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Petra Diamonds Limited lost some of their lustre, sliding 5.3% to 7.65p after the diamond miner underwhelmed with a trading update.
Revenue in the three months to the end of September – the first quarter of the company’s fiscal year – was down 23% to US$61.6 million from US$80.2 million in the same period of 2018.
The company sold 603,626 carats, compared to 626,541 a year earlier, at prices roughly 4% lower than in the three months to the end of June.
Petra Diamonds will hold a special tender of the 20.08-carat blue diamond. The stone, a gem-quality Type llb diamond, was recovered from the Cullinan mine in South Africa last month.
Viewings will take place at Petra’s diamond marketing offices in Johannesburg from November 1-7 and at the Diamond and Exchange and Export Center from November 8-15.
South Africa’s Petra Diamonds could make up to $15 million for a 20.08 carat blue rough diamond it recovered in September at its iconic Cullinan mine, when it goes for sale at a planned tender in Johannesburg next month.
Investment bank Berenberg valued the “exceptional” blue gem quality diamond at between $10 and $15 million, based on prices Petra has achieved for similar roughs from Cullinan in previous years. In 2015, the miner sold “The Blue Moon of Josephine”, a 29.6 carat blue stone, for $48.5 million, marking a world record price per carat at auction for any diamond at the time.
Challenging conditions facing the global diamond industry were underlined on Monday after London-listed Petra Diamonds reported widening losses.
Petra said the industry was dealing with its worst market conditions since the financial crisis that began in 2008, as the company reported a full-year loss of $258m.
The global diamond market is struggling with lower prices and an oversupply of stones. In addition US-China tensions and pro-democracy protests in Hong Kong have hit demand in the industry’s key markets.
“You need a world that’s firing on all cylinders for diamonds to do extremely well,” Richard Hatch, an analyst at Berenberg said. “It’s a luxury, discretionary spend.”
Shares in Petra dropped to a record low of 7.17p on Monday, according to Refinitiv data. They ended the day down 6 per cent at 7.58p.
Stress is being felt across the industry. Last month De Beers, the world’s second-largest diamond producer, said its sales fell 44 per cent from a year earlier. Shares in other listed diamond producers have also sunk this year with Canada-listed Mountain Province Diamonds down 45 per cent and London-listed Gem Diamonds off by 35 per cent.
Petra’s loss included a non-cash impairment charge of $247m due to what the company said was a “more conservative” assumption for diamond prices. It had reported a $203m post-tax loss a year earlier. Revenues fell 6 per cent to $463.6m.
Petra, which runs the Cullinan diamond mine in South Africa, said diamond prices fell 4 per cent in its September tender from the fourth quarter ending in June.
Richard Duffy, who has been chief executive since February, said it would take between 12 to 18 months for the market to stabilise.
“It is a tough market,” Mr Duffy told the Financial Times. “But when it turns, it tends to turn quite quickly.”
Petra now expects that diamond prices will be flat for the next two financial years, rather than up by 3 per cent, above a long-term US inflation rate of 2.5 per cent a year, as previously forecast.
Petra, which also has mines in Tanzania, said it had discussed with its bankers the possibility it might breach certain covenants on its loans this year and next. It said the banks had “reaffirmed” their support.
Mr Duffy said the company would look to reduce its $595m of net debt by improving the efficiency of its mining operations. The company said it had “sufficient liquidity headroom” for at least 12 months.
Source: ft.com
KIMBERLEY Ekapa Mining, the last major diamond company operating in Kimberley, has imposed a three-month, 12.5% salary reduction across the board on its staff in an attempt to remain economically viable in the face of slumping diamond prices and renewed problems with illegal miners on its property.
The operation was formerly run as a joint venture with London-listed, Petra Diamonds, which sold its 75.9% controlling stake in July last year to partner Ekapa for R300m.
At the time, Ekapa was experiencing major problems with illegal miners operating on its properties, but had – hopefully – reached a workable solution after surrendering 600 hectares of its ground to the illegal miners provided they stayed off the rest of the company’s lease area.
That was in terms of a deal brokered by the Department of Mineral Resources & Energy and the Sol Plaatje Municipality which runs Kimberley. The deal, lauded at the time by mines minister, Gwede Mantashe, was called the Batho Pele initiative and the former illegal miners were reclassified as artisanal miners.
