PETRA Diamonds is to defer $65m of its capital extension programmes at the Cullinan and Finsch mines with immediate effect but will not spell out the medium term impact on future production levels at this stage.
CEO Richard Duffy commented that “production guidance for financial year (FY) 2024 is maintained although it is now expected to be at the lower end of the guidance range of 2.9 to 3.2 million carats.
“The impact of the project deferrals on production and capex guidance for FY 2025 and FY 2026 will be provided on a mine-by-mine basis once the value re-engineering and re-planning work has been completed.
“We expect to communicate this, together with our interim results announcement in February 2024 and will provide further information on the potential of Petra’s assets at the company ‘s capital markets day, now anticipated in quarter four of FY 2024.”
Petra’s plans were to ramp up output by 1.3m carats over the next three years but, in September, Miningmx reported market concerns that this new production would co-incide with a structurally weaker diamond market because of weakness in the global economy and rising competition from lab-grown diamonds.
Duffy repeated his confidence in the long-term future of the diamond market but said the steps being taken at Petra were aimed at delivering “increased production into a stronger pricing environment.”
“While diamond inventories remain elevated in both rough and polished goods, we are confident that the discipline shown by diamond producers as well as the Indian diamond import moratorium to mid-December will lead to a recovery in pricing once demand strength returns.
“Through adapting our cost base and deferring two of our capital projects we are targeting cash savings of up to $75m by June 2024.”
Duffy added that Petra is “taking immediate and prudent steps to provide further financial flexibility and preserve the company’s short-to-medium liquidity as well as increase its headroom and flexibility until such time as the market has sufficiently stabilised.”
At the Cullinan mine Petra has deferred the C-Cut extension project until the end of June 2024 and also partially deferred the CC1E project until the end of June 2024.
At Finsch, the 3-level SLC extension has been deferred until the end of June 2024 although the 78-level Phase 2 project will continue as planned to bring these production areas on line during FY 2024.
Petra management intends to “assess further value-engineering opportunities for its capital development programmes aimed at improving efficiencies and/or lowering overall costs.”
Petra had previously announced that it was in discussions with Absa Bank to increase the company’s existing R1bn revolving credit facility by up to R750m “to provide additional operating and sales flexibility in the event of protracted market weakness.”
In March 2021 Petra carried out a huge restructuring programme which reduced its then debt levels from $700m to $290.7m through the issue of new equity to its creditors. That debt had been run up through Petra’s ambitious expansion programmes at the Cullinan and Finsch mines taking place a time of diamond market weakness.