Petra Diamonds says the worst is likely over

Petra saw a 20% increase in like-for-like prices for its third tender of financial year 2024. (Stock image.)

Petra Diamonds (LON: PDL) said on Friday a decline in diamonds prices experienced this year has likely bottomed as the company is already seeing improved market conditions.

The South African miner sold 462,794 carats of diamonds for $58.7 million in its third tender for the 2024 financial year. This represents and improvement from the 444,029 carats is sold in the second tender of the current financial year for $41.5 million. It is also a better result than what it obtained in the third tender of financial year 2023 at 303,300 carats for $41.5 million.

The average price for the third tender was $127 per carat, higher than the $91/ct achieved in the second tender of the year, but lower than the $137/ct achieved in the third tender of the prior financial year.

“The 20% increase in like-for-like prices for our third tender of financial year 2024 supports the view that diamond prices have likely bottomed,” chief executive Richard Duffy said.

The miner believes actions taken by major producers to curb supply and the two-month Indian moratorium that ends on December 15 have helped. It also mentioned strengthened retail sales in the US as a factor that has improved market conditions and made it easier for inventory levels across the pipeline to rebalance. 

“Ongoing discipline by the key players is important to provide some price stability in the new year,” Duffy said.

Credit increase

Simultaneously, the company said the increase of its revolving credit facility with South African firm Absa Bank, had been approved. Petra’s facility is now $93 million from which $45 million has been drawn. This leaves a balance of $48 million that will be available under the “upsized” facility, the company said.

The diamond sector was one of the very few to benefit from the global pandemic as consumers who were confined at home splurged on diamond jewellery and other luxury items. As the lockdowns eased, demand also dropped, leaving traders with surplus inventory that they had overpaid for. And what looked like a cool down quickly turned into a plunge.

Prices for wholesale polished diamonds have dropped by a fifth this year, dragging down with them rough diamonds. Uncut precious stones have declines as much as 35%, with the steepest drop happening though by the end of August.

Petra itself postponed in June what would have been its sixth sale for the 2023 fiscal year due to weak demand related to elevated inventory in the mid-stream sector — mostly cutters and polishers.

De Beers, the world’s No. 1 diamond producer by value, announced it November it would stockpile unsold stones in response to weak prices. Russian rival Alrosa, the world’s No. 1 diamond producer by output, cancelled its sales for two months.