Petra loses its lustre as lower diamond prices bite

The African miner said it expected to produce 3.3m – 3.4m carats in 2016, a rise of 3-6%, adding that it expected a favourable impact on next year's results if the weakness in the South African rand continued.

Petra's 2015 adjusted earnings before interest, tax, depreciation and amortisation fell 26% to $139.3m and adjusted net profit after tax was down 33% to $62.8m.

“Financial results for the year were negatively impacted by underground production being reliant on mature, diluted mining areas, as well as the weaker diamond market, though partially offset by the favourable impact of the weakening in the rand for the year,” Petra said.

It added that undiluted ore from new mining areas would start to contribute meaningfully to the group's production profile from the second half of next year onwards.

In July, the company warned that higher volumes of smaller diamonds and lower grades had also dragged on prices.

Last month, De Beers cut diamond prices by 10% in an effort to boost demand. Rough diamond prices have declined about 14% this year.

Petra said its July guidance also contained 2016 assumptions based on flat diamond prices, but since then “volatility in the broader rough diamond market has been widely reported and these uncertain market conditions may result in deviations”.