Petra Diamonds Sees 27% Drop in Prices, Withdraws Best Stones from Sale

Rough Market
12/04/2020 14:34

Mid-tier miner Petra Diamonds has been keeping us up to date with regards to the impact on the company of the global COVID-19 pandemic, unfortunately reporting that they experienced depressed and opportunistic bidding for its diamonds at its fifth sales cycle of FY 2020, particularly in the larger size and higher quality, greater value categories. Petra therefore chose to only sell a portion of its South African goods, representing approximately 75% by volume and 50% by value. The remaining goods were exported to Antwerp and of these, about 75% were subsequently sold at the company’s Antwerp marketing office.

Rough diamond prices achieved at Petra’s fifth sales cycle fell by about 27% overall on a like-for-like basis in comparison to those achieved at the fourth sales cycle in February 2020. A total of 24,254 carats, comprising higher value +10.8 carat single stones as well as parcels across the size and quality (gem and clivage) ranges, were withdrawn and will be sold privately or at a subsequent sales cycle, when market conditions allow, the company informs us. As previously noted, Petra was due to hold two further sales in May and June before the end of its financial year. They said will continue to monitor marketing conditions before taking any decision on the continuation of the planned May tender, while the outlook for the June sale remains uncertain and will depend on travel and export conditions at the time, as well as activity levels in the key diamond buying centres of India, Israel, China and the US.

Williamson mine to close temporarily

Concerning its operations and output, Petra said operations in South Africa are still operating at significantly reduced levels to comply with the requirements of the 21-day lockdown period in South Africa. The lockdown period is due to end at midnight Thursday 16 April 2020, but the operational outlook is uncertain and will depend upon the governmental approach with regards to managing the spread of COVID-19 in the country. Regarding the situation in Tanzania, Petra notes that in light of the unprecedented depressed market environment, the company has declared force majeure at the Williamson mine and will be placing the operation on care and maintenance from the middle of April, with only essential services to be carried out in order to protect the mine’s assets and resources. This decision was taken to preserve the mine’s cash position to protect the long-term sustainability of the operation. Petra said they will look to resume operations once diamond prices are at a level that make it operationally sustainable.

“Given the unprecedented trading conditions, we are taking all steps necessary to preserve the Company’s liquidity position in order to withstand this very difficult period until market conditions improve," said Richard Duffy, CEO of Petra Diamonds. "We remain committed to protecting the ongoing viability of our operations, to the benefit of all our stakeholders.”

Image: Dense Media Separation washing screen at the Williamson plant, courtesy of Petra Diamonds.