Petra cuts output target amid sluggish diamond price recovery

Richard Duffy, CEO, Petra Diamonds

PETRA Diamonds remained stuck firmly in the red for the six months to end-December and the outlook for the full year to end-June is poor as the group has cut production guidance and is expecting a slower recovery in diamond prices.

Nearly all the key fundamentals turned against the diamond miner as it reported a basic loss per share of 4.87 US cents (previous comparable period – restated loss of 9.86 USc a share) while consolidated net debt jumped to $212.4m ($90.2m) and operational free cash flow turned to a negative $21.2m from a positive $12.5m.

CEO Richard Duffy has dropped production guidance for the full year to end-June to between 2.75 million and 2.85m carats compared with previous guidance of 2.9m to 3.2m carats. As recently as January 16, Duffy commented that Petra was “on track” to reach the previous production guidance.

He said today the revised forecast resulted from “unforeseen underground mechanical issues which emerged at Finsch post period”.

Duffy has also dropped diamond pricing assumptions for the 2024 financial year at all three of the group’s mines with the assumptions for the flagship Cullinan operation dipping to between $105 and $125 per carat from the previous assumptions announced in October of between  $110 and $130/carat.

What Duffy has not done yet is spell out the implications for Petra’s medium and long-term production profile as a result of the sweeping cuts in capital expenditure he announced in November.

At the time he said he expected to provide this information with the release of the interim results. Instead, Duffy stated in today’s interim results announcement that “work is on-going to further optimise costs and future extension capital expenditure, the results of which will be presented at an investor event later in 2024 along with details of the life-of-mine potential of Petra’s assets”.

Speaking on a webcast to investors today Duffy modified this indicating the information should be provided before end-June this year.

Petra’s original expansion plans were to ramp up diamond output by 1.3m carats over the next three financial years.

Duffy remained, as ever, optimistic over the medium to longer-term future of the diamond market. “Whilst we believe that prices have now bottomed, we expect pricing to recover more slowly than initially thought. We continue to see a supportive market in the medium to longer term.

“We are on track to deliver the $75m cash savings announced in November 2023 with cost savings expected to contribute around $10m.

“We are replanning the resumption of our capital projects to deliver a smoothed capital and growth profile with a commensurately lower cost structure to be sustainably net cash generative from financial year 2025.”