Rough pricing returned to pre-Covid-19 levels!

Petra revenue down 8% in H1 2020 

Petra Diamonds Limited presented its’ Interim results for the six months to 31 December 2020 as H1, 2020. At Financial front Petra said, Revenue down 8% to US$178.1 million from 1,712,797 carats sold (H1 FY 2020: US$193.9 million from 1,743,807 carats sold) with the US$40.4 million proceeds from the Letlapa Tala Collection of blue diamonds, offset by weaker prices following the Covid-19 outbreak and fewer tenders during the Period. 

Diamond pricing on a like-for-like basis increased by a further 8% at the Company's January 2021 tender that is confirming that pricing has now returned to pre-Covid-19 levels. Adjusted EBITDA3 up 20% to US$80.8 million (H1 FY 2020: US$67.2 million) yielding an adjusted EBITDA margin of 45%, up from 35% in H1 FY 2020 and 22% in FY 2020; driven by the sale of the Letlapa Tala Collection and reduced mining and processing costs.

By casting their Outlook, Petra said, 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 and this situation remains under continual review. 

The Company is closely monitoring the impact of Covid-19 on its clients’ ability to attend tenders and will continue its flexible approach in planning its upcoming sales events. The Cullinan mine produced a 299 carat Type IIa white gem-quality diamond in January 2021; this stone is expected to be sold during the Company’s tender in February / March 2021.

Project 2022 is on track to deliver throughput targets for FY 2021 of ca. US$70 million. The very significant rainfall levels that continued from December through into January and February 2021 at Finsch and Koffiefontein are likely to negatively impact delivery of the throughput targets at those mines. 

Covid-19 and the ongoing care and maintenance at Williamson may similarly negatively impact on these targets. 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 announced in January that it was aware of media reports suggesting that the parcel of 71,654 carats of diamonds from the Williamson mine in Tanzania, which was blocked for export in September 2017, had been nationalised. The Company has since received communication from the Government of Tanzania that this will be dealt with as part of ongoing discussions with the Government, which are expected to resume by the end of February.

As set out in the interim update dated 9 February 2021 on the status of its work in relation to allegations of human rights abuses at the Williamson Mine in Tanzania, the Company's Tunajali Committee, comprised entirely of independent Non-Executive Directors, is undertaking a review of the output of the ongoing external investigation into these allegations 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, CEO of Petra, commented, “I am pleased that our capital restructuring is now almost complete as we work with the South African Lender Group and the BEE Lenders towards finalising the documentation required for implementation. We expect this to be completed early in March of this year. As mentioned in our last Trading Update, this marks a significant milestone in putting the Company on a sustainable footing going forward. The continued improvement in the diamond market, with prices now back at pre-COVID19 levels, is encouraging, and the recovery of the Letlapa Tala stones and other high value stones from Cullinan supported strong EBITDA growth over the comparative reporting period in FY2020. 

Challenges at Finsch relating to waste ingress, as previously reported, have been exacerbated by the impact of record rainfall in January and February that is hampering mining operations. Koffiefontein has also been impacted by significantly elevated rainfall. I am confident that the Finsch, Koffiefontein and Group Technical teams will manage these challenges to limit the impact on the operations.”