Following a “depressed and opportunistic” time for its diamonds at its fifth sales cycle of this year, LSE-listed Petra Diamonds has chosen 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 the company’s Antwerp marketing office, the London-listed diamond miner said on April 9.
Rough diamond prices achieved at the fifth sales cycle were down by about 27% overall on a like-for-like basis in comparison to those achieved at the fourth sales cycle in February.
A total of 24 254 ct, comprising higher-value +10.8 ct single diamonds, as well as parcels across the size and quality ranges, were withdrawn and will be sold privately or at a subsequent sales cycle, when market conditions allow.
Petra was due to hold two further sales in May and June before the end of its financial year.
However, the company indicated that it would continue to monitor market conditions before taking any decision on the continuation of the planned May tender, while the outlook for the June sale remained uncertain and would depend on travel and export conditions at the time, as well as activity levels in the key diamond buying centres of India, Israel, China and the US.
Petra on April 9 said it “remains focused on taking all actions necessary to support the measures to limit the outbreak of Covid-19” in the countries in which the company operates and to decrease the threat to its employees, contractors and other local stakeholders.
Petra’s operations in South Africa continue to operate at significantly scaled down levels in order to comply with the requirements of the 21-day lockdown period.
While the lockdown period is due to end at midnight April 16, Petra lamented that the operational outlook was uncertain and would depend upon the governmental approach with regard to managing the spread of Covid-19 in the country.
Additionally, in light of the unprecedented depressed market environment, the company has declared force majeure at the Williamson mine, in Tanzania, and said it would be placing the operation on care and maintenance from the middle of April, with only essential services to be carried out in order to protect the mine’s assets and resources.
According to the miner, this decision was necessary to preserve the Williamson mine’s cash position in order to protect the long-term sustainability of the operation. Operations are expected to resume once diamond prices are at a level that makes it “operationally sustainable”.
Meanwhile, discussions with the government in relation to various issues, including the overdue value-added tax receivables and the blocked diamond parcel, were ongoing but had been interrupted by the Covid-19 outbreak.
In the light of the above, Petra said it continued to closely monitor and manage its liquidity risk, modelling the potential impact on its cashflows of a protracted period of operational shutdown and depressed international diamond prices.
Based on this further downside modelling, the board expects it may be necessary for the company to draw on its bank debt facilities in the near term.
Petra has taken a strategic decision to fully draw down its R500-million working capital facility and is in discussions with its South African lender group to access the R1-billion revolving credit facility.
Taking all of this into account, the miner will be delaying the release of its third quarter results to late May in order to “be in a position to provide a fuller update to the market, particularly around its liquidity and capital structure”.
Given the unprecedented trading conditions, CEO Richard Duffy said the company was “taking all steps necessary” to preserve the company’s liquidity position in order to withstand this difficult period until market conditions improve.