Tuesday, February 4, 2014

Petra Diamonds plans to pay regular dividends from June 2016

listed Petra Diamonds is planning to start paying dividends on a regular basis with effect from its financial year to June 2016, once it has completed the major capital expenditure programmes under way at its Finsch and Cullinan mines.
 Petra Diamonds CEO Johan Dippenaar. Picture: FINANCIAL MAIL
Announcing the news at a presentation to investors at the Mining Indaba in Cape Town on Tuesday, CEO Johan Dippenaar said the company was committed to capital expenditure of $180m-$190m a year from 2013 to 2015.
The money is being spent to establish deeper "block cave" extensions to the underground mining operations on the diamond-bearing kimberlite pipes at both mines.
Block caving is a highly mechanised mining method that is one of the safest and cheapest that can be used, but it requires considerable capital invested upfront to start the operation.
Mr Dippenaar said: "There is a very high upfront exposure but, once those block caves are in operation, then our capital expenditure commitments decline sharply and we can leverage off that infrastructure for years to come."
He said the deep-level extensions would take mining operations into "undiluted" kimberlite ore, which had a number of advantages over the present operations that took place in old mining areas where the kimberlite ore had been diluted by amounts of waste rock.
In particular, the grade in the new mining areas is expected to be sharply higher than the material Petra has been mining closer to surface.
Mr Dippenaar said he expected average grades to rise 50%-60% from about 37 carats per hundred tons of ore mined to about 56 carats per hundred tons mined at Finsch, and from about 31 carats per hundred tons mined to about 50 carats per hundred tons mined at Cullinan.
As a result, group profit margins are expected to rise from about 34% in the 2013 financial year to roughly 50% by 2019.
He also pointed out that the expansion programme was fully funded with debt facilities of $222m in place from Absa, Rand Merchant Bank, First National Bank and the International Finance Corporation.
Petra operates six diamond mines, five of which are in South Africa. Four of those mines were acquired from De Beers, while the fifth, Helam, has been placed on care and maintenance after Petra’s initial attempts to sell the mine were unsuccessful.
The sixth operation, the Williamson mine in Tanzania, was also acquired from De Beers.
Asked about the possibility of listing Petra on the JSE, Mr Dippenaar replied: "It’s not a priority for us. We have a lot on our plate at present and we are fully funded to pay for our expansion plans so we don’t need to raise any money."

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