Petra Diamonds has taken off the market diamonds produced in South Africa, and originally scheduled for sale this month as a way of building up demand and in line with other major producers that are restricting supply in light of current depressed prices of these precious stones.
With two operational mines in South Africa and another in Tanzania, Petra Diamonds now expects prices to rebound due to the constricted supply on global diamond markets. The expected pick-up in demand for diamonds ahead of the traditionally lucrative festive season is also projected to boost prices and prospects for the industry.
“We have taken the proactive decision to defer the upcoming August/September tender from our South African operations to support steps taken by major producers to restrict supply in this weaker demand period,” Petra Diamonds’ CEO Richard Duffy said yesterday.
He explained: “Our expectation is that supply discipline, together with the expected seasonally stronger demand as we head towards the festive season will provide some pricing support later in the calendar year.”
The company had thus moved the diamonds initially meant for the August/September tender to mid-October.
In July, Petra Diamonds said it had lowered its net debt by $11 million (R203m) during the half-year period to the end of June. Carats sold for the full year had also registered growth of about 36%, though revenue for the period fell by 13% due to persistently low diamond prices.
The company is gearing up to deliver annual cost-savings of as much as $30m to help generate net-free cash from the current financial year onwards, and “continue to deleverage and provide flexibility with regard to refinancing”.
Duffy said the company’s recent steps to create a stronger balance sheet had provided it with “flexibility around the timing of our tenders to respond to prevailing market conditions”. The company has “adequate liquidity, including available and undrawn balances on our existing revolving credit” facility.
These resources would be used to fund Petra Diamonds’s working capital requirements.
Although the company’s rough diamond parcels from the South Africa operations were now set to be auctioned in October, the scheduled tender for stones from the Williamson mine in Tanzania remains scheduled.
Duffy has previously said that the current weakness in the diamond market is expected to continue through to the end of the calendar year amid pricing volatility. However, he has stated that diamond prices were expected “to show modest recovery in the new year, with market fundamentals providing pricing support” in the medium and longer term.
In June, Petra Diamonds received average prices of $111 per carat compared to $118 per carat attained last month. It also sold 9% lesser carats in diamonds – about 337 000 carats – compared to its sales volumes for May, 2024.
BUSINESS REPORT