Petra's Revenue Falls, Sees Price Stabilization Late in Quarter

Mining and Exploration
25/10/2019 16:39

Mid-tier diamond miner Petra Diamonds Ltd said its first-quarter revenue sank sharply as sales and prices fell, despite production increasing slightly compared to the same period the prior year. For Q1 FY 2020, covering production and sales from 1 July 2019 to 30 September 2019, diamond production rose 1% to 1.08 million carats from 1.07 million carats a year prior.

Diamond sales, however, fell 4% to 603,626 carats from 626,541 in Q1 FY 2019 and prices were 4% lower on the three months prior, a decline the miner said was "compounded by a poorer product mix at Finsch, Williamson and Koffiefontein," three of its mines in South Africa. As a result of lower volumes and prices of goods sold,  revenue declined 23% to $61.6 million from $80.2 million a year before. Petra added that prices at their second tender in Antwerp "indicate some stabilisation with early signs of modest improvement towards year end," which may be due to the efforts of price setters De Beers and Alrosa to limit output and sales into the midstream. Revenues do not yet reflect the sale of a 20.08 carat Type IIb exceptional blue diamond that was recovered at the Cullinan mine in September and will be sold via special tender in Johannesburg in November 2019. Early estimates are that this single stone could earn as much as $15 million.

"We have reported another quarter of solid operational performance putting us on track to achieve our full year production target of circa 3.8 million carats," Petra Chief Executive Officer Richard Duffy said. "The diamond market remains challenging, however we will benefit from the sale of the exceptional 20.08 carat Type II blue diamond from Cullinan recovered at the end of the quarter," Duffy added. "The implementation of Project 2022 is now under way, targeting $150 million to $200 million free cashflow over the next three years. We are expecting benefits to be realised from the second half of 2020 and will provide regular updates on our progress." They also noted that the weak South African rand compared the the US dollar provided "favorable hedging opportunities ... partially offsetting the impact of weaker diamond prices."

Net debt on 30 September 2019 stood at $592.8 million (30 June 2019: $564.8 million), but the miner says the increase is due to only one tender in Q1 and takes into account an increase in diamond inventories, valued at $92.4 million at period end (30 June 2019: US$57.5 million). 

Image source: Petra Diamonds