London-listed Petra Diamonds has, in accordance with what the Department of Minerals Resources and Energy expects from miners during South Africa’s 21-day lockdown period, scaled down its operations.
The diamond miner advised on March 27 that it had scaled down operations to operate at a minimum level to maintain the underground block caves.
AdvertisementThe company has four operating mines in South Africa.
The scaled back operations will be monitored and managed according to the new procedures put in place to protect the health and safety of all staff.
AdvertisementThese procedures cover employee communication and training, hygiene response, security controls, health monitoring, resilience and contingency plans. It is worth noting that all of Petra’s South African mines are highly mechanised underground operations, with limited human interaction.
Upon completion of the lockdown period, it will be possible to ramp the operations back up to steady-state production levels within a relatively short timeframe.
Meanwhile, the number of Covid-19 cases in Tanzania, where Petra owns the Williamson mine, is currently low and the government has taken fast action to put containment measures in place.
The Williamson mine, which is in a remote location in the Shinyanga province, remains in full operation but is being managed in strict accordance with the new procedures.
However, in light of the depressed market environment, the mine’s liquidity position is being closely monitored, as constraints may impact its ability to continue to operate.
Petra has suspended its 3.8-million-carat production guidance for the 2020 financial year.
DIAMOND SALES
Petra’s fifth diamond sale of the 2020 financial year, with tenders in both South Africa and Antwerp, started on March 19 and was due to close on March 26.
However, sensing the rapid deterioration of market conditions, particularly owing to travel restrictions, factory and retail closures, and the spread of Covid-19 in South Africa, the company brought forward the closure of its South African sale to March 23.
During this constrained sales period, the company saw severely depressed and opportunistic bidding for its goods, particularly in the larger size and higher quality, greater value categories.
As a result, Petra chose to sell a portion of its South African goods, representing about 75% by volume and about 50% by value. These goods saw price decreases of about 24% on a like-for-like basis, compared with pricing achieved at the February 2020 sales cycle.
The remaining goods were exported to Antwerp and will be offered for sale when market conditions allow.
The Antwerp tender of Tanzanian goods was also brought forward and closed on March 24. The vast majority of the goods were sold, with only a few strategic, higher-value parcels being withheld, and pricing achieved was on a similar level to that in South Africa.
Petra is due to hold two further sales in May and June before the end of the financial year, but the outlook for both sales is highly uncertain and will depend on travel and export conditions at the time, as well as activity levels in the key diamond buying centres, being India, Israel, China and the US.
Petra remains in close contact with its South African lender group to ensure liquidity through this time.