Petra Diamonds Provides Trading Update with Cut to 2018 Forecast

Petra Diamonds Limited (LSE:PDL) announced an unaudited trading update for the six months ended December 31, 2017 ahead of the publication of the company’s interim results for the period on February 19, 2018.
Highlights are as follows:

• Lost Time Injury Frequency Rate (“LTIFR”) improved to 0.24 (H1 FY 2017: 0.25).
• Production up 10% to 2,208,056 carats (H1 FY 2017: 2,015,087 carats), in line with H1 guidance of 2.2 – 2.3 Mcts. This represents record production for any six month period for the Company.
• Petra is guiding for a lower grade at Cullinan, largely offset by a higher average diamond price, resulting in the revenue per tonne remaining materially in line with expectations. Recoveries at Cullinan’s new plant to date indicate that a steady state higher grade can be achieved by recovering larger quantities of small, low value diamonds; however, it is Petra’s initial assessment that it would be uneconomic to do so and would not be in line with the Company’s strategic focus on value rather than volume production.
• Impact on FY 2018 guidance:
• FY 2018 revenue expected to remain in line with current consensus (including the expected sale of the blocked Williamson parcel in H2).
• FY 2018 production guidance is reduced to 4.6 – 4.7 Mcts (4.8 – 5.0 Mcts previously), mostly due to the lowered grade guidance at Cullinan, as well as production lost further to the labour action in South Africa in Q1.
• FY 2018 EBITDA is expected to be negatively affected by ca. 10-15% versus current consensus, primarily due to the recent strengthening of the Rand and its potential impact on Petra’s cost base in US Dollar terms; operating costs otherwise remain well controlled.

Johan Dippenaar, CEO, commented:

Petra has delivered a record production performance, with 2.2 Mcts being the highest level achieved for any half year period for the Group, and delivered against a solid safety performance, demonstrating the high level of focus on this most important area.

Petra’s stated strategy is to focus on value as opposed to volume production, which is particularly pertinent to diamond operations, as not all carats are of equal value. Our assessment of optimal recoveries at Cullinan has therefore led us to opt for lower carat volumes, due to the positive impact that not recovering the small diamonds has on the average value per carat. This has led to lowered production guidance for FY 2018, but does not materially impact our expected revenue, further to the positive uplift in Cullinan’s average value per carat. Likewise, we have been very encouraged by the recovery of large diamonds and other higher value single stones through the new Cullinan Plant to date, which was in line with our expectations that the incidence of such stones would increase as they are historically associated with the Western side of the orebody.

Click here to read the full Petra Diamonds Limited (LSE:PDL) press release.