Petra Diamonds' Production and Sales Down in Q1 2018, On Target for Projected Output

Mining and Exploration
23/10/2017 10:24

Petra Diamonds Ltd., the London-based diamond miner with five mining operations in South Africa and Tanzania, has reported that Q1 FY 2018 (for the period from July 1 to Oct. 20 2017, covering production and sales from July 1 to Sept. 30 2017) production was down 4% to 1,053,817 carats (Q1 FY 2017: 1,097,523 carats) mainly due to a planned reduction in tailings production at Finsch and Kimberley Ekapa Mining Joint Venture (“KEM JV”). "Encouragingly", they note, Q1 run-of-mine production increased 17% to 842,809 carats (Q1 FY 2017: 720,475 carats), despite the labor disruptions experienced in September 2017 impacting ROM production by ca. 60,000 carats.

Meanwhile, Q1 revenue was down 17% to US$78.7 million from 711,277 carats sold (Q1 FY 2017: US$94.7 million from 745,447 carats sold, including US$10.9 million revenue from Exceptional Diamonds).  No sales from Williamson in Tanzania were included, due to a parcel of diamonds from the mine being detained by the Government of the United Republic of Tanzania. After the end of the period in question, the Petra completed further sales of South African goods yielding US$53.1 million. As previously announced, Petra has received authorisation from the Government of Tanzania to resume diamond exports and sales, and a second parcel of some 40,000 carats from the Williamson mine has been shipped to their marketing office in Antwerp, to be sold in Q2 FY 2018. Petra continues to engage with the government to reach a satisfactory solution with regards to the first parcel of diamonds. 

Diamond prices for Q1 on a like-for-like basis were down ca. 3% in comparison to H2 FY 2017, and by a further ca. 2% at the Company’s second tender held in October 2017, partially offset by the expected improvement in product mix further to a higher proportion of run-of-mine versus tailings carats. Johan Dippenaar, Chief Executive Officer, commented: “Despite the labour disruptions at Finsch, Koffiefontein and KEM JV, the Group has made a strong start to FY 2018, delivering close to 1.1 Mcts for Q1. The Group is continuing its production build up and it is encouraging to see the increasing contribution of run-of-mine production.”

For the year 2017, Petra last week reported that rough diamond production was up 8% to 4 million carats despite a 1% decline in ore processed. Their annual revenues increased 11% to $477 million, but net profit after tax tumbled 69% to $20.7 million. Dippenaar said, "While FY 2017 saw the Company in continued growth mode, reaching record production of 4.0 Mcts and revenue of US$477.0 million, unfortunately we did not meet our production guidance of 4.4–4.6 Mcts for the Year. The lower production and sales for the Year had a knock-on effect to the Company’s profitability. due to the fixed cost structure of the Group, which is circa 70% of our cost base, rising in line with the ramp-up in our expansion programmes. Our financial results were further impacted by the strengthening of the Rand. While this performance is disappointing, we have commenced FY 2018 in a significantly improved position, given that the majority of the capital has now been spent, the major plant construction/modification work has mostly been completed across our mine portfolio, and the new caves at both Finsch and Cullinan are already producing at substantial volumes. We have also been encouraged by the improving grades and product mix, driven by mining higher quantities of undiluted ore from our new mining areas, that we have already experienced to date and which we expect to continue into FY 2018 and beyond."

Non-Executive Chairman Adonis Pouroulis, said, "The Company did grow production 8% to a record level of 4.0 Mcts; however, this was below original guidance of 4.4 to 4.6 Mcts, mainly due to the delay in commissioning of the new Cullinan plant, as well as the slower than expected ramp-up of production at the new Sub Level Cave at Finsch." He added, "While FY 2017 was a difficult year, our imperative is always to critically review our performance in order to evaluate how we can improve. FY 2018 has commenced well, with the continued ramp-up of underground production at Finsch and Cullinan as planned. The Company is on target to reach output of 4.8–5.0 Mcts in FY 2018 and 5.0–5.3 Mcts in FY 2019."

 Petra Diamonds' complete Annual Report and Accounts 2017 is available here.