REG - Petra Diamonds Ltd - Improved resilience through capital deferrals

Petra DiamondsAnnouncement

01/11/2023 07:15

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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
(mailto:investorrelations@petradiamonds.com)

Julia Stone

Kelsey Traynor

 

Financial PR (Camarco)

Gordon
Poole
Telephone: +44 20 3757 4980

Owen
Roberts
petradiamonds@camarco.co.uk (mailto: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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