Petra's 2017 Production & Sales Up, Profit Down, Restarts Tanzania Mine

Mining and Exploration
18/09/2017 09:57

Petra Diamonds Ltd., the London-based diamond miner with mining operations in South Africa and Tanzania, reported its FY 2017 revenue up 11% to $477.0 million (FY 2016: $430.9 million), though its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell to $157.2 million from $164.3 million in the year before due to delayed ramp-up of the expansion programs and higher cash costs. The miner's net profit after was down 69% to $20.7 million (FY 2016: $66.8 million). Cash generated from operations they reported fell 10% to $160.2 million (FY 2016: $177.3 million). Production for the year was up 8% to 4.0 Mcts (FY 2016: 3.7 Mcts), but was markedly below its guidance of 4.4m to 4.6m carats.

Petra also said it resumed operations at Williamson mine in Tanzania after a four-day stoppage and it remains on track to meet production guidance for the current financial year. Petra Diamonds halted operations at the Tanzanian mine last week after the government seized a consignment and questioned some of its personnel as part of a crackdown on the mining sector. Nonetheless, Petra reiterated its production guidance of 4.8-5.0 million carats (Mcts) in the year ending June 2018 and 5.0-5.3 Mcts by FY 2019. However, the company said its forecast include the Tanzanian mine in normal operation. They further note that increasing volumes to be realized against Petra’s fixed cost base are expected to have a positive impact on the company’s financial results for FY 2018 and beyond.

Johan Dippenaar, CEO, said: “While Petra remained in growth mode in FY 2017, achieving record production and revenue, the shortfall against guidance, in conjunction with the significant strengthening of the Rand on our predominantly Rand-denominated cost base, impacted our financial results for the Year. However, the challenges related to the commissioning of the Cullinan Plant have now been overcome and it is ramping up in line with expectations, plus the new mining areas at our two biggest mines, Finsch and Cullinan, are set to deliver double the amount of undiluted ore in FY 2018. The impact of a rising contribution of undiluted ore has already seen ROM grades at both mines rise ca. 30% in FY 2017." He added, "While the diamond market has shown some softness at our first tender of FY 2018, this appears to be attributable to normal seasonal factors, as our assessment of the wider market is that it remains stable. We view the big push in diamond marketing now being made by the Diamond Producers Association, as well as De Beers, as very positive in terms of supporting future consumer demand.”

Petra, the latest miner caught up in a government challenge to the industry, said its parcel of diamonds had not been released for export and discussions with the government were ongoing. Tanzanian prosecutors charged two government officials with economic sabotage after they were accused of undervaluing an export-bound consignment of diamonds seized from the mine majority owned by Petra Diamonds. The government said it will nationalise the diamonds, the value of which it puts at $29.5 million, twice the provisional value approved by the two government officials charged in court. The government has not disclosed how it came to its $29.5 million valuation. Meanwhile, the Financial Times emphasizes that Petra said restrictions on exports from Tanzania following the seizure could hit its lending facilities. If it is unable to resume sales from its Williamson mine in Tanzania before the end of the year, the company may breach covenants on its loans, the company noted in its statement. “Petra will monitor the situation very closely and take decisive action if required to preserve shareholder value,” Petra said.