Petra Weighs Future of Finsch Mine Amid Small-Stone Weakness

Petra Diamonds is considering options for the future of its Finsch mine, including suspending any further outlay of cash on the site to cut costs.

The South African mine produces small rough diamonds, which are currently suffering from prolonged weakness in the market. By lowering costs at the site, or even eliminating it altogether, Petra will be able to focus on the Cullinan mine, which produces larger stones.

“Over the last nine to 12 months, the smaller-size segment has been experiencing continued weakness, adding pressure to cash generation,” Petra said last week. “As a result, the company has decided to undertake a cost-reduction assessment to preserve liquidity. The company is considering suspending further capital expenditure at Finsch.”

The miner is assessing the current financial situation at Finsch, a review that should be completed by the end of the month, it said. Depending on the outcome, Petra will consider all options for the mine.

Petra also plans to shift its focus at Cullinan to the portion of the C-Cut region of the mine known for producing high-value, type II stones, which are doing better in the market. However, while the rough contained in this area is larger and of higher value, the ore grade is lower, meaning the company will produce less rough than originally planned.

“This has already resulted in, and will continue to result in, a reduction in carats recovered from the CC1E [region], which is at a much higher grade,” said Petra interim joint CEOs Vivek Gadodia and Juan Kemp. “This decision has been taken to ensure the product mix at Cullinan mine is able to withstand the ongoing weakness in the smaller-size fractions. We are also evaluating the appropriate capital profile for Cullinan, recognizing the need to balance liquidity protection with future production resilience.”

Given the change in plan for Cullinan, Petra observed it was unlikely to meet its full-year production guidance and was suspending any further forecast for the rest of the year.

Sales for the fiscal third quarter that ended March 31 grew 62% year on year to $68 million, thanks to the sale of a 41.82-carat, blue, type IIb diamond. Sales volume was up 40% to 781,797 carats. Sales increased 39% from the previous three months, with sales volume rising 58%.

The company’s net debt increased to $298 million as of March 31, compared with $284 million on December 31. Petra has 434,182 carats of rough worth $29 million currently in its inventory.

Image: The Finsch mine in South Africa. (Petra Diamonds)