Petra Diamonds LON:PDL, the Jersey-based, Africa-focused diamond mining company published its unaudited interim results for the six-months ending 31st December 2024 today (17th February).
The company also announced new leadership, firing (by mutual consent) long-serving CEO Richard Duffy, who had been at the helm for nearly six-years, and hiring Vivek Gadodia and Juan Kemp as joint CEOs. Gadodia and Kemp have been with the business for four-years and six-years respectively and have been promoted to help restructure the business, as net losses after tax widen to $69m (£55m) for the half-year to December 2024; the company had losses of $11m for 1H24 and refinancing its debt. Gadodia will deal with corporate matters, Kemp will deal with operational and capital matters.
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Debt increased to $215m, as at the end of last year, up from $193m at the half-way point on 2024, which the company attributed to market weakness and the timing of tender sales. On the bright side, cashflow was up to $16m, compared to a $21m outflow, with cashflow improvements a result of bearing down on costs.
As previously reported Petra has three historic diamond mines in production: the Cullinan Mine, Petra’s flagship asset based in South Africa, which started producing in 1902, and is the world’s most important source of blue diamonds; the Finsch Mine, also in South Africa, which has produced a steady supply of 5-carat commercial diamonds since 1967, and also has history of producing rare, fancy yellow stones, and; the Williamson Mine in Tanzania, a shallow mine that is renown for its pink diamonds.
Sale of non-performing assets
In October Petra eventually completed the protracted sale of its Koffiefontein diamond mine in South Africa – something that it had been looking to complete since 2022 – selling the project to Dubai-based Stargems Group. Koffiefontein was acquired by Petra from De Beers in 2007, which had been operating the mine on-and-off since 1911. However, the mine was placed on care-and-maintenance by Petra in 2022, as it was loss-making. The disposal will allow Petra to avoid $15m to $23m in closure costs. The estimated life-of-mine ends in 2025, and Koffiefontein has an estimated resource of 5.25 million carats.
Petra also announced that it was in the process of disposing of its interest in Williamson, selling the mine for $16m to Tanzania-based, Pink Diamonds Investments, part of the indigenous Taifa Group. The sale was announced last month and included shareholder loans raised by Petra and the miner will use the funds, when they are received, to shore up its operations and balance sheets.
Cutting costs, smoothing capital profiles
Petra has been working hard since The Armchair Trader last wrote about the mining company, cutting its costs and smoothing its capital profiles. Diamond miners have always been at the mercy of the vagaries of the global diamond price, especially so as most diamond sales are conducted at periodical wholesale auctions. The company shifted to a focus on value over volume over the past few years, tuning its operations to find higher-value individual stones, against lower carat industrial stones, and have had some notable successes. As such, it decided to concentrate its operations on the mines that produced the bigger gemstones, as opposed to the smaller costume jewellery/industrial use volume mines, and has rationalised its operational assets to follow this strategy.
The company’s joint CEOs were broadly happy with the recent results, saying in a statement today: “These financial results reflect the successful implementation of the cost reduction plans and smoothed capital profiles outlined at our investor day last June, set against the prolonged period of weakness in the diamond market.”
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They continued: “We have sustainably reduced our mining and processing costs from continuing operations by 19% and capex by 32% from 1H24. Revenue was lower [by 30% year-on-year] by $49m largely due to $50m of additional revenue from tenders in FY23 being carried over to 1H24. However, as a result of cost reductions, cash preservation measures, and working capital optimisation, cash flow from operations increased to $55m [from $34m in 1H24].”
The diamond industry, especially at the consumer end of the business, is highly sensitive to inflation and changing consumer preferences. Recent fluctuations in rough-diamond prices have impacted the value chain, benefitting upstream producers but squeezing downstream players. Market volatility has led to stockpiling and sales cancellations, while the rise of lab-grown diamonds (LGDs), offering nearly identical properties at up to 80% lower costs, poses a significant threat to natural diamonds.
Changes in consumer behaviours
Jewellery vendors at the retail end of the market are finding significant shifts in consumer demands, especially from Gen-Z consumers, who are at the stage in their lives when they look towards marriage, settling-down and having families, and are seeking ethical, branded, digital products. As a demographic cohort Gen-Zers are taking to LGDs in greater numbers than previous demographic cohorts. LGDs are the great disruptor of the 2020s for the diamond market.
This affects the consumer options that retailers are offering their customers, which has ramifications up the supply chain, especially with traditional mined-product wholesalers. Miners are also having to react to this trend by providing traceability and transparency of individual stones – in the past the diamond industry has, to be polite, had issues with the opacity of supply chains.
Many diamond mines – Petra arguably excluded – are in unstable regions, riven by geopolitical tensions and operational challenges, and many mines are closing, with little new supply coming online (mined diamond supply is only expected to grow slowly at 1% to 2% a year over the next decade).
Overall, the diamond industry is at a critical juncture, facing challenges from LGDs, shifting consumer values, and regulatory changes. Success will depend on agility, strategic innovation, and alignment with evolving market dynamics.
Petra noted that although revenue fell from $164m to $115m this was due to its deferral of the sale of 456 carats, around $50m, based on the prices of tender one from FY24 which were scheduled to be sold in FY23 but were sold in 1H24. The company also highlighted that it had cut mining and processing costs by 19% y-o-y to $98m. Capital expenditure was also cut by 32% to $30m. The company, at the end of December, had $50m left to drawdown from its revolving credit facility,
Petra opened the week at 26.91p falling to 24p by 1pm. Over one-year the company’s shares were down 37.4%. The company has a market cap of GBP56.3m.
Petra Diamonds is navigating a challenging landscape marked by leadership changes, financial pressures, and a rapidly evolving diamond market. With a strategic focus on cost reduction, operational efficiency, and the sale of non-performing assets, the company is positioning itself for long-term sustainability. As it adapts to shifting consumer preferences and increasing competition from lab-grown diamonds and depressed prices, Petra’s success will depend on its ability to innovate and align with market dynamics. The upcoming tenure of joint CEOs Vivek Gadodia and Juan Kemp will be pivotal in steering Petra through this transformative phase.
