Africa-focused Petra Diamonds has scrapped regular diamond tenders in favour of opportunistic sales as the market for rough stones continues to slump.
The miner reported $53 million in sales from its fifth and sixth tenders of the year, covering production from its two South African mines. Petra will now report sales on a quarterly basis instead of following a fixed tender schedule.
“In response to fluctuations in diamond prices and demand, the company no longer follows regular tender cycles and may postpone portions of tenders or sell goods as run-of-mine,” the company said.
The strategic pivot mirrors De Beers’ reported off-market sales of discounted diamonds to selected clients. The move aimed to reduce inventory without officially slashing prices.
Petra said it sold 613,747 carats in the two tenders, a 29% increase from its fourth tender in February. The average price was $86 per carat, about 4% higher than February’s auction. On a like-for-like basis, prices were down 16% compared to the first six tenders of 2024, largely due to lower-value goods.
Year-to-date, the company has sold 2.39 million carats for $239 million, down from $329 million over the six first tenders of its 2024 financial year.
Petra delayed its April and May tenders due to a weaker product mix at its flagship Cullinan mine. The Finsch mine, meanwhile, saw improved pricing thanks to better ore access. The company expects an improved product mix as it ramps up production from the CC1E and the western side of the C-Cut block.
Petra also drew an additional $33 million in debt, bringing its consolidated net debt to $258 million by the end of March. It attributed this to working capital requirements.
“The continuing challenges in the diamond market and the weaker sales do not bode well given the ongoing negotiations to refinance Petra’s debt obligations,” Raj Ray, an analyst at BMO Capital Markets, wrote on Monday.
Petra has been restructuring to cut costs, including the sale of its stake in Koffiefontein in October and the recent $16 million sale of the Williamson mine in Tanzania.
Petra shares fell almost 3.5% on the news to 19.5 pence each, putting its market cap at about £38 million ($51 million).
Petra Diamonds is to begin discussions with financiers on refinancing a $273m bond that matures in March next year amid scepticism that the company will survive the event.
The ratings agency S&P last week downgraded the company’s credit to CCC on the increased likelihood of default, and maintained a negative outlook.
Shares in the company fell 10% today shortly after the company posted its third quarter results. Petra is now trading at a fresh all-time low and is valued at only £34m on the London Stock Exchange.
While its remaining two assets – the Cullinan and Finsch mines in South Africa – had a solid three months operationally, with a quarter to go, full year guidance has been maintained at 2.4 to 2.7 million carats.
However, the company is still burning cash.
Petra drew on a further $33m as consolidated net debt increased to $258m as of end-March, which the company put down to working capital requirements.
The truth is that the company is desperately in need of improved diamond prices, which have continued to trough this year amid economic uncertainty generated by US President Donald Trump’s on-off tariff regime.
Petra said in April that it had postponed the sale of about 200,000 carats of diamonds from the Cullinan mine near Pretoria because of the “considerable diamond market uncertainty caused by the US tariffs announcement”.
“S&P believes the company faces mounting liquidity challenges amid uncertainty regarding the recovery of the rough diamond market and approaching debt maturities in 2026, with increased likelihood of default – including distressed exchange or debt restructuring – over the next 12 months, if Petra is unable to refinance its debt maturities on time,” said analysts at Berenberg Bank in a note last week.
Commenting on the third quarter results – in which revenue fell to $42m from $106m in the comparative quarter last year (buoyed by sales from a deferred tender) – interim joint CEOs Vivek Gadodia and Juan Kemp, said Petra had experienced “a very difficult diamond market”.
They added: “We believe the steps we have taken over the past 12 months position Petra well for a successful refinancing. We will now look to commence engagements with our lenders on the refinancing of our debt maturing in early 2026.”
Independent mining group Petra Diamonds, which owns and operates diamond mines in South Africa, has appointed two interim CEOs Vivek Gadodia and Juan Kemp to succeed Richard Duffy, who has resigned by mutual agreement and with immediate effect.
Gadodia will oversee all corporate matters of the group, while Kemp will oversee all operational matters.
At this point, they will not be appointed as directors.
Vivek joined Petra in 2021 with his roles having included planning and corporate planning executive and chief restructuring officer. He previously worked for Sasol in various engineering, project management and corporate positions over a 15-year period.
Kemp, meanwhile, joined Petra in 2009 when the company bought its flagship Cullinan mine from fellow miner De Beers.
Kemp was GM of the mine since 2011 before having been appointed as a chief technical officer in 2019 and operations executive for the Cullinan mine in 2024.
His earlier career included positions at De Beers and AngloGold Ashanti.
The appointments of the interim CEOs come as Petra struggles with lower earnings generation and high debt.
