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Diamond Seizure Dents Petra’s Sales
Jan 29, 2018 3:22 AM
By Rapaport News
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RAPAPORT... Petra Diamonds’ sales fell in the first fiscal half after
the Tanzanian government confiscated a parcel of rough stones from its
Williamson mine.
Authorities seized 71,654 carats destined for Antwerp in
September, claiming that Petra had undervalued the
goods, according to reports. While production at Williamson has resumed following a four-day closure immediately
after the incident, the government is still holding the parcel, Petra said
Monday.
Petra’s inability to ship those goods to its marketing
office in Belgium led sales volume to decline 5% to 1.8 million carats in the
six months ending December 31. Revenue slipped 1% to $225.2 million.
“Petra will continue to engage with the [Tanzanian
government] in order to find a resolution to release the blocked parcel,” the company
said.
Company-wide production rose 10% to a record 2.2 million carats
during the period as expansion projects outweighed the impact of labor
disruption in South Africa. The main growth in
output was at the Cullinan mine, where a new processing plant and increased
production at the C-Cut extension drove a 45% jump in diamond recovery to 607,235
carats.
However, the group lowered its overall production outlook to
4.6 million to 4.7 million carats for the fiscal year ending June 30, having
previously predicted output of 4.8 million to 5 million carats. That mainly
reflects plans to reduce recovery levels at Cullinan, where it has decided to forego higher volume in order to achieve a greater average
price.
The company could maintain a higher grade at the South
African mine by recovering larger quantities of small, low-value diamonds, it
noted. However, doing that would be “uneconomic” and contradict the company’s emphasis
on value over volume.
Meanwhile, the recent strengthening of the South African
rand is likely to reduce the company’s profit for the fiscal year, Petra
warned. Earnings before interest, taxes, depreciation and amortization (EBITDA)
will be 10% to 15% below analysts’ estimates, it said.
As all but one of Petra’s mines are in South Africa, many of
its costs are in rand, and a stronger local currency results in higher expenses
in dollar terms. Petra operates the Cullinan, Finsch and Koffiefontein mines in
the country, and is engaged in a joint venture with Ekapa Mining at the
Kimberley mine.
Petra’s share price fell 15% at press time on Monday following the
results.
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Tags:
Antwerp, Belgium, Cullinan Mine, diamond, Ekapa Mining, Finsch, Johan Dippenaar, kimberley, Koffiefontein, Petra Diamonds, Rapaport News, South Africa, tanzania, Williamson Mine
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