TIDMPDL
RNS Number : 9491R
Petra Diamonds Limited
01 November 2023
01 November 2023 LSE: PDL
Petra Diamonds Limited
("Petra" or "the Company")
Improved resilience through capital deferrals and reduction in
operating and group expenditure
Petra announces steps taken to provide further financial
flexibility should prevailing market conditions continue if diamond
prices remain weaker-for-longer.
Richard Duffy, Chief Executive Officer of Petra, commented:
"Actions announced today in response to the diamond market
weakness are aimed at ensuring Petra remains resilient and able to
withstand weaker-for-longer market conditions. While diamond
inventories remain elevated in both rough and polished goods, we
are confident that the discipline shown by diamond producers as
well as the Indian diamond import moratorium to mid-December will
lead to a recovery in pricing once demand strength returns. Through
adapting our cost base and deferring two of our capital projects,
we are targeting cash savings of up to US$75m by June 2024 whilst
minimising the impact of these deferrals and aiming to deliver
increased production into a stronger pricing environment. We will
continue to maintain our flexibility to respond to market
conditions safely and responsibly, through our enhanced operating
model and flexible sales approach."
Petra believes the steps recently introduced by the diamond
industry will curb declining diamond prices through rebalancing
inventory levels across the pipeline. Notwithstanding this, the
Company is taking immediate and prudent steps to provide further
financial flexibility and preserve the Company's short to medium
term liquidity as well as increase its headroom and flexibility
until such time as the market has sufficiently stabilised. Through
these actions, the Company expects to be able to continue to meet
all its obligations should a weaker-for-longer diamond market
scenario persist.
Amendments to capital spend
Certain amendments and deferrals to capital programmes have been
approved for immediate implementation which are expected to reduce
Petra's extension capex for FY 2024 by up to US$65 million. These
include:
-- At Cullinan Mine:
o The deferral of the C-Cut extension project until the end of
June 2024.
o The partial deferral of the CC1E project until the end of June
2024, with approximately half of the development crews continuing
to develop the 813 and 833 Levels of the Sub-Level Cave (SLC) to
ensure higher-grade ore is brought into production from the end of
June 2024 onwards.
-- At Finsch:
o The deferral of the 3-Level SLC extension project until the
end of June 2024.
o The 78-Level Phase II project will continue as planned to
bring these production areas online during FY 2024 to supplement
production from the existing SLC which is nearing its end of
life.
-- The deferral of US$3-5 million of sustaining capex against the FY 2024 guidance.
-- Delaying delivery of equipment on order given the pause in
execution of the development programmes outlined above.
-- The deferral of feasibility studies related to future capital
investment opportunities and trade-off studies at all
operations.
During this period of reduced development activity, the Company
will assess further value-engineering opportunities for its capital
development programmes aimed at improving efficiencies and/or
lowering overall costs, whilst undertaking re-planning work that
looks to minimise the impact of these deferrals on the Company and
its growth profile. Although the deferred programmes are currently
expected to restart from July 2024, the Company retains the
flexibility to restart the deferred programmes earlier should
market conditions improve.
Reduction in operating and Group expenditure
Further to the capital deferrals outlined above, the Company has
identified operating and group cost savings of US$7-10 million
against the FY 2024 guidance.
Increasing headroom and flexibility
As previously announced, Management is in discussions with Absa
Bank to increase the Company's existing ZAR1 billion Revolving
Credit Facility by up to ZAR750 million (c. US$40 million) to
provide additional operational and sales flexibility in the event
of protracted market weakness. An in-principle decision is expected
during November 2023.
Guidance
Production guidance for FY 2024 is maintained, although is now
expected to be towards the lower end of the guidance range of 2.9
to 3.2 Mcts. The impact of the project deferrals on production and
capex guidance for FY 2025 and FY 2026 will be provided on a
mine-by-mine basis once the value-engineering and re-planning work
has been completed. We expect there will be a reduction in current
production guidance for these two years at a reduced cost base. We
expect to communicate this, together with our Interim Results
announcement, in February 2024 and will provide further information
on the potential of Petra's assets at the Company's Capital Markets
Day, now anticipated in Q4 FY 2024.
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is being
released on behalf of Petra by the Company Secretary.
For further information, please contact:
Investor Relations, London Telephone: +44 20 7494 8203
Patrick Pittaway investorrelations@petradiamonds.com
Julia Stone
Kelsey Traynor
Financial PR (Camarco)
Gordon Poole Telephone: +44 20 3757 4980
Owen Roberts petradiamonds@camarco.co.uk
Elfie Kent
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
a supplier of gem quality rough diamonds to the international
market. The Company's portfolio incorporates interests in three
underground mines in South Africa (Finsch and Cullinan Mine) and
one open pit mine in Tanzania (Williamson). The Koffiefontein mine
is currently on care and maintenance in preparation for
closure.
Petra's strategy is to focus on value rather than volume
production by optimising recoveries from its high-quality asset
base in order to maximise their efficiency and profitability. The
Group has a significant resource base which supports the potential
for long-life operations.
Petra strives to conduct all operations according to the highest
ethical standards and only operates in countries which are members
of the Kimberley Process. The Company aims to generate tangible
value for each of its stakeholders, thereby contributing to the
socio-economic development of its host countries and supporting
long-term sustainable operations to the benefit of its employees,
partners and communities.
Petra is quoted with a premium listing on the Main Market of the
London Stock Exchange under the ticker 'PDL'. The Company's loan
notes due in 2026 are listed on the Irish Stock Exchange and
admitted to trading on the Global Exchange Market. For more
information, visit www.petradiamonds.com.
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END
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