Petra Diamonds has revised its rough-diamond pricing forecasts for the fiscal year, citing continued market weakness across most size categories. The company also announced job cuts as part of a cost-saving strategy aimed at achieving net cash generation by fiscal 2025.
Falling Prices Across Key Mines
Petra has lowered its price expectations for diamonds from three major mining operations:
- Cullinan Mine (South Africa): Prices now expected between $120-$130 per carat, down from $125-$135.
- Finsch Mine (South Africa): Adjusted to $80-$90 per carat, from an earlier forecast of $98-$105.
- Williamson Deposit (Tanzania): Dropped to $170-$200 per carat, compared to the previous estimate of $200-$225.
The price reductions come after like-for-like pricing fell 7% across most size categories at Petra’s third tender in December. Since the fiscal year began, like-for-like pricing is down 10% compared to the equivalent period last year, driven primarily by weaker demand for smaller-sized diamonds.
Revenue Declines and Sales Trends
At the December tender:
- Revenue fell 7% compared to earlier sales this year, reaching $71 million.
- The average price dropped 20% to $101 per carat, despite a 17% rise in sales volume to 700,803 carats.
For the first three tenders of the fiscal year:
- Sales totaled $146 million, a 22% decrease from the same period last year.
- Volume slid 22% to 1.3 million carats, while the average price fell 1% to $112 per carat.
Petra noted a slight 3% improvement in prices for diamonds between 5 and 10.8 carats, providing a glimmer of optimism.
Cost-Cutting and Restructuring Initiatives
In response to the challenging market, Petra has:
- Appointed Vivek Gadodia as Chief Restructuring Officer to lead cost-saving measures.
- Initiated a section 189 retrenchment process, which will impact its group and South African operations support teams.
Petra CEO Richard Duffy commented:
“We remain committed to achieving net cash generation by fiscal 2025. Regrettably, this requires significant cost reductions, including job cuts. Refinancing discussions have been deferred to allow these initiatives to take effect.”
Looking Ahead
As Petra continues its restructuring efforts, the company is closely monitoring market conditions to navigate ongoing challenges. While the diamond market remains volatile, Petra’s focus on cost control and cash generation reflects a pragmatic approach to weathering the downturn.