The company’s results for the six months ended December 31, 2024, reflect Petra’s progress in implementing cost reduction plans and smoothed capital profiles, despite weakness in the diamond market.
Petra managed to reduce its mining and processing costs from continuing operations by 19% year-on-year to $98-million.
However, the group’s revenue was also lower by 30% year-on-year, or $49-million, at $115-million owing to additional revenue of $50-million having been carried over from tenders into the prior comparable period.
Adjusted earnings before interest, taxes, depreciation and amortisation amounted to $15-million, which was lower than the $38-million adjusted Ebitda reported in the first half of the prior financial year.
The company’s basic loss a share from continuing operations was $0.30, or $0.13 on an adjusted basis.
Operational free cash inflow of $16-million in the six months under review compares with a $21-million outflow in the first half of the prior year, which Petra says largely reflects the impact of its cost reduction measures, capital smoothing and working capital management.
The lower revenue and earnings over the financial year of 2024, caused Petra to not meet its required leverage and interest cover covenant ratios in its revolving credit facility measured at December 31, 2024.
Petra has since obtained a waiver from the lender, Absa Bank, related to these covenant breaches, and is restarting engagements with lenders regarding the refinancing of its debt.
The group’s consolidated net debt was $215-million as at December 31, compared with $193-million at the end of June, owing to diamond market weakness and the timing of Petra’s tender sales.
Three tender sales took place during the first half of the 2025 financial year (the six months ended December 31), while four have been scheduled for the remainder of the financial year.
Petra realised an average price of $103/ct in the reporting period, which reflects the positive impact of product mix over the period offsetting the overall weaker diamond pricing environment.
OPERATIONS
The group has achieved cost reductions through sustainably lowering overheads and on-mine cost optimisation with limited impact to its operations.
Petra completed the sale of its interest in the Koffiefontein mine to the Stargems Group in the six months under review, which allowed the group to avoid closure-related costs of $23-million.
Petra also entered into an agreement in January to sell its interest in the Williamson mine, in Tanzania, to Pink Diamonds Investments for a headline consideration of $16-million.
The group expects the sale of its interest in the Williamson mine to be completed by the end of the calendar year.
The Finsch mine has transitioned into new production areas called 78-Level Phase 2, with steady operations having been reported over the past few months.
In turn, production from the CC1E zone at the Cullinan mine has also started in the interim period, while Petra continues to advance more extension projects at both of these mines, as well as life-of-mine plan reviews.
Petra intends to re-engage its lenders with a revised business plan and updated cost-savings initiatives, as part of its overall restructuring plan.
The group is targeting net free cashflow generation for the remainder of the financial year, as well as more efforts to make the company resilient to pricing weakness.
Petra Diamonds reported increased sales for FY 2024, despite weak market conditions.
The UK based miner said it had saved $75m by deferring capital expansion programs and sustainably reducing its cost base.
Revenue for the year was $367m, an increase of 13 per cent on FY 2023, according to its Audited Full Year 2024 Results, published on Tuesday (24 September).
“Petra demonstrated its agility in responding to a weaker pricing environment by building greater business resilience,” said CEO Richard Duffy.
“We acknowledge the difficult market conditions through FY 2024 and believe that prices will stabilise through to the end of CY 2024 with some improvement expected in CY 2025.”
Petra sold 3.2m carats of rough during the year an increase of 36 per cent but achieved lower average prices per carat, down 17 per cent to $116, attributable to a 12.4 per cent decline in like for like prices, as well as product mix movements.
Last month Petra today Petra canceled its August/September tender to restrict supply amid ongoing weak demand.
Goods from its Cullinan and Finsch mines, in South Africa, will be sold instead at its next tender, which is expected to close in mid-October.
Having reset its cost base, delivering new life-of-mine (LoM) plans with a smooth capital profile, the focus of Petra Diamonds is very much on refinancing its $250-million loan notes.
“We plan to get that done before the end of this calendar year,” Petra Diamonds CEO Richard Duffy outlined to Mining Weekly in a Zoom interview. (attached Creamer Media video.)
The refinancing of the loan notes will place the London-listed, Africa-active diamond mining company in a position to execute on the growth potential of its long-life assets.
These are Petra’s historic Cullinan diamond mine, located 100 km north-west of Johannesburg, its Finsch diamond mine, which is 160 km north-west of Kimberley, and the Williamson mine, 140 km south-west of Mwanza, in Tanzania.
It will also allow the company to begin to execute on its value-led growth strategy presented by not only its existing asset base, but also through other opportunities.
“We’ll be able to deliver and leverage what we believe will be a much more supported market from next calendar year,” Duffy commented.
The main focus of Petra’s recent investor day was to demonstrate the resilience of the business through steps implemented over the recent months.
