Petra to reach five-million-carat target earlier than expected

JOHANNESBURG (miningweekly.com) – Following a year of strong growth and record production, Petra Diamonds now expects to reach its five-million-carat-a-year production target in the 2018 financial year – a year sooner than previously anticipated.

Petra produced 3.7-million carats in the year ended June 30, a 16% increase on the 3.2-million carats produced in the 2015 financial year and above guidance of 3.6-million to 3.65-million carats.

A greater contribution from undiluted run-of-mine (RoM) ore and additional production from the newly established Kimberley Ekapa Mining (KEM) operation following the acquisition of Kimberley Mines in January, contributed to the higher production, Petra said in a trading update on Monday.

It added that the group’s main expansion projects at Finsch and Cullinan also continued to progress well, with key milestones delivered in line with expectations.

Operational expenditure for the financial year reached $294.2-million, 10% lower than the guidance of $326.7-million, owing to the weakening of the rand against the dollar, which was partially offset by inflationary pressures, acceleration of spend at the Cullinan and Finsch projects and $2.5-million related to additional waste stripping at the Williamson mine, in Tanzania.

“Our peak capital expenditure (capex) year is now behind us and due to the advanced nature of our development programmes and the new mining areas coming on stream, we expect the group as a whole to start generating free cash flow from the 2017 financial year onwards.

“Petra is fully financed to completion of its expansion programmes, all of which remain on track, and its financial position is in line with expectations, including the related debt facility covenant measurements,” CEO Johan Dippenaar said.

Petra’s revenue increased 1% year-on-year to $430.9-million in the year ended June 30, mainly as a result of higher volumes sold, most notably tailings carats from KEM. Carats sold increased 9% year-on-year to 3.47-million, compared with 3.17-million in the 2015 financial year.

Rough diamond prices on a like-for-like basis were down 6% year-on-year, but the market showed signs of recovery and stabilisation during the second half of the financial year under review.

OUTLOOK FOR 2017
Petra expects its production to increase by 25% to 30% to between 4.6-million and 4.8-million carats for the 2017 financial year, with 2.1-million carats to be produced in the first half of the financial year and 2.6-million carats in the second half of the year.

The diamond miner expects to reach its five-million-carat-a-year target in the 2018 financial year, after which production is expected to increase to 5.3-million carats in the 2019 financial year.

Capex for the 2017 financial year is expected to reach $218-million, compared with the previously anticipated $175-million. Capex is expected to fall to $130-million in the 2018 financial year and then to $85-million in the 2019 financial year.