Petra cuts latest sign of a down diamonds market

Petra Diamonds (LSE: PDL) has revised its guidance for the next two fiscal years and appointed a new finance leader as part of its plans to lower expenses and debt in a clear sign the diamond market remains in bad shape.

The South African miner had anticipated in December that the sector was beginning to recover. Six months after that hopeful prediction, Petra has instead slashed its production targets. It now expects to produce between 2.8 million and 3.1 million carats in fiscal 2025 and between 2.9 million and 3.3 million in fiscal 2026. This represents a reduction of 18% and 19%, respectively, on the prior target-ranges’ midpoint.

The company also said it expected total carat recovery for this year to be at the lower end of its target range of 2.74 million to 2.78 million.

These downgrades, announced in an investor day presentation, coincide with Petra’s plan to reduce operating costs by US$30 million annually starting in the fiscal year that ends next June. The miner also plans to trim capital spending to $100 million from $117.1 million in fiscal 2023.

“We have worked hard to deliver an updated business profile in response to ongoing market challenges and to further enhance our resilience to future market and capital cycles,” chief executive Richard Duffy said in a statement.

Petra’s revisions come just a day after the world’s largest diamond producer by value, De Beers, posted disappointing sales results for the second time this year, and as Anglo American (LSE: AAL) plans to sell it off.

New CFO

Petra announced it had appointed Johan Snyman to take on the role of chief financial officer starting from Oct. 1. Snyman will replace Jacques Breytenbach, who will leave his position as CFO and director at the end of September due to personal reasons, the company said. 

“[Snyman] has played a crucial part in the progress of Petra since joining in January, and I am excited to collaborate with him in his new capacity,” Duffy said.

The new CFO joined Petra this year as financial controller, having worked as vice-president for financial reporting at AngloGold Ashanti (NYSE: AU). He has also previously held various financial roles in the mining sector.

Expansions unaffected

Despite the challenging market, Petra remains committed to expanding its Finsch and Cullinan mines in South Africa, it said, and it is projecting production to reach between 3.4 to 3.7 million carats by 2028.

Cullinan is Petra’s flagship mine and the source iconic diamonds, including the famed 3,106-carat Cullinan diamond, which was cut to form the 530-carat Great Star of Africa. They are the two largest diamonds in the British Crown Jewels.

Petra’s planned output increase, equivalent to 15% to 17% over three years, will require about $100 million annually. Duffy stated the plans will be financed internally.

Cullinan mine life can be potentially extended beyond 2050. Finsch, South Africa’s second largest diamond operation by output, could be producing until around 2040.

Shares in Petra experimented high volatility in London after the announcements and were last down 1.96% to 40 pence. This leaves the miner with a total market capitalization of £78.6 million (around US$100 million).