The key features were cutting the cost base by $30-million on a sustainable annualised basis.
Through mine replanning, Petra has also smoothed its capital profile going forward basis to around $100-million a year or less.
The main reason is to ensure that the business is cash generative from this financial year (FY) 2025 and to refinance its loan notes, which mature in March 2026.
Mining Weekly: What, specifically, were the LoM updates?
Duffy: In the case of Cullinan mine, we have a board-approved mine plan that goes through to 2033, and the potential through further extensions in the mine itself to be mining beyond 2050. At Finsch mine, we highlighted that the board-approved mine plan sees mining through to 2032 but with the potential to continue mining below the current Block 5 through to 2040. Williamson has an approved mine plan to 2030 with extension opportunities and growth opportunities well into the 2040s. We also provided guidance for the next five years so that we could create some visibility in terms of our production, which we see growing from the current levels of around 2.8-million carats annually to around 3.5-million carats a year by 2028. Most of that growth comes from increasing grade, both at Cullinan and at Finsch.
When you speak of a lower-for-longer diamond market, how does that impact Petra?
What we’re seeing is a diamond market that we expect will continue to remain a little softer through to the end of this calendar year. We took measures towards the end of last year in recognition of what we expected to be a weaker-for-longer market. The steps we took back in October 2023 around deferring some of our capital spend and initiating that cost savings programme meant that we were able to reduce net debt by $11-million from the end of December 2023 to the end of June 2024, the end of our FY 2024. The measures taken ensured that we stopped any cash burn in the business, even in a tougher market. The steps we’ve taken around costs and smooth capital profile mean that we’ll continue to be resilient as a business, and be cash generative from this financial year 2025 onwards. So, we’re well placed to benefit from an improving market, which we expect to see from next calendar year.
What makes you more confident about the market in the medium- to long-term?
What we’ve seen in the market is the culmination of a number of factors that have created some headwinds for us, and that really has been on the back of the higher interest and inflation rates that have been a little more stubborn than expected, the slower return of demand from China, which is an important market for diamonds, and the disruption caused by the rapid growth of lab-grown diamonds. Those were the factors that led to the softer market, which we expect to continue through to the end of December. Why we’re more encouraged in the medium to longer term about what we expect to be a supportive diamond market is around some of the underlying supply-demand fundamentals. If you look at projected supply, or global production of diamonds, all the way through to 2033, the projections are that we’ll see an average 1% decline on an annual basis over that period. When you look at the demand side, there’s projected growth to 2033, of 2% to 4%, so from a fundamental supply-demand perspective, there’s a structural supply deficit. The US buys around 50% of all diamonds, and the projections are that US demand will continue to grow through to 2033. Interestingly, China isn’t projected to grow at the same rate as the US, but India is emerging as a very strong consumer, with 30% growth forecast through to 2033. We see India and its growing middle class as a new, increasingly important market for diamonds that is likely to overtake China.
How are natural diamonds faring against laboratory-grown diamonds?
If you look at lab-grown diamonds, the disruption they caused initially was largely the result of consumers not properly understanding this new lab-grown diamond category. Over the last few years, we’ve seen the price of lab-growns collapse to now sell at a discount of 80% to 90% of a natural diamond. As a result, lab-growns are now firmly established as a different product category in the diamond space. They’re a cheap early entry point and that differentiation will become more discernible and clearer over time. Also, importantly, retailers, jewellers are shifting back to natural simply because the price of lab-grown has collapsed. The margins have collapsed, and it doesn’t make economic sense for them to continue to push lab-growns. We see, in a sense, some reversal of the displacement of lab-grown that we saw previously, in favour of natural diamonds. Another important point is a number of lab-grown producers have stated that they’re moving out of producing gem lab-grown diamonds, and they’re shifting their lab-grown production to industrial applications, around semiconductors, etc. This is led by De Beers’ Lightbox business, where they’ve indicated they’re no longer going to be producing gem lab-grown diamonds, and the same is true of a number of other large lab-grown producers. For all of those reasons, we see inventory levels starting to come down across that value chain going into next year, a shift away from lab-grown back to natural, and the general economics starting to shift in favour of diamonds with the structural supply deficit providing the support.
How do you see traceability unfolding?
