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Petra hikes FY output, pricing drags revenue 10%

27th July 2015

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – Despite “challenging operating conditions”, London-listed Petra Diamonds has achieved record production for the year to June 30, as output edged up 2% year-on-year to 3.2-million carats.

However, flat diamond pricing and static sales weighed on the company’s revenue for the year under review, while reduced output from its Cullinan and Koffiefontein operations and the idled Helam mine had partially offset the gains made by higher production at Finsch, Kimberley Underground and the Tanzania-based Williamson mine.

Petra sold 3.16-million carats in the 12 months to June, a 1% uptick on the 3.13-million carats sold in the prior year.

Revenue for the year contracted 10% to $425-million on the back of a 10% lower average diamond price and the impact of mining heavily diluted areas on both grade and product mix.

Further, the rough diamond market experienced challenging conditions in the 2015 financial year.

“In the short term, the market continues to face headwinds due to various factors, including the limited liquidity currently available in the downstream pipeline, the impact of the strong US dollar and a slowdown in retail demand in China,” explained Petra CEO Johan Dippenaar.

However, he added that retail demand remained stable in the US market and was registering growth in other emerging markets, albeit at lower levels.

Meanwhile, measures introduced by the miner to mitigate the lower grades of Cullinan’s mature area, where output plunged 11% to 729 496 ct during the year to June, started to yield positive results, with a run-of-mine grade of 23.1 carats per hundred tonnes (cpht) achieved for the fourth quarter, compared with the 20.9 cpht reported in the third quarter.

“It is encouraging to see that measures to manage the grade profile at Cullinan have yielded successful results in the last quarter and are expected to continue to assist until undiluted ore meaningfully contributes to our production profile from the second half of the 2016 financial year,” he said.

Petra was halfway through its new growth strategy that aimed to shift production from mature mining areas to new undiluted areas.

In line with this, the construction of the new, $142.8-million modern, fit-for-purpose processing plant at Cullinan was also progressing well.

The processing plant, which would be completed within two years, was expected to deliver a 10% improvement in grade, a three-year payback, an internal rate of return of 25%, a 12% hike in energy efficiency per tonne, a 6% to 8% increase in revenue per tonne and about R20/t to R25/t in operating cost savings.

“Additionally, our various expansion programmes remain on track to meet our long-term target of five-million carats by the 2019 financial year,” Dippenaar said.

The company expected a 3% to 6% increase in diamond production to between 3.3-million and 4.4-million carats for the 2016 financial year.

Meanwhile, Petra invested $235.8-million in capital expenditure during the year under review – $45-million above the guidance for the year, mainly owing to spending at both Finsch and Cullinan being brought forward as certain aspects of the projects ran ahead of schedule.

Petra posted cash at bank of $166.2-million as at June 30, a surge on the $34-million reported in the prior year, while the group’s net debt had increased from $124.9-million during the year to June 2014, to $172.1-million by June 2015.

Petra expected to publish its preliminary results for the year ended June 30 on September 18.

Edited by Creamer Media Reporter

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