Diamond Seizure Dents Petra's Sales

RAPAPORT... Petra Diamonds' sales fell in the first fiscal half afterthe Tanzanian government confiscated a parcel of rough stones from itsWilliamson mine. Authorities seized 71,654 carats destined for Antwerp inSeptember, claiming that Petra had undervalued thegoods, according to reports. While production at Williamson has resumed following a four-day closure immediatelyafter the incident, the government is still holding the parcel, Petra saidMonday. Petra's inability to ship those goods to its marketingoffice in Belgium led sales volume to decline 5% to 1.8 million carats in thesix months ending December 31. Revenue slipped 1% to $225.2 million. "Petra will continue to engage with the [Tanzaniangovernment] in order to find a resolution to release the blocked parcel," the companysaid. Company-wide production rose 10% to a record 2.2 million caratsduring the period as expansion projects outweighed the impact of labordisruption in South Africa. The main growth inoutput was at the Cullinan mine, where a new processing plant and increasedproduction at the C-Cut extension drove a 45% jump in diamond recovery to 607,235carats. However, the group lowered its overall production outlook to4.6 million to 4.7 million carats for the fiscal year ending June 30, havingpreviously predicted output of 4.8 million to 5 million carats. That mainlyreflects plans to reduce recovery levels at Cullinan, where it has decided to forego higher volume in order to achieve a greater averageprice. The company could maintain a higher grade at the SouthAfrican mine by recovering larger quantities of small, low-value diamonds, itnoted. However, doing that would be "uneconomic" and contradict the company's emphasison value over volume.Meanwhile, the recent strengthening of the South Africanrand is likely to reduce the company's profit for the fiscal year, Petrawarned. Earnings before interest, taxes, depreciation and amortization (EBITDA)will be 10% to 15% below analysts' estimates, it said. As all but one of Petra's mines are in South Africa, many ofits costs are in rand, and a stronger local currency results in higher expensesin dollar terms. Petra operates the Cullinan, Finsch and Koffiefontein mines inthe country, and is engaged in a joint venture with Ekapa Mining at theKimberley mine. Petra's share price fell 15% at press time on Monday following theresults.