Petra Diamonds: Revenue up Slightly, Profit and Output Jump

Mining and Exploration
19/09/2016 09:14

Petra Diamonds Limited announced that revenue edged up just 1% to $430.9 million in its preliminary results for the year ended June 30. Net profit after tax, however, jumped 12% to $66.8 million. The miner, which operates four former De Beers mines in South Africa and one in Tanzania, also reported that net debt more than doubled from last year to $384.8 million.

Production surged 16% to 3.7 million carats which was ahead of company guidance. Meanwhile, capital expenditure was $324.1 million compared with $274.1 million last year, "reflecting the peak activity around the group’s expansion programs," the company said. Gross Diamond Resources, including reserves, increased 1% to 312.2 million carats.

Looking ahead, Petra expects production to rise to 4.4 million carats – 4.6 million carats in FY 2017 before reaching Petra’s stated long-term target of around 5 million carats in FY 2018, a year earlier than expected, and rising to about 5.3 million carats by FY 2019 – both targets representing production attributable to Petra. All expansion programs are materially on track and on budget, with both the new sub level cave at Finsch and the new block cave at Cullinan expected to deliver undiluted ore in excess of about 1 million tonnes each during FY 2017. The new Cullinan plant remains on track to be fully operational by Q4 FY 2017.

"Despite a cautious outlook on the diamond market, Petra has made a solid start to FY 2017, with the first tender held in early September yielding about $94 million; two more tenders will be held during H1 FY 2017. Prices on a like-for-like basis were generally on par with H2 FY 2016. In terms of production, the operations are performing according to expectations, with an improved product mix and increase in ROM grades witnessed across all operations (in line with guidance).

Petra will not declare a dividend for FY 2016. "Should the current positive production and trading conditions continue, Petra will revisit this with its lender group post H1 FY 2017, with the intention to resume dividends as soon as possible."

Johan Dippenaar, CEO, said: “The company delivered a strong set of results notwithstanding the number of challenges faced during FY 2016, which included managing production from heavily diluted areas at our underground mines, as well as market related pressure on prices particularly in H1. I am particularly pleased with the continued steady progress that has been made with our expansion programs, which have remained on target over the last seven years. FY 2017 is forecast to be the first year that the company reaps the benefit of this work as we are in line to become free cashflow positive in H2, with our cashflow profile rising strongly thereafter. We now enter the final phase of our capital expansion programs in a strong position, with a robust balance sheet, efficient cost base and the drive to succeed.”