Rough Recovery Boosts Petra Earnings

RAPAPORT... Petra Diamonds saw a rise in earnings and announced a return to dividend payments following strong rough demand during the past fiscal year.Revenue jumped 44% to $585.2 million for the 12 months ending June 30, the miner reported Tuesday. Profit before tax and one-off extraordinary charges came to $141.9 million, compared with a loss of $18.3 million a year earlier. Net profit fell 55% to $88.1 million, reflecting a financial gain the company made a year earlier when it carried out a restructuring, as well as a foreign-exchange loss.Management attributed the results to the company's Project 2022 turnaround plan, which it implemented in 2019 to cut costs and reduce debt. Petra also announced it would launch a $150 million debt reduction plan that could save the business up to $15 million a year in interest expenses. The board reintroduced a dividend policy and will consider whether to make a payout to shareholders for the current first fiscal half, which ends on December 31.Petra also benefited from the quick recovery of the diamond market in 2021 from the previous year's Covid-19 shutdowns. Rough prices rose 41.5% on a like-for-like basis for the fiscal year, returning to pre-pandemic levels amid a supply deficit and a rebound in demand, the company explained. Record recoveries of large and high-value stones also buoyed earnings, as did the resumption of operations at its Williamson mine in Tanzania, it added. "While some of the price recovery may have been helped by sanctions on Russian goods, it appears that these goods have continued to flow into the market," the miner explained. "From a demand perspective, the Chinese lockdown has moderated demand for certain categories of polished goods, while the rising inflation and interest-rate cycles may impact disposable income and therefore further moderate [or] reduce short-term demand for diamonds."Rough prices slipped 4.5% at the company's September tender, its first of the new fiscal year. The company sold $102.9 million in rough, 11% more than at the previous tender in June, as an increase in the proportion of high-quality stones led to a rise in the average price. The sale total was 10% lower than in September 2021."We have seen strong support in fancy-colored and large white stones, while pricing of smaller stones has continued its recent upward trend," CEO Patrick Duffy commented. "Subdued demand in China has led to relative pricing pressure on 0.75-carat up to 5-carat size ranges."Image: Ore on a conveyor belt at the company's Finsch mine in South Africa. (Petra Diamonds)