Petra delivers solid full-year performance in tough market
MINING WEEKLY / 22 JULY 2019 - 12.01 / TASNEEM BULBULIA
LSE-listed Petra Diamonds delivered solid results for the financial year ended June 30, despite a difficult market environment, while it continues its transition from a period of high capital investment to a steady-state operational phase, CE Richard Duffy said on Monday.
“The focus in the short term is on driving efficiencies across the business through Project 2022 to provide a stable, consistent operating platform off which to drive improvements, supported by an appropriate organisational structure and cost base to enhance our cash flow generation and significantly reduce our net debt,” he noted.
Petra revealed in an unaudited trading update for the 12 months that its production increased to 3.87-million carats, compared with 3.84-million carats in the prior financial year.Run-of-mine (RoM) production had increased to 3.76-million carats from 3.65-million carats in the prior financial year, but surface tailings production decreased to 110 000 ct from 190 000 ct in the 2018 financial year, in line with the company’s focus on value over volume.
Petra’s Cullinan mine in South Africa recovered four gem-quality diamonds weighing more than 100 ct during the financial year under review. This included a 425.1 ct D-colour Type II gem-quality diamond that was sold for $15-million.Post period-end, a 132 ct D-colour Type II gem-quality diamond was recovered from the mine.
Full-year revenue decreased by 6% year-on-year to $463.6-million, reflecting a weaker diamond market.Petra’s realised diamond prices reduced by about 5% per carat, in line with market movement during the period.
Operational capital expenditure (capex), excluding capitalised borrowing costs, reduced to $81.7-million from $129.6-million in the 2018 financial year and was within budget and in line with the company’s reducing capex profile.The company generated net free cash of $17-million in the second half of the 2019 financial year, adjusted for diamond debtors, after repaying $20-million against black economic empowerment (BEE) debt and $23.6-million in bond coupon payments.
Net debt at period end was $560.5-million, or $537.5-million when adjusted for diamond debtors, compared with $559.3-million as at December 31, 2018, or $554.9-million when adjusted for diamond debtors.The South African lenders to the company’s BEE partners have agreed to an amended repayment profile of the about $54.2-million BEE banking debt.
The balance will be spread over the period to November 2021 with about $5-million payable in November this year, followed by four equal bi-annual instalments of $12.3-million each from May 2020.
Project 2022 has been launched with a project team established, led by a senior project executive, to identify and drive efficiencies and improvement across all aspects of the business to enable the company to deliver an initial target of $150-million to $200-million free cash flow over a three-year period, based on flat nominal pricing over the three years.2020 GUIDANCE
Petra expects to produce about 3.8-million carats of diamonds in the 2020 financial year, while RoM production is expected to remain largely flat at 3.75-million carats and tailings production decreases to 50 000 ct.
RoM production will come from the newly established underground block cave and sub-level caves at Cullinan, Finsch and Koffiefontein, as well as surface RoM production from the Williamson openpit and the Finsch overburden RoM stockpiles.
The relatively small contribution of surface tailings from Finsch and Cullinan mines is mainly owing to the depletion of the pre-79 tailings at Finsch, while tailings production at Cullinan will be curtailed to about 0.1 Mcts for full year 2020 owing to weak pricing especially evident in smaller size ranges.The economic evaluation of Cullinan’s 160-million-tonne tailings resource will be monitored continuously and could be included in future mine plans should market conditions and pricing of smaller diamonds improve.
The company has assumed flat diamond prices and an exchange rate of R14 to the dollar for the 2020 full-year.Capex for the 2020 financial year is expected to reach $43-million, $29-million lower than previously expected, and continue on the declining trend since peak capex was reached in full-year 2016.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER