limited Annual Report and Accounts 2012Company AccountsGroup AccountsCorporate GovernanceOperational ReviewBusiness ReviewDiscover Petra DiamondsCEO's Review continuedJohan DippenaarSenior Independent Non-Executive Director following the year end. Petra is grateful for the contribution of its independent Non-Executive Directors and we now benefit from a Board with a broad range of expertise across a range of complementary and highly relevant disciplines.Production effectively doubled for the year further to the acquisition of Finsch, which contributed 1.1 Mcts in FY 2012, although revenue growth was affected by the volatility of the diamond market and overall weaker prices.Carats sold were up 77% to 2,084,429 (FY 2011: 1,174,825). Carat sales were lower than carats produced due to the inclusion of Finsch into closing inventory for the first time; going forward the effects of Finsch should level out.Petra sold eight stones exceeding US$1 million each during the year, for total revenue of US$14.4 million (FY 2011: 12 stones exceeding US$1 million each were sold for a total of US$27.7 million).The Operational Review to follow on pages 24 to 37 provides more detail on the Group's operational performance for FY 2012 and forms part of this review.Increase in effective interests in South African operationsAs announced in February 2012, the Company has entered into an agreement whereby it can acquire a 49.24% effective interest in Sedibeng Mining (Pty) Ltd ("Sedibeng Mining"). Sedibeng Mining is one of Petra's South African empowerment partners, with varying interests in all of Petra's South African operations. The total consideration payable by Petra for the acquisition of the effective 49.24% holding in Sedibeng Mining is US$17.8 million. To date, the Company has paid US$17.2 million in respect to this agreement (refer to note 30). It is expected that the agreement will complete in the near future and the balance of the consideration of US$0.6 million will then be paid by the Company. Disposals of the Fissure MinesPost year end on 31 July 2012, the Company announced that it had, in conjunction with its BEE partners, decided to undertake a sale process in respect of the Fissure Mines.Due to Petra's focus on the development of its major assets, the Group has evolved into a successful producer from underground and surface (Williamson), high-tonnage kimberlite pipe mines. The Fissure Mines have therefore become non-core to the Group, both in terms of their revenues and resource base, and Petra is of the view that the Fissure Mines have the potential to deliver strong returns under the ownership of an operator to whom they would be core assets. On 7 September 2012 Petra announced that the disposal process had formally commenced and that Petra had appointed QuestCo (Pty) Limited, a South Africa-based corporate finance adviser with prior experience in the successful sale of other diamond assets in South Africa, to manage the sale process. Although in the early stages, the sale process is progressing well and the Company will provide a further update as and when appropriate, although the nature of such sale processes is they run for several months at a confidential level.Potential transactions arising from the sale process will be subject to detailed scrutiny and, apart from financial objectives, Petra will consider prospective purchasers' approach to employment, health and safety, environmental management and other issues fundamental to the long-term success of the Fissure Mines for all stakeholders.Given the sale process and the immateriality of the Fissure Mines' numbers to the enlarged Petra Group, detailed reporting of the Fissure Mines' results have not been supplied in the Operational Review to follow.SafetyThe health and safety of all employees remains the Company's number one priority and Petra is highly focused on this area. In addition to appropriate risk management processes, Petra has strategies, systems and training in place to promote a safe working environment. Management's focus on a zero harm environment requires a zero tolerance Maintenance underway on one of the automated (driverless) underground truck fleet at Finsch

Annual Report and Accounts 2012 Petra Diamonds Limited19Operational ReviewCorporate GoDiscover Petra DiamondsBusiness ReviewvernanceGroup AccountsCompany Accountsperiods in both the diamond and capital markets.We are focused on continuing to increase production, with the ultimate objective of taking annual output to 5 Mcts by FY 2019. We have built up a solid track record of meeting our targets and our team's experience and working knowledge of the Group's mines is essential to delivering the Company's future success. Finally, I would like to thank the Petra team for the hard work and resilience which continues to drive the Group forward. I would also like to thank our valued Government and BEE partners, whose support underpins Petra's long-term prospects.Johan DippenaarChief Executive Officer15 October 2012approach for any action that results in potential injury to employees and Petra seeks to instill a systemic culture of safety.It is with deep regret that Petra experienced a fatality on 22 January 2012 at the Kimberley Underground operation. The Company and its management team express their sincere condolences to the family and friends of the deceased.The Group's Lost Time Injury Frequency Rate ("LTIFR") for the year was 1.13 (FY 2011: 0.80). The Company's ongoing initiatives will endeavour to lower the LTIFR in line with its policy of zero harm.Petra produces an in-depth report annually on its sustainable development policies and practices, covering areas such as health and safety, environment, community and employment. The 2012 report will be made available once published on the Petra website at www.petradiamonds.com. South African mining environmentSince year end, labour unrest in South Africa's mining industry has been widely reported in the media. With regards to Petra, it is important to note that the majority of the Group's employees are skilled and semi-skilled workers, as block cave mining is a highly mechanised process. The Company continues to monitor the situation both within South Africa as a whole and at its specific operations. Petra has a strong record of stable labour relations and remains focused on the ongoing dialogue which the Company has always practised with the representative unions.OutlookWhilst the current economic climate is challenging, Petra is well placed to withstand market conditions, due to the quality of its assets and management team. Our focus on the key areas of our business has been honed over many years of operating underground diamond mines, including through other challenging The open pit operations at the Ebenhaezer satellite pipe at Koffiefontein