
PRODUCTION from Williamson mine in Tanzania and receipt of revenue from a delayed sale enabled Petra Diamonds to cut net debt as of its year-end.
This was despite lower-than-guided production which came in at 2.73 million carats for the 12 month period ended June. Net debt fell to $201m from $212m at the interim stage.
Diamonds sold increased a third to 3.12 million carats while revenue rose 13% to $366m. “This increase was driven by Williamson ramping up to steady-state operations and the planned benefit of the delayed sale of the final tender in FY 2023,” said Richard Duffy.
Production from Williamson was suspended in November 2022 following a breach in a tailings dam which flooded the near vicinity. The mine was reopened last year.
Despite the lift in revenue, Petra remains constrained by depressed diamond prices. Duffy stuck to previous market guidance that conditions would remain difficult – and volatile – this year. He added, however: “We expect diamond prices to show modest recovery in the new year with market fundamentals providing pricing support in the medium and longer-term”.
“Cash discipline efforts have trimmed the net debt position sooner than we expected, which at the margin should start to act as oil on troubled waters,” said Peter Mallin-Jones, an analyst for UK-based Peel Hunt in a note on Tuesday morning. “Management reiterated guidance, implying – all else equal – a faster reduction in net debt starting now,” he said.
At an investor day on June 27, Duffy laid out new life of mine and capital spending plans primarily for Petra’s Finsch and Cullinan mines in South Africa.
Having cut costs by $30m a year, Duffy forecast free cash flow (after capital and debt servicing) of $180m over the next five years assuming the low end of its diamond price forecasts. The company assumed 2025 prices of $125 to $135 per carat at Cullinan and $98 to $105m for Finsch.
The improved cash flow would enable the company to tackle pressure on its balance sheet where net debt to Ebitda increased to 3.2x as of end-December (end-December 2022: 1.6x).