Petra reports diamond prices at pre-Covid-19 levels, but keeps guidance suspended

PETRA Diamonds reported declines in production and revenue for the first half of its 2021 financial year, but it said diamond pricing had returned to pre-Covid-19 levels which would help bring to an end a chastening 18-month period in which it avoided bankruptcy.

Most regulatory approvals had been received for a debt-for-equity swap hatched last year in which $650m in bondholder debt is to be exchanged for shares worth about 91% of the issued share capital. It had earlier cast around for buyers.

“This marks a significant milestone in putting the company on a sustainable footing going forward,” said Richard Duffy, CEO of Petra Diamonds. Matthew Glowasky, who is representing bondholder interests, has been appointed to Petra‚Äôs board in terms of one of the conditions of the equity-for-debt swap.

After spending six months in mothballs, Petra was assessing the re-opening of Williamson mine in Tanzania. “Williamson remains under care and maintenance and we are considering various options to resume mining operations,” Duffy said.

The biggest source of cheer, however, is the diamond market.

Petra said in its trading statement that diamond pricing on a like-for-like basis increased 8% at its January 15 tender at which $30.5m was earned from the sale of 382,000 carats in rough diamond sales. These sales included goods deferred for sale from the first half of the year owing to Covid-19 related travel disruptions.

Revenue in the first half was 8% lower (despite having sold special diamonds – the Letlapa Collection – for $40m) as a result of depressed pricing, as well as 16% lower production – itself a function of lower grade from Finsch mine in South Africa.

“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,” said Duffy. The company said it expected to see further pricing improvements this year.

However, Petra has kept production guidance suspended as the resurgence of Covid-19 could have an impact on sale logistics and timing.

It also said that annualised economic benefits of Project 2022, a business improvement initiative aimed at improving cash flow, would come in at $70m compared to previous expectations of $101m. This was owing to the decline in grade at Finsch, which had led to lower volumes in order to manage the effects of dilution, and Williamson’s mothballing.

Commenting on media speculation that the Tanzanian government had nationalised a 71,654 carat parcel of rough diamonds, Petra said it had written to the mines minister of Tanzania seeking an update on the parcel. The diamonds, blocked for export by the government in 2017, were said to be worth $27m at the time.

Petra also said it intended to report back in March on a study into allegations by civil rights groups of human rights abuses involving artisanal miners at the Williamson mine.

Petra is scheduled to report its interim results on February 16.