South Africa- and Tanzania-focused diamond producer Petra Diamonds is targeting free cash flow generation starting next year despite difficult market conditions currently dogging the industry after the company accrued $44 million (R755m) yearly cost reductions.
Petra Diamonds owns the Williamson mine in Tanzania and operates two diamond mines in South Africa. It has transitioned the Finsch mine in SA from a 2.8 million tons per year operation to a 2.2m tons per year, with greater emphasis on planning and maintenance, said Richard Duffy, CEO of Petra Diamonds.
“With a smoothed capital profile and $44m reduction in annual operating costs going forward ($30m at our SA operations and $14m at Williamson), we are targeting free cash flow generation from FY 2025. We acknowledge the difficult market conditions through FY 2024 and believe that prices will stabilise through to the end of FY 2024 with some improvement expected in 2025,” explained Duffy.
He added that Petra Diamonds had throughout the full year to June 2024 “demonstrated its agility in responding to a weaker pricing environment” by building resilience. This included reduction of cash expenditures by $75m through deferment of capital expansion programmes and cost reduction.
This kind of approach was also being instituted by other producers that are having to rebalance inventory across the pipeline. Duffy continues to “see supportive market fundamentals in the medium and longer term” outlook.
At its SA operations, Petra Diamonds is rolling out traceability technology which will enable the tracing of its +0.5 carat gem-quality diamonds across the value chain.
“This will provide consumers with assurance and verification around provenance and origin along with information on our sustainability credentials which are supported through purchases of our diamonds. We believe traceability technologies will further differentiate natural diamonds through highlighting their rarity, uniqueness and benefits to stakeholders,” said Duffy.
During the year under review, revenues in Petra Diamonds rose from $325m to $367m. It realised average prices for the period under review of $116 per carat, down 17% compared to the previous period, attributable to a 12.4% decline in like-for-like prices while the balance has been blamed by the company on product mix movements.
Total on-mine cash costs for the same period rose 11% due to the ramp-up at Williamson and cost inflation. A build-up of diamond inventory in the prior year of $34m and a subsequent release in the 2024 financial year of $37m contributed to adjusted mining and processing costs increasing from $202m to $296m.
With adjusted net loss for the period of $46m, Petra Diamonds tipped into an adjusted loss per share of 21 cents compared to 3 cents loss per share in 2023.
Consolidated net debt, however, decreased from $212m as at December 31, 2023, to $201m as at year-end under review. During the period under review, Petra Diamonds raised its commitments under its R1 billion revolving credit facility with Absa Bank to R1.75bn, providing it with an additional $41m liquidity headroom.
BUSINESS REPORT