Petra Diamonds production surges in first half

Petra Diamonds posted its unaudited trading update for the six months to 31 December on Monday, ahead of the publication of its interim results for the period on 20 February.

The FTSE 250 company said production was up 24% to 2,015,087 carats, which it put down to an increased contribution from undiluted return-of-mine ore leading to improved return-of-mine grades, and additional tailings production from Kimberley Ekapa Mining.

It said it remained on track to deliver full year production of between 4.4 million and 4.6 million carats.

Revenue increased 48% to $228.5m due to increased sales volumes.

Diamonds sold rose 47% for the period to 1,910,113 carats, and in line with previous years, Petra said the second half is expected to be a stronger sales period due to the timing of tenders being weighted towards the latter half of Petra's financial year.

Rough diamond prices were flat during the first half on a like-for-like basis, in comparison to the second half of the 2016 financial year.

Underground expansion projects remained on track with Finsch's Block 5 SLC and Cullinan's C-Cut Phase 1 delivering initial production during the period, as evidenced by the reportedly improving return-of-mine grade profiles.

Petra added that commissioning of the new Cullinan Plant was to commence towards the end of the third quarter.

Expansion and sustaining capital expenditure was $134.9m, reducing from $139.8m, and representing around 60% of total forecasted capex for the financial year.

Petra’s board said that was in line with guidance and demonstrated the continued decline in the capex profile, with peak capex spend having passed in the second half of 2016.

Net debt stood at $465.4m, in line with levels reported in the first quarter, and Petra said it expects to be within the required covenant ratios for the measurement period as at 31 December 2016.

The company did report one further fatality during the first half, in addition to those reported in the first quarter, despite “historically excellent” safety records and a “leading” lost time injury frequency rate of 0.25 achieved during the period.

“Due to the increased contribution in [the first half] from undiluted ore, we have delivered strong operational results, reporting significant increases in production and revenue,” said chief executive Johan Dippenaar.

“We continue to advance our expansion programmes and, from this point onwards, will see a meaningful reduction in capex as the capital projects, which were first set out in 2009, come to fruition.

“Safety remains our highest priority at Petra and we are placing renewed focus on this vital area and relentlessly striving for a zero harm workplace.”