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Petra Diamonds Returns a Profit in 1H

Feb 20, 2014 4:26 AM   By Deena Taylor
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RAPAPORT... Petra Diamonds posted a net profit of $28.4 million during the fiscal half year that ended on December 31 versus a loss of $15.2 million one year earlier. Profit was driven by a significant increase in the company's revenue and production during the period.

Petra reported that revenue grew 19 percent year on year to $185.5 million during the six months, while the volume of sales rose 33 percent to 1,140,479 million carats. Petra’s production increased 31 percent to 1,635,716 million carats and it intends to produce  3 million carats for the whole of fiscal 2014.

During the first half, Petra's operating profit from mining activity jumped 115 percent to $73.4 million, representing an operating margin of 39.6 percent. The company noted that for the first time since 2008, the group was able to fund its capital expenditure, which amounted to $85.3 million, from operating cash flow. 

Petra's diamond inventory was worth $49.4 million on December 31, compared with $45.4 million one year ago.

The company contended that while the rough diamond market was weak at the start of the reporting period, it firmed up due to strong seasonal sales, increasing global economic confidence and restocking throughout the diamond pipeline.

"We look forward to a strong second half, incorporating a continued firm rough diamond market, higher carat sales and higher revenue and cash flows augmented by the sale proceeds of the 29.60-carat blue diamond from Cullinan," said Johan Dippenaar, Petra's CEO.

Petra's 29.60-carat blue diamond  sold on February 14 for $25.6 million or $862,780 per carat during a highly competitive bidding process. At its recent tender, the company sold 432,187 carats for $60.2 million or $139 per carat.

In the long term, the company maintains a positive outlook for the diamond market supported by continued economic recovery in the U.S. and growing demand from emerging consumer markets.

Petra owns controlling shares in the Cullinan mine, Finsch, Koffiefontein, Kimberley underground, and three fissure mines in South Africa, as well as the Williamson mine in Tanzania but it intends to focus on expansion into new mining areas to increase its cash flow.

Based on the company's current operations and expansion plans, stated production growth, diamond prices and other relevant factors, Petra expects free cash flow to allow the company to consider the commencement of dividend payments from the end of fiscal 2016, according to its statement.

Additionally, the company reported that it entered into a cooperation agreement in Botswana with Manica Minerals led by Peter Hildebrand and renowned kimberlite expert John Gurney. The agreement will combine the extensive exploration experience of both parties and provide access to prospective Botswana Precious Stones Prospecting Licenses covering approximately 23,000 square kilometers.

Petra is also evaluating the KX36 kimberlite in Botswana and intensifying its search for other kimberlites in the surrounding area.  
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