Diamond-miner Petra Diamonds is taking strong steps to ensure that it survives the economic downturn by focusing on mines that generate cash and closing down most of its cash-consuming exploration activities, says company CEO Johan Dippenaar.

He says that while the downturn has caused substantially reduced diamond prices, Petra’s portfolio of mining assets is still able to meet monthly cash costs.

Dippenaar adds that, over the past month, there have been positive signs that economic activity will improve and that it is a cycle that the world will recover from.

“I am not saying we are over the worst, but must remark on the fact that there have been some positive indicators lately,” says Dippenaar.

Further, the financial crisis has hurt diamond prices and shaken the stability of prices that have existed for years. He says that although it is no longer easy for large companies to justify expenditure on expansions, this will be positive for the supply and demand aspects of the industry, as it is among a number of factors that will ensure a fairly tight supply.

Dippenaar adds that there have not been any recent significant deposit findings and if any do take place, they will take many years to come on stream. He says that all the significant diamond mines in the world have existed for many years and the geology of diamond orebodies is carrot shaped, becoming physically smaller as they become deeper.

It is also not as easy to maintain high production levels from a smaller footprint. He adds that some mines will have to start mining underground, which also does not allow for the volumes achieved in opencast mining.

Dippenaar suggests that, once the crisis is over, the fun- damentals for the exciting growth in the Indian and Chinese markets will remain intact. He says that the sheer numbers of middle-class consumers adding to their economies bodes well for a product such as diamonds.

“Diamonds remain the ultimate gift of love and affection, and people keep on buying diamonds for special occasions. You can buy a diamond to suit your budget,” he adds.

Blue Diamond
The 7,03-ct fancy vivid blue, internally flawless, cushion-shaped diamond Petra dis- covered in its Cullinan mine has sold for a record price of $9 488 754, or $1 349 752/ct, at Sotheby’s Magnificent Jewels auction, in Geneva, establishing a new record price per carat for any gemstone sold at an auction and the highest price for a fancy vivid blue diamond sold at an auction.

Dippenaar says that, besides the revenue that the sale of the diamond generates for the company, it is a strong indi- cation that acquiring the mines from diamond-miner De Beers was a strategic move, and that the mines still have an important role to play in the mining future of the company and South Africa, as a whole.

“The mines still have much life left in them if they are managed correctly, and they will continue to be great con- tributors to the growth of Petra,” says Dippenaar.

He says that the Cullinan mine is arguably the most famous mine in the world for producing special stones and there is nothing in its geology that suggests that more special stones will not be produced. He says that the mine is known for producing blue stones, as well as one-quarter of all the 400-ct diamonds found and the largest diamond discovered, the Cullinan, at 3 106 ct in the rough.

Petra plans to produce one-million carats in its financial year, ending June 2009. Dippenaar says that the com- pany has a portfolio of assets that will continue to provide returns for its shareholders as the company expands its production substantially in the years to come.

“The diamond industry is an exciting industry and these have been trying times, but we believe the long-term fundamentals of the diamond market remain as strong as ever,” concludes Dippenaar.

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