16th Apr 2015 06:56
LONDON (Alliance News) - Petra Diamonds PLC Thursday said its results for the current financial year are expected to be below the range of current market estimates due to poorer diamond grades it is finding at one of its mines, although it reiterated it is trying to tackle the issue and expects grades at that mine to improve in coming quarters.
The diamond miner is suffering lower run-of-mine grades at its Cullinanin mine in South Africa, an old mine where the production areas are increasingly mature and highly diluted and it's having to deal with high-density waste material.
It is taking steps to try and improve the run-of-mine grade profile at Cullinanin and expects grades to improve over coming quarters. However, that wasn't enough to prevent its profit warning, and it also cut its full-year group production guidance to 3.2 million carats from 3.3 million carats previously.
The company said production rose 1% to 2.4 million carats in the nine months to end-March, but was up 6% at 791,443 carats in the third quarter. However, third-quarter revenue fell by almost a third to USD96.1 million, which it blamed on the earlier timing of the March tender. It said the earlier timing resulted in lower sales volumes at the tender, and a change in the mix towards higher volumes of smaller stones and fewer high-quality stones.
It said the diamond market stabilised in the third quarter of the financial year, with like-for-like prices slightly up on the fiscal second quarter. However, the company achieved lower average prices than it had guided for in January due to the change in sales mix towards higher volumes of smaller diamonds.
Petra also said the cutting and polishing of the 122 carat blue diamond that it sold last September but retained a 15% interest has now finished and has produced four polished stones "of significance". It is now deciding with its partners how best to market the stones.
Despite the profit warning and big sales decline, Petra at cash at the bank of USD41.8 million at the end of March, up from USD29.7 million a year earlier, while net debt was down to USD99.3 million from USD118.0 million a year earlier.
It reiterated that it will pay its maiden dividend this financial year, and kept the level at 2.0 pence a share.
Chief Executive Johan Dippenaar was optimistic of a turnaround in fortunes.
"We have delivered production growth in the third quarter by an increase in tonnes treated at all operations. The current reliance on production from the mature mining areas at our underground mines is expected to change over the coming quarters as the company passes through this transitional period and starts to access undiluted ore," he said.
By Steve McGrath; [email protected]; @stevemcgrath1
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