Wednesday, February 1, 2012

Petra Diamonds on track for 2m carats

London-listed Petra Diamonds has started to reap the benefits of its acquisition of Finsch Mine from De Beers in September last year.

Petra reported production was up 64% to 953,553 carats for the six months ended December 2011, and that was with just over three months production contribution from Finsch.

And with further production increases for the second half of fiscal 2012 expected due to a full six months' contribution from Finsch and two additional run-of-mine (ROM) treatment plants coming on stream - Kimberley Underground's Wesselton plant and the Williamson plant in Tanzania, CEO Johan Dippenaar says the company is well on track to achieve production of more than two million carats in fiscal year 2012. It is also on track to grow total production to five million carats by 2019.

For the six month period, revenue was up 13% to US$101.4 million, while carats sold grew 16% to 678,772 carats.

The difference between carats produced and carats sold - around 275,000 carats - was due to Finsch's closing stock of 195,000 carats (as the acquisition completed during the period there was no opening stock) and the early sales cycle cut-off for all the South African mines due to the December holiday period, which meant that closing stock was on average higher than in June 2011.

The group expects a significant carat sales increase for H2 mainly due to increased production from Finsch and net release of approximately 100,000 carats closing stock.

Dippenaar added that the integration of Finsch into Petra's portfolio of mines had been successful and "everything is operating very smoothly." He expects one million carats to be produced for the full year - at the half year mark, more than 400,000 carats have already been produced.

It has been an eventful year for Petra, with the Finsch acquisition and the company's step up to the Main Board of the London Stock Exchange.

"By March we expect to enter the FTSE250 index, with all the benefits that come with that," he said.

The directors believe that the Main Market provides the appropriate platform for Petra's continued growth, allowing a broader range of investors, seeking direct exposure to the positive long term fundamentals of the diamond market, to invest in the company.

Turning to the diamond market, Dippenaar noted that revenue growth in the first half was affected by the weakening in rough diamond prices since July 2011. "But the long-term outlook for the rough diamond market remains positive due to the growth in demand from emerging markets set against a flat or declining supply trend."

He noted that Petra saw the market stabilising towards end of last year, and while he expected to see some short term volatility, he noted that Christmas retail sales recorded modest growth.

He added that the group was still seeing modest growth in the US market overall, and the information at hand shows that in another three years' time China, India and the Middle East would grow to the size of current US market, which comprises 34%-36% of the market.

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