Yet KEM CEO, Jahn Hohne, has now revealed that KEM is still spending R3m a month on security measures to keep the miners off mine property after further incidents including arson on some of the company’s haul vehicles.
Hohne could not be reached directly for comment.
In reply to written questions the company issued a statement saying: “Kimberley Ekapa Mining is reliably informed that an alleged new third force of illegal miners is attempting to muscle in and around the Batho Pele initiative.
“They are using force; trespassing; conducting illegal mining; sabotaging mine infrastructure and allegedly being supported by illegal diamond traders”.
Asked what was being done about the situation, the company replied: “Kimberley Ekapa Mining is working closely with all relevant stakeholders … to ensure the success of the initiative”.
According to the statement the current crunch in the global diamond market, which has hit small diamond prices particularly hard, “… equates to an approximately 20% year-on-year price decrease in dollar terms for Ekapa’s mining operations in Kimberley”.
Hohne had originally proposed a 25% wage cut which was vehemently rejected by the National Union of Mineworkers and the union has also rejected the 12.5% cut now imposed.
This is despite Hohne’s commitment that the reductions will be repaid “… from the earliest available distributable profits when the new business model is successful”.
The statement said management was engaging directly with the NUM in the Northern Cape and that “… at the time of this response Kimberley Ekapa Mining had not received any formal notification of a dispute being declared”.
Source: miningmx
South Africa’s Petra Diamonds has found yet another big rock at its iconic Cullinan mine, the third coloured diamond over 100 carats since March that has been unearthed at the operation.
“It is the third Type II D colour gem quality diamond weighing more than 100 carats recovered at Cullinan since March”
The 209.9 carat, D colour, Type II gem quality diamond is also the fourth such stone discovered by Petra so far this financial year.
Shares in Petra Diamonds jumped more than 8% on Friday after the miner announced it had dug up a 425.1 carat, D colour, Type II gem quality diamond at its iconic Cullinan mine in South Africa.
The discovery comes less than a month after Petra found a 100.83 carat gem-quality white diamond at the same mine, source of the world’s biggest ever diamond, which was unearthed in 1905.
“Earlier in March, Petra had recovered a 100.83 carat, white D-colour type II gem-quality stone”
The company, which appointed last month former gold miner Richard Duffy as chief executive, said both recoveries demonstrated the frequency of such large stones at Cullinan.
Petra, which has been seeking to turn around its fortunes after piling up debt to expand the operation, plans to sell the 425.1 carat diamond during the June quarter.
Diamond miners are struggling across the board, especially those producing cheaper and smaller stones where there is too much supply. In December, some of Rio Tinto’s customers refused to buy cheaper diamonds, while De Beers has been forced to cut prices and offer concessions to buyers.
South Africa’s Petra Diamonds is keeping founder Adonis Pouroulis as chairman, despite some shareholders voting against his renewal at the 2018 annual general meeting.
The company, which last month appointed former gold miner Richard Duffy as chief executive effective in April, said the appointment of a new chair was “not appropriate” at this time.
Petra said the board and nomination committee had considered the 22.12% vote against Pouroulis’ re-election as chairman in the context of Petra’s ongoing three-year succession plan.
Despite concerns raised by some shareholders, the diamond miner said the current chairman continued to “demonstrate the independence of thought and challenge required for his role, notwithstanding the number of years he has served as a director.”
Pouroulis founded Petra in 1997 and has been its chairman ever since.
The company has been seeking to turn around its fortunes after piling up debt to expand its iconic Cullinan mine, in South Africa, where the world’s largest-ever diamond was found in 1905.
Source:mining.com
Petra Diamonds has appointed former gold miner Richard Duffy as chief executive as it grapples with a heavy debt load following a period of expansion.
Mr Duffy was previously chief financial officer and head of African operations at AngloGold Ashanti before setting up a company that develops renewable energy projects in Africa.
Mr Duffy “will be critical to drive Petra’s transition from a phase of intensive capital expenditure and expansion to a focus on steady-state, cash-generative operation,” Petra’s chairman, Adonis Pouroulis, said. The appointment comes as Petra faces lower diamond prices and $559m of net debt that it needs to pay off.
