Strikes, currency strength push Petra to H1 loss

JOHANNESBURG (miningweekly.com) – Strike action at some of its South African mines, currency strength and the inability to sell a parcel of diamonds from its Williamson mine, in Tanzania, negatively impacted on Petra Diamonds’ profitability in the six months ended December 31.

The diamond miner swung to a net loss of $117.7-million for the six months under review, from a net profit of $35.2-million in the six months ended December 2016.

This was despite a 10% year-on-year increase in production to 2.21-million carats, compared with the 2.02-million carats produced in the prior comparable period.

Revenue decreased to $225.2-million, compared with $228.5-million in the prior comparable period, as carat sales decreased by 5% year-on-year to 1.81-million, mainly as a result of the blocked Williamson parcel not being sold.

The Tanzanian government in September 2017 seized a 71 654 ct parcel of diamonds produced at the Williamson mine, alleging that the value of the diamonds had been underdeclared. The government eventually allowed Petra Diamonds to resume the export and sale of diamonds in Tanzania, but issues around the seized parcel of diamonds remained unresolved during the six months under review.

Meanwhile, adjusted earnings before interest, taxes, depreciation and amortisation for the period under review were $80.1-million, slightly lower than the $87.1-million recorded in the prior comparable period.

This resulted in an adjusted net profit of $5.3-million for the first half of the current financial year, compared with a net profit of $24.1-million in the first half of the prior financial year.

Further, Petra on Monday reported that is was subject to noncash impairment charges of $118-million resulting from the carrying value of its Koffiefontein and Kimberly Ekapa Mining joint venture (KEM JV), which was impacted on by a stronger rand in relation to the cost base of these assets.

This was compounded by continuing operational underperformance and the diamond pricing for smaller, low-value goods – as was the case for the KEM JV.

“Our focus now is to keep on delivering from the new production blocks, particularly at Finsch and Cullinan where the expansion programmes continue to ramp up, and to further optimise the new Cullinan plant. The challenge of the strong rand has also sharpened focus on our operating and capital expenses,” CEO Johan Dippenaar said.

While the company expects its revenue for the full year to remain in line with expectations, it expects full-year production to increase to between 4.6-million and 4.7-million carats, with an estimated 2.4-million to 2.5-million carats to be produced in the second half of the current financial year.
The higher production guidance is supported by the two key underground development programmes – Finsch’s Block 5 sublevel cave and Cullinan’s C-Cut Phase 1 – that are progressing as planned.