Petra Diamonds’ subsidiary has struck an offtake deal that will provide the company with near-term liquidity to run its business, given as an advance for future rough production.
Cullinan Diamond Mine Proprietary Limited signed a binding advance payment offtake agreement with a midstream diamantaire group. The deal will see the offtake group pay Petra at least $20 million through revolving advance payments for all future run-of-mine production, the company said Wednesday. Additionally, Petra signed a separate contract with its senior secured lender, which extends its repayment due date on outstanding debt for 12 months.
“Together, the advance-payment agreement and the forbearance provide near-term liquidity and stability for Petra and Cullinan mine whilst it continues to progress its strategic review to find a long-term financing solution,” the miner explained.
Petra also noted a slight improvement in prices of smaller goods toward the end of September. However, it didn’t benefit from that rise as much as it could have due to a weak product mix that stemmed from changing shift patterns as a result of its retrenchment process, it said. Total revenue for the first fiscal quarter fell 43% year on year to $21 million, even as sales volume grew 18%, as the weaker product mix drove prices down 52% to $63 per carat. Sales fell 31% from the previous quarter, with sales volume down 16%, as prices slid 18%. Production for the period slipped 12% year on year to 291,517 carats. Petra expects an improvement in both the product mix and grade from November onward, when it is due to receive “critical equipment” needed for mining the higher-value C-cut portion of the deposit.
During the period, the miner completed its layoff process, letting go of 25 workers. It also implemented a number of cost reductions. Those two initiatives are likely to result in an annual savings of $3 million, Petra said.
The company has fully drawn down its revolving credit facility of $107 million, as well as its working capital facility of $18 million, which it secured in July. Consolidated net debt increased to $348 million as at September 30, compared to $322 million on June 30.
Petra’s strategic review is ongoing, with the company considering “all potential paths to address liquidity,” including refinancing or a potential sale, it said. It has already commenced asset sales for its Finsch deposit, with over 3,000 lots catalogued for disposal, primarily via auction.
Image: The processing plant at the Cullinan mine. (Petra Diamonds)
