Petra Diamonds navigates weak rough diamond markets with strategic adjustments

The Finsch operation is also transitioning from continuous to a two-shift operation. Picture: Supplied

The Finsch operation is also transitioning from continuous to a two-shift operation. Picture: Supplied

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Petra Diamonds is taking proactive measures to adapt to a challenging landscape marked by weakness in rough diamond markets.

In a recent announcement, Petra Diamonds CEO Richard Duffy revealed that the company is postponing auctions and ramping up production in response to market conditions while also focusing on diversifying its product offerings.

The diamond producer reported a significant revenue achievement, raising $76 million from the sale of approximately 600 000 carats during the first and second tender cycles for its fiscal year ending in 2025.

Despite the overall market downturn, Petra’s enhanced product mix contributed to a commendable 22% increase in average prices for their auctions, although this was somewhat tempered by a 9% decline in like-for-like prices, notably affecting smaller diamond fractions.

“Our combined first and second tenders indicate continued weakness in the rough diamond market, more than offset by Petra’s product mix,” Duffy said.

“Product mix showed improvement across the operations, with Cullinan Mine, in particular, benefiting from an 18.85 carat blue diamond, of exceptional quality in terms of colour and clarity, that was sold for $8.5m into a partnership agreement and a top light brown 405 carat diamond of exceptional clarity, from Cullinan Mine that was sold for $4.7m.”

During the quarter to end September, Petra Diamonds lifted up diamond production by 7% to 679 625 carats compared to the previous quarter, boosted by solid performances from Cullinan Mine and Williamson.

The Finsch operation is also transitioning from continuous to a two-shift operation.

However, the diamond producer sought to respond to weaker market conditions through deferment of the sale of the majority of its South African produce. This was in support of steps taken by other major producers to manage supply.

Petra Diamonds’ revenue for the quarter only reflected proceeds of of the $8.5m for the 18.85 carats blue diamond from Cullinan Mine and $14m from Williamson.

The company drew down $48m from its revolving credit facility (RCF), which will be lowered down once the proceeds from its recently closed diamond tenders are received.

“We have continued with the open market repurchase (OMR) of our 2026 2L Notes, cancelling $8m during the quarter,” Duffy said.

“This brings the total of 2L Notes cancelled as at 30 September 2024 to $13m…we will continue to look at opportunities to further reduce our 2L debt through the OMR programme as we consider our options to refinance the 2L Notes ahead of their maturity in March 2026.”

Petra Diamonds has completed the disposal of the Koffiefontein operation to to Stargems Group. The transaction will “enable economic activity to continue under new” ownership.

Resultantly, Petra will avoid incurring closure-related costs of $15-18m as it carries out further reviews of cash generation opportunities to mitigate the impact of ongoing weakness in the diamond market and a stronger rand.

“We remain committed to our target of net cash generation for the full year in FY 2025. We continue to expect prices to show some improvement in FY 2025, with market fundamentals being supportive in the medium-to-longer term.”

BUSINESS REPORT