Driven by significantly reduced diamond prices, especially in its March tender, diamond miner Petra Diamonds reports a drop in revenue of 32% year-on-year to $91.3-million for the third quarter of the financial year ended March 31.
Reflecting stable market conditions before the Covid-19 pandemic took hold internationally, the company notes that its February tender saw pricing, on a like-for-like basis, up marginally in comparison to prices achieved in the first half of the 2020 financial year.
As a result of depressed and opportunistic bidding for its diamonds at its fifth sales cycle of the 2020 financial year, particularly in the larger size, better quality and higher value categories, the company chose to only sell a portion of its South African goods, representing about 75% by volume and about 50% by value.
The remaining goods were exported to Antwerp and of these, about 75% were subsequently sold at Petra’s Antwerp marketing office. Prices achieved at this tender were down about 27% overall on a like-for-like basis in comparison to those achieved at the February tender.
A total of 24 254 ct, comprising higher-value 10.8 ct single diamonds, as well as parcels across the larger size and higher-quality (gem and clivage) ranges, were withdrawn and will be offered for sale in the next tender cycle.
In terms of production, Petra reports a 1% increase in carats, to 932 456 ct, with a 2% increase in run-of-mine (RoM) production to 913 017 ct.
For the nine months of the financial year, to date, Petra’s production increased 2% to three-million carats, while RoM production increased by 2% to 2.91-million carats.
The company notes that this production result was achieved despite the disruptions caused by load-shedding by power producer Eskom in the second quarter and the Covid-19 lockdown measures implemented towards the end of the third quarter, demonstrating the delivery of significant throughput benefits through the proactive implementation of Petra’s Project 2022.
CE Richard Duffy says the company continues to prioritise the safety and health of its workforce in implementing prescribed Covid-19 measures as it moved the South African mines to operating at 50% of their workforces and will continue to carefully manage the increase towards full production over time.
He adds that, although restrictions brought about by lockdowns implemented internationally resulted in the cancellation of the company’s May tender, Petra is seeing early signs of markets reopening and it is considering the viability of holding a June tender.
The miner’s Gauteng-based Cullinan mine’s third-quarter production was down 7% to 400 542 ct, from 432 001 ct in the comparable period of 2019, while RoM tonnes treated reduced 3%, mostly owing to the lockdown towards the end of the period end coupled with the RoM grade declining 4% to 38.5 ct per hundred tonnes (cpht).
The Northern Cape-based Finsch mine’s third quarter production increased 15% to 444 578 ct, compared to 387 370 ct in the comparable period of 2019. This was supported by improving RoM grades delivering 60.4 cpht, up 21% from the 50.1 cpht achieved in the comparative period.
The improved grade is the result of only treating underground RoM tonnages and no lower-grade surface material, as was the case in the comparative period.
The Free State-based Koffiefontein mine’s third quarter production was in line with that of the prior year at 17 307 ct, despite being impacted on by the lockdown initiated towards the end of the period.
Petra’s Tanzania-based Williamson operation experienced a 20% reduction in third-quarter production to 70 029 ct as a result of a pit slump of about 1.3-million tonnes that occurred in January in an area of the south-western sector of the pit.
As a result of these factors, the Williamson mine was placed on care and maintenance in mid-April, owing to the unprecedented depressed market environment.
The company states that it will look to resume operations once diamond prices are at a level that make it operationally sustainable.
MARKET AND SALES
The diamond market has been severely impacted by the Covid-19 outbreak, which has significantly reduced activity throughout the pipeline, from production, rough sales, trading, cutting and polishing right through to consumer sales, according to Petra.
The miner notes that the time it takes the market to recover will depend on the success with which the Covid-19 pandemic can be arrested, thereby limiting the length and severity of the economic downturn, as well as the lifting of restrictions on the movement of people and products for activities across the pipeline to be resumed safely.
However, Petra also notes that there are early indications of improving market conditions in China and other Asian economies, while, in the US, a small number of retail outlets are beginning to reopen.