Petra Diamonds says supply curbs, India’s moratorium stabilizing market

Petra Diamonds (LSE: PDL) said on Tuesday that operations at its Cullinan and Finsch mines in South Africa, and the resumption of production at the Williamson mine in Tanzania, led to a jump in production for the first quarter of the 2024 financial year.

The miner saw production for the three months ended Sept. 30 increase by 12% to 696,639 carats, when compared to the last quarter of fiscal 2023. Revenue rose 96% to US$97.6 million ($133.8 million) from the US$49.9 million reported in the prior quarter.

Petra kept production guidance for 2024 unchanged at 2.9 million to 3.2 million carats, assuming steady operations at the Cullinan and Williamson mines.

Finsch is currently experiencing volatility in terms of both grade and tonnages, but the company is now focusing on value (grades), rather than tonnes to maintain stability.

Petra said it’s confident about the positive effects that supply curbs by major producers and a two-month Indian diamond import moratorium will have on the market. It said these actions will stabilize the diamond sector, supporting prices as inventories decline.

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

Building up resilience

While it sees support for the market in the medium- to longer-term given a structural supply deficit, Petra noted that it’s taking steps to improve business resilience, given uncertainties and challenges expected to persist over the coming months.

“We view Petra as a turnaround story that can provide significant leverage to the diamond price,” BMO analyst Raj Ray said in a note to investors. “While the operational and financial outlook is positive, the low share liquidity could be a challenge for investors and something that the company will need to address.”

The company said that while it has sufficient liquidity in the near-term, it’s in discussions with a lender to upsize its existing line-of-credit. 

It added that it was evaluating options to provide further financial flexibility, such as optimizing operational expenditure and deferring capital spending.

Petra shares were up 3.1% to £48 ($80.24) on Tuesday, valuing the company at £90.4 million ($151.1 million). Its shares traded in a 52-week range of £45.05 and £120.31.