Petra Diamonds calls for buyers after review of $650m debt slams into COVID-19

Petra Diamonds: Cullinan mine

PETRA Diamonds said on Friday it would seek offers for the company after concluding a strategic review aimed at finding ways to repay $650m in debt.

An option would be to sell certain assets in the group which largely consist of South African mines bought over the years from De Beers, including the famed Cullinan mine.

The London-listed company said on Friday it had “… decided to seek offers for the company, or for parts of the business or assts of the Petra Diamonds group”. The strategic review was conducted with Rothschilds & Co, a bank.

“Parties with a potential interest in making a proposal should contact the company’s advisers, Rothschild & Co,” it said. No offer had yet been made to the company.

Potential offers would be assessed before moving to a sale process. “The company will continue to update all stakeholders on this process and other aspects of the strategic review as and when appropriate,” it said.

By late May, Petra had taken steps to secure its immediate liquidity concerns. These included delaying payment of interest to holders on some $650m in bonds, and agreement with South African banks that it draw on R400m of a R1bn revolving credit facility.

As of March 31, net debt increased to $601m from $596.4m on December 31. That was before the onset of the COVID-19 pandemic which resulted in the partial shutdown of its South African operations and which appears to have contributed to its liquidity crisis.

Petra had previously shut its Williamson mine in Tanzania and had significantly reshuffled its capital expenditure profile as well as embarking on a business optimisation plan.

The development will come as a hammer blow to Richard Duffy, the former AngloGold Ashanti executive who was drafted last year with a view to turning the company’s balance sheet problems around.

Duffy succeeded Johan Dippenaar, the former CEO, and Petra’s long-standing chairman, Adonis Pouroulis, who ran the company for more than a decade together.

In the context of an extremely subdued diamond market, Petra’s assets could be scooped up for relatively bargain prices.

The company recovered 2.07 million carats in the first half of its financial year and was on track for 3.8 million carats in full-year production before the pandemic struck.

However, it reported an interim net loss after tax of $10m (2019: +57.9m) and a basic loss per share of 1.01 cents.

The prospect of restructuring may be further bad news for the South African government. Joblessness increased to about 30.1% of the working population and including people who have stopped looking for work, it may be as much as 39.7%.