[miningmx.com] – UK-listed Petra Diamonds lifted its exposure to its
South African mines by buying a stake owned by an offshore investment house in its
black economic empowerment company, Sedibeng.
Most notably, Petra Diamonds now has an 8.38% higher stake in its Finsch mine, an
operation it recently bought from De Beers and an asset that will help take Petra to
full-year production of an estimated 2.2 million carats, according to Johan Dippenaar,
CEO of Petra Diamonds.
Petra Diamonds now owns 82.38% of Finsch. It also lifted its stake in the Kimberley
Underground mine 12.8% to 86%, and has higher interests in five other diamond
mines in its portfolio.
Petra Diamonds offered $17.8m for shares owned by Sirius Resources Fund 1, which
ultimately owned shares in Sedibeng, of which $16m has been paid.
“There is no cash uplift from the deals, as all the cash flow accrues to the company
anyway. We didn’t want to expose Sedibeng to the vagaries of the market,’ said
Dippenaar.
Commenting on the market, Petra Diamonds said it expected improved conditions
during the second half of its financial year, following a difficult interim period in which
it posted a disappointing $26.7m taxed loss. This was owing to unrealised or non-
cash foreign exchange losses. There was also a cash outflow of $38.1m related to
large closing diamond stock levels.
The company reported a profit on mining, however, of $30.7m; some $6m better than
in the first half of the previous financial year.
“The second half of our 2012 financial year will see significantly higher production and
sales, set against a more stable diamond market. We remain on target to deliver on
our stated growth strategy,’ Dippenaar said in the company’s results announcement.
Petra Diamonds is endeavouring to become a five-million-carat-a-year diamond
producer. Commenting on where the growth would come from, Dippenaar told
Miningmx the growth was all organic.
“An additional 1.4 million carats will come from the Cullinan mine, and a further
500,000 carats from Finsch. We’re already ready to produce 2.2 million carats this
year so Williamson [a mine in Tanzania] will add a further few hundred thousand
carats in diamonds a year. That’s where the growth comes from,’ Dippenaar said.
Petra guided the market earlier this month on its weaker financial results, a
development described as “disappointing’ by Numis Securities analyst Andy Davidson.
Davidson said that diamond values at $128/carat and $129/carat from Cullinan and
Finsch respectively were well below Numis’ expectations of $150/carat.
However, Petra said that prices had stabilised in November, while in February “prices
strengthened slightly at the company’s first tender…’
“Feedback from the company’s client base is generally positive concerning current
global demand for rough diamonds. Whilst uncertainty may continue in the first half
of calendar 2012, there is an expectation that demand will pick up in the second half
of this financial year,’ Dippenaar said in the company’s results announcement.
