Petra on Track to Become SA’s King of Diamonds

PDL_logoJohannesburg: Petra Diamonds is on track to reach 5-million carats by 2019 as it deepens two key mines in SA, positioning it to overtake De Beers, the largest source of South African diamonds for many decades.

De Beers will produce more than 4-million carats this year, but it is in the process of selling its Kimberley tailings treatment operation, its second-biggest mine which delivered 722,000 carats last year. Once the sale is completed, De Beers will have just two mines in SA.

De Beers received about 70 expressions of interest in Kimberley and will whittle the number down to about a dozen parties. By the time Petra has hit its 2019 target, De Beers will most likely be down to just its Venetia mine where it is spending R20bn to develop an underground mine and keep production at about 4-million carats because the Voorspoed mine in the Free State will be reaching the end of its life around then.

Petra produced 3.2-million carats in its 2015 financial year to end-June, up marginally from last year’s 3.1-million carats.

It forecast it would raise production to between 3.3-million and 3.4-million carats in its 2016 financial year, as mining at the Cullinan mine near Pretoria moves more fully into fresh kimberlite ore, reducing the amount of waste ore it processed last year, said CEO Johan Dippenaar.

Petra is developing a fresh underground block to mine, moving away from the nearly depleted block it has been mining since it bought the mine from De Beers.

Petra says the consistency of diamond production will improve as it mines fresh kimberlite ore in the new 5.7ha block that is about 190m high. To handle the fresh source of ore, Petra is building a new processing plant at Cullinan.

The plant will allow Petra to capture large diamonds and is forecast to boost revenue by 6%-8%. The plant will lower processing costs by up to R25 a tonne, with better energy and water usage efficiencies. Capital expenditure at Cullinan for 2016 will be R970m higher than planned, coming in at R2bn, of which R950m will go towards building the new plant.

Cullinan produced 729,500 carats in the 2015 financial year, an 11% fall mainly because of waste dilution and the lower grade from the mature block.

“Petra remains a growth story even if diamond prices are flat as the rise to 5-million carats per annum for financial year 2019 is on track and increased fresh ore is starting to contribute to lift output in the year ahead,” said Investec.

Petra is also developing fresh ore at its Finsch mine, which increased output by 10% to 2.1-million carats in the year.

Petra reported net debt rising to $172m by the end of June from $125m the year before. Its cash grew to $166m from $34m.