Petra mulls full-year dividend despite $17.6m interim net loss

21st February 2023 By: Marleny Arnoldi - Deputy Editor Online

Petra mulls full-year dividend despite $17.6m interim net loss

Photo by: Creamer Media

London-listed Petra Diamonds says the actions it has taken to strengthen the business and improve cashflow generation, together with capital discipline, place the company in good stead for the remainder of the current financial year and for the following years, despite the company posting an interim net loss of $17.6-million.

CEO Richard Duffy says the fundamentals of the diamond market will continue to support prices, with demand for luxury goods remaining robust in the US, notwithstanding economic volatility.

He also expects China's economic recovery to benefit diamond prices in the near to medium term.

In the six months ended December 31, Petra generated adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of $77.4-million, compared with adjusted Ebitda of $151-million in the prior comparable six months.

The company’s net loss after tax came to $17.6-million, compared with a net profit of $49-million in the prior comparable period.

Duffy attributes the lower earnings to a lack of contribution from exceptional diamonds from the Cullinan and Williamson mines, as well as lower sales volumes.

The company confirms it is considering a dividend for the full 2023 financial year.

Operational free cash flow was $11.7-million in the period under review, compared with free cash flow of $122-million generated in the prior comparable period, while capital expenditure (capex) totalled just under $52-million in the six months under review, compared with $16.7-million in the prior corresponding six months.

Duffy states that capex increased on the back of planned expenditure relating to expansion projects at the Cullinan and Finsch mines, coupled with accelerated equipment replacement at Finsch.

Particularly, the Koffiefontein mine contributed to the company’s losses, incurring an operating loss of $8.7-million in the period under review. The operation has been making losses for a number of years, and Petra is taking important steps towards responsible closure of the operation.

On the other hand, the Finsch and Cullinan diamond mines have the potential for long lives and are poised to deliver between 3.6-million and 3.9-million carats in the 2025 financial year.

This while production at the Williamson mine will only resume during the first quarter of the 2024 financial year, following a tailings storage facility (TSF) wall breach. The company is undertaking maintenance and waste stripping to construct an interim TSF, to enable an efficient ramp-up in production.

A $5.9-million remediation charge is reflected in the profit and loss statement of the company, of which $1.5-million of this amount was incurred up to December 31, 2022, with the balance accrued for at period-end, and this will impact on full-year results.

Meanwhile, under a framework agreement entered into by Petra, its subsidiary Williamson Diamonds Limited (WDL) and the government of Tanzania in December 2021, the government agreed to allocate the proceeds of what had been a confiscated diamond parcel of 71 654 ct to WDL. However, Petra has become aware that a portion of the block parcel has been sold.

Petra is engaging with the Tanzanian government to confirm the application of the proceeds.

Further, post period-end, two blue diamonds recovered from the Cullinan mine, including an exceptional diamond, were sold into partnership. The 17.4 ct and 10.4 ct gem-quality blue diamonds were sold for $7-million and $2-million, respectively.

"We will share equally in any upside on the sale of the stones once cut and polished, extending our partnership approach on selected diamonds,” Duffy says.