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Petra Diamonds Posts Heavy Loss

Stronger rand impacts results for South Africa-focused miner.
Feb 19, 2018 3:46 AM   By Rapaport News
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RAPAPORT... Petra Diamonds slumped to a significant loss in the first fiscal half as the South African rand strengthened against the dollar, reducing the value of two mines the company operates in the country.  

The net loss came to $117.7 million for the six-month period ending December 31, while profit from mining activities slipped 7% to $85.6 million.

The miner suffered a $118 million impairment charge — a permanent reduction in the value of an asset — at its Koffiefontein and Kimberley operations in South Africa. The stronger South African rand resulted in higher costs at these mines, slashing the value of those assets.

Sales were affected by the Tanzanian government’s seizure of a parcel of 71,654 carats from the Williamson mine. Those rough stones are currently in the hands of the government, Petra said. First-quarter strikes at some of its South African operations also dented profit, the company added.

“Our focus now is to keep on delivering from the new production blocks, particularly at Finsch and Cullinan, where the expansion programs continue to ramp up, and to further optimize the new Cullinan plant,” said CEO Johan Dippenaar (pictured). “The challenge of the strong rand has also sharpened focus on our operating and capital expenses." 

Despite a 1% drop in revenue for the first half to $225.2 million, Petra expects to meet analysts’ expectations for the full fiscal year’s sales. The company has signed a three-year wage agreement that has put an end to labor strikes, and expects to be able to sell the confiscated parcel before the end of June. Additionally, like-for-like diamond prices were up 3% to 4% at the first tender of the second fiscal half.

The performance of the rand will continue to affect Petra’s financial position, it added. A stronger local currency results in higher expenses in dollar terms. 

Petra operates the Cullinan, Finsch and Koffiefontein underground mines in South Africa, the Williamson open-pit facility in Tanzania, and a joint venture with Ekapa Mining at the Kimberley deposit, also in South Africa. 

Image: Petra Diamonds CEO Johan Dippenaar holding the 122.52-carat Cullinan Dream. Credit: Petra Diamonds
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Tags: Cullinan, Ekapa Mining, Finsch, Johan Dippenaar, KEM JV, kimberley, Koffiefontein, miner, petra, Petra Diamonds, Rapaport News, tanzania, Williamson Mine
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