Robust rough demand from the midstream! Petra

Petra suspends production guidance for FY 2021 

The diamond market has continued to show improved demand for rough diamonds, as evidenced by the recent strong sales from the majors De Beers and Alrosa, further to continued robust demand from the midstream, following positive consumer sales during the holiday retail season. There are expectations that this improved demand will continue throughout Q1 CY 2021. 

However, the current resurgence of Covid-19 in many countries poses a significant risk to the logistics and timing of sales in H2 FY 2021. Due to the ongoing uncertainty around the impact of Covid-19, production guidance for FY 2021 remains suspended. Furthermore, the Williamson mine remains on care and maintenance, as has been the case since April 2020; this situation remains under continual review.

Project 2022 throughput targets have been impacted by reduced grade at Finsch as a result of the increased waste ingress and reduced volumes to manage the dilution, as mentioned above, and Williamson remaining on care and maintenance for longer than initially planned. 

Although Cullinan remains on track to deliver on its throughput stretch target for FY 2021, the impact of reduced throughput at Finsch and Williamson is expected to lower the annualised contribution of the throughput initiatives from some US$101 million by the end of FY 2021, as previously disclosed, to around US$70 million. 

Any longer term impact of increased waste ingress at Finsch will be clarified as part of the current life of mine planning process. Petra continues to expect the Project 2022 cost saving initiatives to deliver an annualised contribution of ca. US$22 million from the end of Q3 FY 2021.

The Company’s Tunajali Committee, comprised entirely of independent Non-Executive Directors, will undertake a review of the output of the external investigation into the alleged breaches of human rights at the Williamson mine and will make recommendations to address any findings. The Company intends to make a further announcement on these issues by the end of March 2021.

Richard Duffy, Chief Executive of Petra Diamonds, commented, “We are living through a time of great uncertainty as a result of Covid-19, which has put considerable pressure on the business and all of our employees. 

I am grateful for the continued fortitude and resilience of our entire Petra team in the face of this challenge and extend our sincerest condolences to the families and friends of the four employees who have tragically lost their lives to Covid-19. 

I am delighted that we have now secured the support of our note holders, lenders and shareholders for the proposed restructuring of the Group’s balance sheet, which will formally complete in the coming weeks following the receipt of the requisite regulatory approval. This marks a significant milestone in putting the Company on a sustainable footing going forward. The improvement in the market, with prices from our January sale now back at pre-Covid levels, is very encouraging and will provide some support as we look to optimise the value of our asset base. 

Our operations in South Africa and Cullinan in particular, continue to perform well despite emerging operational challenges at Finsch, resulting from waste ingress that has negatively impacted on its carat production. Mitigation plans have been developed and are currently being implemented to address this. Williamson remains under care and maintenance and we are considering various options to resume mining operations.”