Petra Diamonds’ Full-Year Profit Slumps Amid Rising Costs

Petra Diamonds (PDL.L), which mines and sells rough diamonds, posted a sharp drop in its adjusted net profit after tax for the fiscal year ended in June amid rising on-mine cash costs, the delayed ramp-up of its expansion programmes and an increase in the value of South Africa’s currency, the Rand, against the US dollar.

Adjusted net profit after tax fell by 54% to $29.0 million in the year ended June 30, compared with $63.6 million in the previous fiscal year, the company said on Monday in a regulatory statement. Revenue, however, rose by 11% to $477 million from $430.9 million in the 2016 fiscal year and adjusted earnings per share fell to $5.04 per share from $9.76 per share a year earlier.

The company, which operates mines in South Africa and Tanzania, said that adjusted mining and processing costs had risen to $311.3 million in the full year, up from $257.7 million a year earlier. It said that the increase in the value of the Rand had also weighed with an average of ZAR13.59:US$1 for the year, as opposed to ZAR14.51:US$1 for the full year in 2016. Some 80-to-85% of the company’s costs are Rand-based, meaning that a strengthening Rand has a negative impact on conversion to Dollar-reported costs.

Petra reiterated its production estimate of between 4.8 million carats and 5.0 million carats of diamonds for the fiscal year ending June 2018 as well as forecasts for between 5.0 million carats 5.3 million carats for the 2019 fiscal year, citing a “solid start” to the new financial year. The forecasts assume that Petra’s Tanzanian Williamson mine, which is the subject of a dispute with Tanzanian authorities, will operate without disruptions during that period.

The company said on September 11 that it had temporarily halted operations at the Williamson mine after a parcel of diamonds (71,654.45 carats) from the mine has been blocked from export to Petra’s marketing office in Antwerp, Belgium, adding that certain key personnel from Williamson were being questioned by the authorities.

The incident occurred in relation to findings of an investigation into the Tanzanian diamond sector by a parliamentary select committee in Tanzania, Petra said, citing local press reports. Petra owns 75% of the mine, with the rest held be Tanzanian government.

Petra said on Monday that operations had resumed at Williamson after a four-day stoppage, but the company’s parcel of diamonds has not been released for export and its discussions with the government are continuing.

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