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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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