JOHANNESBURG (miningweekly.com) – Southern Africa-focused miner Petra Diamonds expects its production for the 2017 financial year to rise to between 4.4-million and 4.6-million carats, before reaching its long-term target of five-million carats in 2018, a year earlier than expected, and rising further to about 5.3-million carats by 2019.
This increase comes on the back of a 16% increase in production to 3.7-million carats in the year ended June 30, well ahead of company guidance.

Its expansion programmes are also on track and within budget, with both the new sublevel cave at Finsch and the new block cave at Cullinan expected to deliver undiluted ore in excess of one-million tonnes each during 2017.

The new Cullinan plant also remains on track to be fully operational by the fourth quarter of next year.

The diamond miner recorded an 18% year-on-year increase in adjusted earnings before interest, taxes, depreciation, and amortisation to $164.3-million in the year ended June 30, while its adjusted net profit after tax rose 1% to $63.6-milion.

Group on-mine cash costs decreased 3%, owing to a 7% increase in tonnes treated and a 7% increase in inflationary costs, but offset by translation of the South African operations’ rand costs at a weaker exchange rate.

“We delivered a strong set of results, notwithstanding the number of challenges faced during the year, which included managing production from heavily diluted areas at our underground mines, as well as market related pressure on prices particularly in the first half,” CEO Johan Dippenaar said in a statement.

He added that he was “particularly pleased” with the continued steady progress made with the expansion programmes, which have remained on target over the last seven years.

“The 2017 financial year is forecast to be the first year that we reap the benefit of this work as we are in line to become free cash flow positive in the second half of this year, with our cash flow profile rising strongly thereafter.

“We now enter the final phase of our capital expansion programmes in a strong position, with a robust balance sheet, efficient cost base and the drive to succeed,” he highlighted.

Despite a cautious outlook on the diamond market, Petra has made a solid start to the new financial year, with the first tender, held in early September, yielding about $94-million from the sale of 745 000 ct.

Two more tenders will be held during the first half of 2017.

Dippenaar commented in a webcast of the company’s results presentation on Monday that the market can expect some supply constraints, as global rough diamond production rose only 2% to 127-million carats, paired with no new finds and cuts in exploration expenditure.
However, while global supply is expected to decline slowly after 2020, the demand for diamonds is still increasing, bolstered by an improving US market and an increase from China and India.

Dippenaar said that as the US economy continues to improve, its retail demand will continue to perform well.

The bridal sector also provides a certain level of immunity to fluctuating economic conditions with diamond bridal jewellery demand increasingly taking hold in emerging markets, including China and India.