Petra Diamonds production, revenue knocked down by covid-19

Petra has abandoned plans to sell the business in favour of a debt-for-equity restructuring. (Image of Koffiefontein mine. Courtesy of Petra Diamonds.)

South Africa’s Petra Diamonds (LON:PDL), which put itself up for sale in June, sold 23% fewer carats for 36% less revenue in the year to June 30, as the coronavirus pandemic wreaked havoc on an already struggling diamond industry.

Petra, which has been hit by a triple whammy of weak market conditions, power emergencies in the home country and covid-19, said on Thursday it only sold 2.9 million carats in its full-year 2020.

The figure compares to the 3.7 million carats Petra sold in 2019, when most diamond miners were struggling to keep afloat amid poor prices.

Revenue for the year fell to $295.8 million from $463.6 million last year.

Lockdowns implemented in South Africa from March 26 severely disrupted production. Around the same time, the company saw its founder and chairman for 23 years, Adonis Pouroulis, step down.

Petra also placed its Williamson mine, in Tanzania, on care and maintenance.

Financial crunch

The company tried to turn around its fortunes after piling up debt to expand its flagship Cullinan mine in South Africa. The renowned mine, where the world’s largest-ever diamond was found in 1905, produces about a quarter of the world’s gem-quality diamonds. It is also the source of the vast majority of blue stones.

Petra failed in May to make an interest payment on a $650 million bond, but won some breathing space from creditors who said they would not declare a default until August.

Despite the numerous challenges, Petra is targeting a ramp-up to pre-covid-19 production levels 

The diamond producer also cancelled May and June tenders because of travel restrictions and low demand from the midstream. It expects to hold its next tender in September.

Petra said that talks with noteholders and south African lenders continued, adding it expected to update the market on the matter this quarter.

Despite the numerous challenges, Petra is targeting a ramp-up to pre-covid-19 production levels. It added it will disclose production targets for 2021 once it reaches a “sustainable level of operational stability.”

As the number of confirmed coronavirus cases in South Africa continues to surge, accounting for more than 50% of cases in Africa, Petra staff has been affected.

The company said that 39 workers have tested positive at its South African operations so far, and one worker has died of the respiratory disease at its Cullinan mine.

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