Petra Diamonds (PDL)* has seen its revenue fall year-on-year even with a major diamond find in the period.
The miner said the ongoing lull in diamond prices and a lower-quality mix of stones at the Finsch and Williamson mines had hit its income, which was down 6 per cent on a year ago at $194m. This was bolstered by the recovery of a 20-carat blue diamond in September that sold for almost $15m (£11.5m). Petra’s shares were down 9 per cent on the update, to 9.8p. The company’s valuation has dropped by 73 per cent in the past 12 months.
The diamond industry has reacted against the weak prices, with major diamond producer De Beers cutting supply in 2019. It also relaxed rules for those taking part in its rough diamond sales, allowing buyers to hand back the smaller, low-margin, stones.
The Anglo American (AAL) subsidiary has set 2020 production guidance around 10 per cent above last year on the expectation of some market recovery.
A 29 January update showed that the value of rough diamond sales for De Beers’ first sales cycle of 2020 amounted to $545m, up from $500m a year earlier.
Petra said there were “early indications” of an improvement in rough pricing at the start of 2020, with those in the supply chain inbetween miners and retailers looking to “replenish inventory”.
Petra’s production was steady at 2m carats in 2019, and the company said it was on track to meet 2020 guidance of 3.8m carats. There was a collapse in the open-pit wall at the Williamson mine in January, with 1.3m tonnes of rock coming down. Petra said no one was injured and that the production hit would be limited, given Williamson running ahead of its plan before the collapse. Heavy rainfall has hindered the recovery work, however, and a pit access road was blocked.
New Petra chief executive Richard Duffy has had to balance a tight debt covenant alongside the weak market and production challenges. The South African lenders had set a net-debt-to-Ebitda (cash profits) ratio covenant of 4.25 times at 31 December, but have waived this. This follows a revision of the covenant last April, upping it from a flat expectation of net debt being a maximum of 2.5 times Ebitda to a sliding scale starting at 4.5 times in June 2019. Net debt was $596m as of 31 December, up from $593m on 30 September.
