
PETRA Diamonds would not make “silly decisions” regarding a new cost cutting programme warning of the “fatigue” on labour where jobs were shed in a previous restructuring exercise in April last year.
The diamond miner said in December it had lowered its price assumptions for the 2025 financial year to March 31 amid disappointing trading conditions. In addition to a second round of cost cuts it had also delayed a refinancing plan.
“We consider risk in the [restructuring] process and so we won’t be silly about decisions we make. We need to ensure we make the business sustainable not just in the context of the current market but going forward,” said Richard Duffy, CEO of Petra in a presentation of its second quarter and interim operating results.
On an interim basis diamond production fell 2% to 1.4 million carats. There was a $42m year-on-year hit on the revenue line, which came in at $146m for the six months ended December. This was partly due to prices – down 10%, especially in lower sizes – and partly owing to the sale of previously deferred sales that then took place during the six months ended December 2023.
The latest cost cutting process is the responsibility of Vivek Gadodia, Petra’s chief restructuring officer who said today: “The challenge here is we need to absolutely protect our revenue line. It is not an easy task”.
Looming large in Petra’s thinking is some $273m in loan notes that are due to mature in March 2026.
Details of how Petra intended to recapitalise the balance sheet would be published on February 18, the date set aside for its interim results presentation. Today, however, Petra said net debt increased to $225m as of December 31 compared to $201m at June 30. This was “mainly due to the continued weak diamond market and timing of tender sales”.
There were four tenders scheduled for the second half of the financial year compared to three in the first half. “The effect of the lower diamond pricing environment was partly offset by cost control and efficiencies in capital spend profiles,” it said.
In its December 20 update, Petra said that Cullinan rough diamonds would sell at between $120 to $130 per carat compared to a previous estimate of $125 to $135/carat.
Average prices for Finsch production would range between $80 to $90/carat and between $170 and $200/carats for Williamson mine production. These assumptions compare to previous estimates of $98 to $105/carat for Finsch and $200 to $225/carat for Wiliamson, a mine in Tanzania.
Commenting on the current diamond market, Duffy said today in notes to the operating update he was encouraged by recent reports of stronger online jewellery demand in the US and stronger jewellery demand in India over the festive season and Diwali.
“This, together with reduced supply from the major producers and industry-wide marketing efforts, should help rebalance inventories,” he said.