Petra to restructure Finsch in effort to stem cash flow leakage

Richard Duffy, CEO, Petra Diamonds

PETRA Diamonds has issued a restructuring notice to employees at its Finsch mine in South Africa as part of efforts to stem negative cash flow.

The UK-listed miner said on Monday it hoped the measure would reduce operating costs by $30m a year starting in its 2025 financial year. This is better than the previous $10m/year target.

Richard Duffy, CEO of Petra said today that the cost cutting push would “transition Petra to a more smoothed capital profile”. This would enable “sustainable net free cash flow generation” despite the slump in diamond prices. The group previously announced a delay in certain capital programmes.

Duffy also remarked the diamond market was taking longer to recover than anticipated owing to “ongoing economic uncertainty and weakness in China”. Details on the impact of the restructuring would be announced in June, the company said.

Finsch will be reduced to a run of mine of 2.2 million tons from the current production of 2.8 million tons a year. Cost savings at Cullinan mine were targeted on “currently planned throughput tonnages going forward”, the company said.

Miningmx reported in February that Petra remained stuck firmly in the red for the six months to end-December (2024 financial year).

Nearly all the key fundamentals turned against the diamond miner during the period as it reported a basic loss per share of 4.87 US cents (previous comparable period – restated loss of 9.86 USc a share). 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.

Petra consequently dropped production guidance for the full year to end-June to between 2.75 million and 2.85 million carats compared with previous guidance of 2.9 million to 3.2 million carats.

Koffiefontein saved

Petra also announced today it had found a buyer for its Koffiefontein mine in the Free State saving it $15m to $18m in closure costs. A definitive transaction agreement had been signed with diamond trader Stargems which is numbered among De Beers’ customers.

Koffiefontein will be ‘sold’ for a nominal cash consideration considering the savings on both closure and environmental liabilities for which Petra last provided $23.1m. After completion, Petra will remain liable for funding certain ongoing social commitments relating to Koffiefontein that were made during Petra’s ownership, the group said. The sale was also conditions on consent from South Africa’s mineral resources and energy department.

Mining was opened at Koffiefontein in 1870. It was sold by De Beers to Petra Diamonds in 2007, but placed on care and maintenance by Petra in late 2022.

Despite its operational history, Koffiefontein is not exhausted. According to a June 2021 assessment, it has a gross resource base of 5.25 million carats including 1.11 million carats in the indicated resource category accessible through underground mining. Petra said previously that “it may be feasible for another owner to extend the mine’s life”.