THE continuing grim conditions in the global diamond business have claimed another South African victim in the form of Petra Diamond’s Finsch mine in the Northern Cape which is being put into business rescue.
Announcing this today, Petra CEO Vivek Gadodia also said the group is looking to achieve further cost reductions at its flagship Cullinan mine near Pretoria which will implement a Section 189A process to reduce expenditure. That implies retrenchments, but Petra has given no specifics on labour cuts at this stage.
Gadodia – previously joint CEO at Petra with Juan Kemp – is now the full CEO following Kemp’s decision to agree to a “mutual separation as part of the company’s broader restructuring and operational realignment”.
Petra has been through a series of cost reduction and financial restructuring measures over the past five years as it has tried to cope with falling prices for its production of smaller-sized diamonds while trying to complete a major capital expenditure programme at the Cullinan Mine.
Demand for smaller and less valuable diamonds – typically those used in cheaper diamond jewellery and engagement rings – has been hammered by the growth in lab-grown synthetic diamonds which cost on average some 10% of the price of the natural diamond equivalent.
Despite the constant optimism from diamond company executives that the setback is temporary and the natural diamond markets will recover it is clear that conditions are getting worse not better judging from Gadodia’s latest comments.
In a business update, Gadodia said: “We are faced with an unprecedently weak diamond market, due to global macro factors as well as the recent Middle East tensions.
“In particular, we continue to see deterioration in the value of the smaller-sized diamonds where we do not expect a material, near-term recovery. Our tender results for April 2026 and May 2026 have yielded an average for Cullinan Mine of around $81/carat (compared to $109/carat in the third quarter) while Finsch averaged around $47/carat (compared to $56/carat during the third quarter).
“In addition, the sustained stronger rand has had a significant impact with no indication that this is going to change in the near future.”
Finsch is particularly exposed because its product mix is predominantly smaller-sized diamonds while Cullinan has the benefit of producing a volume of high value Type 11 stones. Cullinan is now focusing its efforts on mining from areas that are known to contain higher value stones.
Petra is in a difficult financial position because of the extent of its debt. Gadodia commented that Petra “has entered into discussions with its senior secured bank lender and has obtained the senior secured bank lender’s consent that the Finsch business rescue will not result in a default under the senior secured bank facility.”
He added: “Similarly the relevant group company has obtained the required commitment from more than 50% of the holders of the senior second lien notes to consent to certain waivers under the indenture governing the notes which will ensure that the Finsch business rescue and any potential non-compliance with the minimum liquidity requirement will not result in a default under the second senior lien notes.”
