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Petra Diamonds will shutter its Finsch mine and dismiss a number of employees to tighten its spending and focus on the higher-value Cullinan deposit amid the prolonged industry downturn.
“We are faced with an unprecedentedly weak diamond market, due to global macro factors as well as the recent Middle East tensions,” Petra CEO Vivek Gadodia said last week. “In particular, we continue to see deterioration in the value of the smaller-sized diamonds, where we do not currently expect a material near-term recovery.”
Because the Finsch deposit produces primarily smaller-sized stones, Petra has been assessing its current viability, it explained. It will instead focus on its other mine, Cullinan, which produces larger, higher-value diamonds. At the company’s most recent tender, which took place in April and May, prices for rough from Finsch averaged $47 per carat, compared to $56 per carat at the previous tender, while Cullinan goods saw an average of $81 per carat versus $109 per carat.
The increasing strength of the South African rand against the US dollar has also hindered Petra’s finances, it said. Petra earns money in dollars but pays debts in South African currency.
Finsch will enter into business rescue, a legal restructuring process that helps financially distressed companies avoid immediate liquidation, and Petra will stop any capital outlay at the site.
“This is being done in order to protect the overall business, which we believe has a viable future given the Cullinan mine’s unique product mix, which has thus far allowed it to mitigate both the weaker market and the stronger rand,” the company said. “These are difficult times for the natural-diamond sector.”
Petra also intends to lay off staff to “reduce expenditure at the Cullinan mine and the rest of the group,” it said. It will conduct the process in consultation with employees and the labor union, it added. The miner did not disclose the number of workers it would dismiss. It currently employs approximately 4,000 people between the two mines and its headquarters.
Additionally, the company parted ways with Juan Kemp, who held the position of joint CEO alongside Vivek Gadodia, as part of the restructuring process. Petra has suspended its guidance until it finalizes a new business plan.
Image: The Finsch mine. (Petra Diamonds)