We see traceability technology as being part of the differentiation between lab-grown and natural diamonds. What this technology allows us to do, and we’re busy piloting this at the moment, in collaboration with De Beers’ Tracr™ and Sarine Diamond Journey™ technology, is to map all of our half-a-carat gem-quality diamonds, and half-a-carat in the rough and larger. The data around a diamond gets block-chained in a register, and we then trace that diamond through the cutting and polishing. Our clients link the polished diamonds back to the original rough, and that enables traceability all the way through to the retail jeweller – essentially from mine-to-finger. For a consumer who then walks into a jewellery store in New York to buy a one-carat engagement ring, there would be a certificate associated with that, stating that the diamond was recovered from, for example, Cullinan mine in 2020. It would set up the number of employees that the Cullinan mine employs, provide details on all of the social and community projects undertaken by the mine, and include the carbon footprint associated with that polished diamond. So, there’s a whole story around the diamond that reinforces that purchase experience for the consumer, creating an opportunity to grow margin as part of that story, around the mine-to-finger journey.
DIAMOND VERACITY
The traceability that Petra expects to implement during the course of this calendar year will enable it to clearly verify that the diamonds:
are from a Petra mine; are natural and not lab-grown; and are not subject to any sanctions. The application of Tracr™ means that the diamonds from these mines will be subjected to the Internet of Things, AI and blockchain technology to provide comprehensive supply transparency.
In addition, the application of Sarine Diamond Journey™ begins with three-dimensional scanning to establish a verifiable image of the physical diamond and a definitive link to its digital report.
This enables the creation of an unbroken chain of authentication at every stage of the diamond’s journey – from rough to rough, rough to polished, polished to report.
Securely stored in the cloud, this data provides the foundation of end-to-end traceability.
Petra Diamonds (LON: PDL) announced the launching of a special tender process for the Letlapa Tala Collection, which comprises five blue diamonds sourced from the Cullinan mine in South Africa.
Cullinan is known as the world’s most important source of blue diamonds, as well as being the place of birth of the 3,106-carat Cullinan diamond, which was cut to form the 530-carat Great Star of Africa and the 317-carat Second Star of Africa, being the two largest diamonds in the British Crown Jewels.
In a press release, Petra said that the name of the new collection actually means ‘blue rock’ in Northern Sotho (commonly known as Pedi), the predominant language spoken in the Cullinan area.
CULLINAN IS KNOWN AS THE WORLD’S MOST IMPORTANT SOURCE OF BLUE DIAMONDS
The collection consists of five Type IIb blue diamonds of 25.75, 21.25, 17.57, 11.42 and 9.61 carats, respectively. Type II diamonds contain no detectable nitrogen in their chemical structure and tend to display exceptional transparency. Type IIb stones contain a small amount of boron, which is what determines their blue colour.
“Blue diamonds are so rare that most people working in the diamond industry have never even seen one,” the media release states. “There are no official statistics on their recovery, so it is therefore even more unusual that these five spectacular stones were all recovered within the space of one week’s production in September 2020.”
According to Petra, this is likely to be the first time that five blue rough diamonds have ever been offered for sale at one time, with buyers being offered the chance to bid either on individual stones, more than one, or for the entire collection.
The Letlapa Tala gems will be available for viewings in Antwerp from October 25 to November 1; Hong Kong from November 5 to November 10; and New York from November 16 to November 20, 2020.
Petra Diamonds Limited has announced that while its production for the six months ended December 2019 was up 3 percent to 2,070,240 carats (H1 FY 2019: 2,019,147 carats), revenue for the same period was down 6 percent. Revenue fell to $193.9 million from 1,743,807 carats (H1 FY 2019: $207.1 million from 1,736,357 carats).
The decline in revenue comes from lower diamond prices and the adverse product mix at Finsch and Williamson. This was, however, partially offset by the sale of the 20.08-carat blue diamond from Cullinan for $14.9 million.
The company is currently on track to meet or exceed its FY 2020 production guidance of ca. 3.8 Mcts.
In addition, Petra said it saw growing stability in pricing as the calendar year closed and that demand has continued to improve as the midstream looks to replenish inventory with early indications that rough pricing has improved modestly in the third quarter of 2020. .
Petra reported that its net debt as of December 31, 2019 stood at $596.4 million
(September 30, 2019: $592.8 million). It also reported a diamond inventory of 992,425 carats valued at $85.2 million compared to $92.4 million for September 30, 2019.
South Africa’s Petra Diamond has found yet another big rock at its iconic Cullinan mine, one of the many coloured diamonds it has unearthed at the operation this year.
The exceptional 20.08 carat blue gem quality diamond Type IIb demonstrates that Cullinan remains a significant source of rare blue diamonds, and confirms the ability of the mine’s plant to recover the full spectrum of precious stones, Petra said.
In April this year, the company found a 424.89 carat exceptional D colour Type IIa diamond at the same mine. The stone was sold the next month for just under $15 million.
In 2015, Petra sold “The Blue Moon of Josephine”, a 29.6 carat blue diamond, for $48.5 million, marking a world record price per carat at auction for any diamond at the time.