Diamond prices were about 4 per cent lower in the six months ending December due to “industry wide lower prices for lower quality” small stones, the company said on Monday. Average pricing for diamonds at the company’s flagship Cullinan mine in South Africa fell to $96 a carat, the lowest six-month level since 2010.
Petra said adjusted earnings before interest tax and other items, or ebitda, fell 6 per cent to $75.6m in the second half of last year. It reported a net loss of $57.9m, from a loss of $117.7m in the same period a year earlier. Revenues rose by 8 per cent to $207.1m as diamonds sold increased by 15 per cent to 1.74m carats. The company said reduction of its debt is a priority.
It has $90.7m in cash at the bank and said net debt is expected to be “largely flat” during the first half of this year if diamond prices remain at the same levels.
Source: ft.com
Shares of Petra Diamonds Ltd slid as much as 10 percent on Monday after lower diamond prices at its flagship Cullinan mine and an increase in net debt took the shine off higher half-year revenue.
The company has been trying to keep a lid on debt after heavy investments and a stronger South African rand had burdened the miner, which pays in rands and earns in dollars.
Petra’s net debt jumped to $557.2 million (422.06 million pounds) in the six months to Dec. 31 from $538.9 million as at Sept. 30. The company was forced to raise $178 million last May by issuing equity to cut its debt burden.
Rough diamond prices fell to $96 per carat from $140 per carat in the previous year at the Cullinan mine, which in 1905 yielded the Cullinan diamond the largest rough gem diamond ever found and now part of the Crown Jewels of the United Kingdom.
“The significantly lower realised Cullinan pricing and the impact on cashflow generation sees us take renewed caution,” said RBC, which cut the miner’s price target to 40 pence from 65 pence after the company’s half-year report.
Petra posted an 8 percent jump in revenue to $207.1 million, about 10 percent below RBC forecasts of $230 million, hurt by lower pricing at Cullinan. The company stuck to its production forecast 3.8 – 4.0 million carats for fiscal 2019.
Shares of the miner, which runs four mines in South Africa and one in Tanzania, were 8.5 percent lower at 41.12 pence.
Source: Euronews
Tough times in some parts of the diamond-mining industry has prompted an innovative solution, a four-way merger to create a new southern African diamond specialist.
The proposal, from the London office of the German bank, Berenberg, could see Gem Diamonds, Petra Diamonds, Lucara Diamond Corporation and Firestone Diamonds emerge as a single business with enhanced financial metrics courtesy of cost savings and a focus on big, high-quality gems.
If the deal happens, and at this stage it is just a proposal from Berenberg and not something the diamond-miners have embraced, the new business would have mines in South Africa, Botswana, Tanzania and Lesotho.
3% By Volume, 8% by Value
Collective diamond production would total five million carats a year, which is equivalent to 3% of global output, but more importantly the proposed business would account for 8% of diamond supply by value.
The difference between volume and value is the key to Berenberg’s plan which has been published at a time when miners of small and low-grade diamonds are battling a flooded market whereas companies able to supply high-quality gems are generating strong profits.
An uncut 25 carat diamond mined in Botswana.
Values At Trough Levels
Berenberg said in a research report titled “Consolidating African diamond mining” that current valuations of diamond mining companies were at trough levels with lacklustre enthusiasm for the sector.
“We think something new is needed to return this sector to its former glory,” Berenberg said.
The bank said the logical way to start the process would be for a transaction between Lucara and Gem, which would create the go-to business for large diamonds, followed by a transaction with Petra and then with Firestone rolled into the structure.
Each company has its own production profile but Lucara is the best known for big diamonds having given the world the monster Lesedi La Rona in 2015, an 1109 carat stone which sold for $53 million and has since been cut into 67 smaller gems by Graf Diamonds.
Strong Cash Flow
According to Berenberg’s multi-stage merger proposal the new business would emerge with annual revenue of around $1.1 billion and free cash flow of $200 million.
The merged business would overcome problems which hurt investor interest in smaller diamond miners including low stock-market value, high debt levels, project risk, limited growth options and a lack of return to shareholders.
“Our $1.3 billion market capitalization business would have listings in Canada, London and Sweden and, through the ability to pay an attractive dividend (we calculate a possible yield of 7%-to-8%) and the potential to attract investment from a range of global investors,” Berenberg said.