Positive consumer demand for diamond!

The diamond market improved continuously! 

At the juncture of providing the update on Q2 FY 2021 trading, Petra Diamonds said, the diamond market has continued to show improved demand for rough diamonds, as evidenced by the publicly disclosed sales from the majors De Beers and Alrosa, with polished stock and industry debt levels at lower levels than they were at the same time in 2019 due to positive consumer demand as we enter the holiday retail season. 

In particular, demand for larger stones (+1 carat) have improved and there are expectations that this will carry into the new calendar year. However, there remains a risk around further disruption as a result of Covid-19. In terms of production in Q2 FY 2021 to date, the Cullinan mine continues to run ahead of the Company’s internal plan, combined with the positive revenue impact of the sale of the Letlapa Tala Collection for US$40.36 million in November 2020.

The Finsch mine, however, has seen higher than expected levels of waste ingress in a number of the upper levels of the Block 5 Sub Level Cave, which has served to negatively impact the recovered grade. The Company has been going through a detailed exercise to better understand this issue and has put a plan in place to mitigate the impact. 

In the short term, this will include a revision to the draw strategy to limit planned draw tonnage for the next four months, a build-up of inventory rings to allow for increased blasting from March 2021, and a change to the drill and blast designs to optimise ore extraction. In the longer term, the Company will also investigate ore mixing programmes to better assist with the prediction of waste ingress. 

A combination of the reduced ore tonnage extraction (further to the dilution caused by the waste material ingress) and a lower grade is expected to lead to Finsch’s production for FY 2021 being ca. 15 per cent. Lower in carat volumes than the Company’s internal plan (bearing in mind production guidance remains suspended while the Covid-19 pandemic continues to cause uncertainty in the short term).