KEY POINTS
- Petra expects diamond prices to stabilize by the end of 2024, with improvements in 2025.
- The company reduced annual operating costs by $44 million and deferred expansion plans.
- Petra is implementing traceability technology to track gem-quality diamonds from mine to consumer.
Petra, a diamond mining company, anticipates the stabilisation of diamond prices through the end of this year, with a potential improvement in 2025.
The company realised an average of $116 per carat for diamonds in the fiscal year 2024 (FY24), which ended on June 30. This is a 17% decrease from the $139 per carat realised in the previous year. Changes in the product mix were responsible for the remaining portion of this loss, which was mainly caused by a 12.4% decline in like-for-like prices.
Compared to FY23’s $2 million, the company’s adjusted net loss was $46 million.
Production adjustments and cost reductions
Led by CEO Richard Duffy, the London-listed, Africa-focused diamond mining business has responded to the lower diamond pricing environment by postponing its expansion program, decreasing its cost base, and slashing $75 million from expected cash expenditures.
Petra has reduced production at its Finsch diamond mine in the Northern Cape area of South Africa from 2.8 million tonnes annually to 2.2 million tonnes annually, putting more of an emphasis on planning and maintenance.
The company is confident that it will fulfil FY25 projections despite these reductions since it will have access to new ore from recently developed projects in South Africa and will be able to scale up production at the Williamson mine in Tanzania.
Furthermore, the business intends to reduce yearly operational expenses by $44 million, with $30 million coming from South Africa and $14 million from Williamson. It also aims to generate free cash flow with a smoothed capital profile.
Petra expects producers to maintain their discipline in order to assist in rebalancing inventory throughout the supply chain.
In a statement to Mining Weekly, Duffy stated, “We continue to see supportive market fundamentals in the medium and long term.”
Technological advancements and repurchase program
In order to track gem-quality diamonds bigger than 0.5 carats from mine to customer, Petra is putting traceability technology into place for its operations in South Africa. In addition to showcasing social and community projects funded by Petra diamond purchases, the technology will offer provenance, origin verification, and sustainability credential information.
“We believe traceability technologies will further differentiate natural diamonds by emphasizing their rarity, uniqueness, and benefits to stakeholders,” Duffy said.
As reported by Mining Weekly, Petra repurchased $12 million of its 2026 second-lien notes through an open-market repurchase program, saving $1.2 million in interest over the course of the program. The notes cost $9 million.
Petra’s revenue for the 12 months ended June 30 increased to $367 million from $325 million in the prior year.
The increase at Williamson and inflationary pressures were the main causes of the 11% increase in on-mine cash costs over FY23.
The profit from mining operations less adjusted corporate overhead is known as adjusted earnings before interest, taxes, depreciation, and amortisation, or EBITDA. This year, it dropped to $66 million with an EBITDA margin of 18% from 35% the previous year.
On December 31, 2023, the total amount of consolidated net debt fell from $212 million to $201 million.
