PETRA DIAMONDS SAYS CORE EARNINGS FELL 8 PERCENT

Following a strike at its South Africa operations and the blocking of a consignment of diamonds in Tanzania, Petra Diamonds Ltd said core earnings fell 8 per cent in the first half of the year.

The miner issued a profit warning and cut its production forecast last month after it faced a string of issues, including a three-week strike at its South Africa operations and the blocking of a consignment of diamonds in Tanzania that led it to flag a possible breach of two of its debt covenants in October.

Petra, which was accused of under-declaring the value of the stones, is caught up in an industrywide crackdown by the Tanzanian government in an effort to reap more revenue from its minerals.

Petra has denied this. The company has also been hit by the strengthening of the South African rand. Miners in South Africa pay costs in rand and earn revenue in dollars. The company’s adjusted earnings before interest, tax, depreciation and amortisation fell to $80.1 million in the six months ended December 31, from $87.1 million a year ago.

Petra said output rose 9.6 per cent to 2.2 million carats (mcts) in the first half, while carats sold fell 5.2 per cent to 1.8 million due to the blocked diamond parcel not being sold. The company said it expects to produce 2.4 – 2.5 mcts in the second half and added that it expects 2018 revenue in line with consensus.

“The diamond market is currently experiencing positive momentum post the healthy Christmas sales period, with pricing up about 3 per cent to 4 per cent sequentially on a like-for-like basis based on the company’s first tender for the second half of the year,” Petra said.

The company, which is currently at peak debt levels at $644.7 million, also said it has sufficient banking facilities to meet its working capital and capital development requirements and it maintains headroom against its revised financial covenants going forward. It expects net debt of about $600 million by June 30, at the higher end of the $560 million to $600 million range it forecast in January.