Petra Diamonds swings to loss amid diamond production decline

Petra Diamonds has reported that it swung to a pre-tax loss of $38.8m (£31.31m) in its preliminary results for FY2023, down from a pre-tax profit of $139.5m (£112.58) the previous year.

It also confirmed its adjusted profit before tax amounted to $8.3m (£6.69m), compared with $155.1m a year prior.

Petra said the performance comes amid a 42% decline in revenues to $325.3m (£262.26m), driven by decline in total diamond production and average realised price to US$139/ct.

Its adjusted profit from mining activities also decreased 58% to $122.7m (£98.92m) mainly due to lower sales of exceptional stones during the year.

Meanwhile, adjusted loss per share of USc2.96, was down from USc48.01 profit (FY 2022)

Additionally, operational free cash outflow dropped to $66.5m (£53.61m) due to reduced sales, including the deferral of sales to FY 2024, and the planned increase in capital expenditure

In FY 2023, the group also recorded 17 lost time injuries (LTIs), a 13% increase from FY 2022, which translated to a lost time injury frequency rate (LTIFR) of 0.24 per 200,000 hours worked, up from 0.22 in FY 2022.

Petra said that this largely reflected the ramping up of the two extension projects at Cullinan Mine and Finsch and a single, blasting-related, incident at Cullinan Mine in which four employees were regrettably injured and have since fully recovered.

In FY 2024, the group said it will continue to focus on stabilising operational performance.

It stated that its projects remain on track to contribute to the group’s increased annual production by up to 1.3 million carats in FY 2026 as it continues to develop the long-term potential of its large resource base.

It also expects rough diamond demand will continue to be subdued in the short-term on account of increased polished inventory, prolonged weakness in the Chinese market, lab-grown diamond sales in the bridal jewellery segment and higher interest rates impacting the mid-stream in particular.

Richard Duffy, chief executive officer of Petra, said: “FY 2023 has demonstrated the improved resilience of Petra’s operating model as we realise value from our operations, placing us in a strong position to deliver on our stated target of increasing annual group production by up to 1.3 million carats in FY 2026 as we continue to develop the long-term potential of our large resource base.

“Production in FY 2023 at 2.67 Mcts, while marginally below revised guidance on the back of some operating challenges, showed an improving trend during the second half as operating performance stabilised. Williamson restarted production in July 2023 and is ramping up ahead of schedule. Key Group operational guidance is maintained.”

He added: “In line with our objective of reducing gross debt while investing in organic growth and life extension, we successfully repurchased just over one-third, or $144.6m (£116.58m), of the company’s 2026 loan notes during the year, both strengthening our balance sheet and reducing future interest costs. This, coupled with our flexible sales process, enabled us to delay the sales of some diamonds from our last two Tenders of FY 2023, in expectation of improved pricing.

“…Actions taken to strengthen our business and improve cash flow generation, together with our capital discipline around investing in the growth and life extension of our operations, means that Petra is resilient in the short-term and well placed in the medium to longer term to leverage these continued supportive diamond market fundamentals.”