Tuesday, August 16, 2011

Petra sees Finsch completion in a month

Africa-focused miner Petra Diamonds expects to complete the acquisition of the Finsch mine, South Africa's second-largest mine by output, within a month, Chief Executive Johan Dippenaar told Reuters on Tuesday.

The mine, which just requires a routine registration of its transfer from De Beers, is likely to boost the group's resource base by about 48 million carats to over 300 million carats, he said. The updated reserves and resources figure will be included in the group's full-year results on September 20.

The company has already announced that revenue rose 24 percent in the year to end June as higher rough diamond prices and fast-growing demand in Asia outweighed a 4 percent decline in production to 1.12 million carats.

The mining industry is facing increasing cost pressures, particularly relating to fuel and labour.

Petra recently concluded wage negotiations, effective July 1, covering the next two years on terms similar to those negotiated between De Beers and South Africa's National Union of Mineworkers.

De Beers, one of the world's largest diamond producers, said artisans and more highly skilled employees would get an 8 percent wage rise, while salaries of entry-level employees would grow 10 percent.

"On the face of it, ours (wages) seemed to be a little bit lower, but we had other issues that we dealt with, such as medical aid, so all in all it comes out the same," said Dippenaar.

Still, Petra has kept its unit costs per tonne "fairly flat" over the last two to three years, said Dippenaar. "We have been able with these volume increases to manage the unit costs."

The company is looking to more than double production in fiscal year 2012, and is targeting over 5 million carats by FY 2019.

Miners are also facing a number of other issues, with resource nationalism seen as the biggest threat facing the sector this year and next, advisory and accountancy firm Ernst & Young (E&Y) said earlier this month.

"Miners all over the world have their job cut out," he said, referring to growing resource nationalism and attempts by governments to raise taxes and/or royalties.

The global markets have been fairly choppy since Petra last commented on the outlook for diamond prices.

"We could ... experience a little bit of nervousness," said Dippenaar. "I'm not saying anything about price, but I think the fundamentals should give us some protection," he said.

He said the company had not held any sales in the previous two weeks, but its tenders were still fully booked.

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