Petra Diamonds lays out new $100m/y expansion plans

Petra Diamonds Letlapa Tala Collection

PETRA Diamonds on Thursday detailed expansion plans for its Finsch and Cullinan mines in South Africa in which production is projected to between 3.4 to 3.7 million carats by 2028.

The increase in output represents an increase over three years of between 15% and 17% requiring sustaining and expansion capital of about $100m annually. The expansion will be self-funded, said Petra CEO Richard Duffy.

The UK listed diamond producer also announced the appointment of Johan Snyman as its CFO from October. Formerly vice-president of financial reporting at AngloGold Ashanti, Snyman will take the reins from Petra’s CFO of eight years Jacques Breytenbach who said in March he would step down for personal reasons.

The trajectory of Petra’s growth plans, and their funding, has been in the air for most of this year, largely owing to diamond market uncertainty.

For instance, in January, Petra CEO Richard Duffy said the group remained on track for production of 2.9 million to 3.2m carats for the year to end-June 2024. This was adjusted to 2.75 million and 2.85 million carats by April having earlier announced the restructuring of Finsch mine.

An investor day, planned for 2pm BST today will flesh out Petra’s growth and capital outlay expectations, as well as the projected life of mine of its two anchor operations. Duffy will be hoping to put a foot on the ball for Petra given this year’s market volatility.

As demonstrated by another disappointing sales cycle from De Beers earlier this week, the recovery in the diamond market is taking longer than expected.

“We continue to expect a protracted U-shaped recovery in demand,” said De Beers CEO Al Cook on Wednesday. The group’s fifth cycle sales totalled $315m compared to $383m in the fourth cycle, and 31% lower than fifth cycle sales last year.

Morgan Stanley said polished natural diamonds were in “a downward spiral”. In a report earlier this month the bank said there was “little evidence that prices are at an inflection point”. It was “yet to see pointers that the tide is about to turn”.

Said Duffy today: “We have worked hard to deliver an updated business profile in response to ongoing market challenges and to further enhance our resilience to future market and capital cycles”. He added the company had been derisked. As announced earlier, costs would be reduced by $30m a year.

Shares in Petra gained nearly 3% in early London trade. Year to date however has seen massive pressure on the firm’s valuation which has fallen 37%.