Petra FY production lower than forecast; sees big rise in 2018

Petra Diamonds said full year production was lower than forecast as revenues rose 11% to $477m, but expected a big ramp up in output in 2018.

The independent South Africa-based miner said full year operating costs remained in-line with expectations despite inflationary pressures, but added that unit cost per tonne was “adversely affected by the high fixed cost base and below plan throughput”.

“The strengthening in the rand for the year had a negative impact on dollar reported operating costs,” Petra said in a trading update.

Output was up 8% to 4m carats, below forecasts of 4.4m. Petra said full year 2018 production was expected to rise 23% to 4.8m – 5m carats and provided guidance of 5.0 - 5.3 Mcts for 2019.

Production next year was expected to have a “marked increase” in the proportion of higher value diamonds produced.

Operational capital expenditure fell to $255m from $295m, but was still 17% higher than original guidance of $218m, mainly due to the impact of strengthening of rand/dollar exchange rate on dollar reported costs and some additional spend associated with the slower than expected ramp up in some mine expansion programmes.

Petra said 2018 capex would continue its declining trend, falling to around $164m excluding capitalised borrowing costs.
Net debt was $554.4m, up from $382.8m.

Chief executive Johan Dippenaar said the company had now attained the required production levels “which will see production rise again substantially in 2018”.

“The company has a strong balance sheet in place to deliver on the final stages of its expansion programmes,” he said.

“Petra’s investment case therefore remains the same, as the forthcoming step-change in production and revenue is expected to see debt levels start to fall in full year 2018 and the company become free cashflow positive during the year.”