Petra Diamonds drops full-year output target

Reuters

SOUTH Africa-focused mining firm Petra Diamonds lowered its full-year production target by about 7 percent yesterday, citing volatility of recovered grades, particularly at its Finsch and Cullinan mines.

Petra, which has seven operating mines in South Africa and one in Tanzania, said it was expecting to produce about 2.65 million carats for the year to June, down from its previous forecast of 2.85 million carats.

The company said the management of run-of-mine grades, which is the raw mined material as it is delivered and prior to any treatment, remained a challenge specifically at Finsch and Cullinan due to the mature nature and dilution of current mining areas.

Petra bought the Finsch mine, South Africa’s second-largest diamond operation by output, from De Beers in 2011.

“Management has demonstrated their ability at making these assets work,” Investec Securities said. “Near-term production appears a little disappointing but not major.”

Production rose 31 percent year on year to 1.25 million carats for the six months to December last year, mainly due to the inclusion of output from the Finsch mine. Petra produced 2.2 million carats in its previous financial year.

Revenue was up 54 percent to $156.3 million (R1.4 billion).

“We expect to be cash positive from our 2016 financial year, so we will look at paying dividends before 2019,” chief executive Johan Dippenaar said.

London-listed Petra said its production target of 5 million carats a year by the 2019 financial year remained on track.

Dippenaar said the rough diamond market was flat for the majority of the first half of the financial year.

However, with the market firming and prices increasing slightly towards the end of the half, he was optimistic prices could pick up by year end.

The shares fell 4.25 percent to £1.1483 (R16.26) by 2.30pm in London yesterday. – Reuters