Diamond prices continue to soar but Petra CEO warns about the impact of the war in Ukraine

Richard Duffy, CEO, Petra Diamonds

Petra Diamonds reported a 43% increase in sales revenues for the nine months to end March as what CEO Richard Duffy described in February as a “structural change” in the diamond market continued to drive diamond prices up.

Duffy cautioned, however, that he expected “some pull back in diamond prices” from the elevated levels recorded at Petra’s March tender sales because of the economic impact of the war in Ukraine.

He commented, “Petra is closely monitoring the impact of the war in Ukraine and sanctions on Russian companies.  We also continue to monitor COVID-19 and the impact it may have on clients’ ability to attend tenders and we will remain flexible in our approach to planning upcoming sales events.”

Despite this he expected the structural shift in the diamond market “to continue to provide positive momentum.”

At an investor day presentation held in February Duffy told analysts that “the long-predicted supply squeeze  is being reflected over all the diamond categories”  and added there was  a   “ very strong demand pull into an inventory pipeline where inventories are largely depleted and the ability of suppliers to provide inventory to the market is very low.”

He commented, “this is important because it is a structural change – not a bubble or a blip – and it is supported by supply/demand fundamentals.  This suggests we will have a robust and supportive market going forward.”

Petra reported a 37.6% “like for like” increase in realised diamond prices in the March tender compared with the previous tender which closed in December 2021. Duffy noted that the sale of “exceptional stones” – diamonds with a value and selling price of more than $5m per stone – contributed $83.4m to total sales revenue for the nine months to end-March.

Petra sold a total of 2.33m carats in the nine months to end-March 2022 (previous comparable period – 2,78m carats) for revenues of $405.4m ($284.2m) . The group further strengthened its balance sheet dropping consolidated net debt to $107m ( end-December 2021 – $152.3m).

Duffy also fnally confirmed the statement made by the National Union of Mineworkers on March 28 that it is to cut jobs at the Koffiefontein mine. The mine was slated for closure in 2025 but Duffy said the intention was to reduce production and improve efficiencies at the operation ahead of this in order to curtail negative cash flow.

He commented, “regretfully, this is expected to result in job losses.”