Source: Rapaport
Author: Avi Krawitz
Production decline to turn as Finsch acquisition nears completion.
Petra Diamonds reported that gross revenue rose 24 percent to $220.6 million in the fiscal year that ended June 30, 2011, driven by price increases in the second half of the year. The company is expecting prices to consolidate in the coming months.
“Petra anticipated a positive outlook for the diamond industry in 2011 and the market has indeed performed strongly, with rough prices in all categories increasing throughout the year,” the company explained. “This robust market is underscored by firm retail demand, particularly from China, India and, to a lesser degree, the U.S.”
Petra noted that a shortfall in supply has resulted from restocking that occurred throughout the pipeline during the period with strong demand for large stones and commercial goods. The company added that there has been exceptional growth in the price of smaller gem diamonds in line as the trend to use these stones in a wider range of luxury goods, such as watches, has developed.
Johan Dippenaar, Petra’s chief executive officer (CEO), told Rapaport News he expects a brief respite in rough price levels during the current quarter before prices starting to increase again around October. “Last year we saw the market consolidate around July and then uptick from the fourth quarter and we expect the same pattern again this year,” he said.
Dippenaar added that the while the diamond market was still exposed to economic risk, demand in India and China has resulted in a more diverse customer-base and healthier diamond market.
Group production for the year fell 4 percent to 1.117 million carats as the company’s South Africa operations were impacted by heavy rainfall, output from the Cullinan mine declining by 4 percent to 894,879 carats. Production at the Koffiefontein mine fell 20 percent to 47,956 carats. Output from Petra’s Williamson mine in Tanzania dropped 71 percent to 29,510 carats while productions at its South Africa fissure mines increased 18 percent to 87,488 carats.
Production is expected to increase in fiscal 2012 as the Finsch mine, which Petra bought from De Beers in January, comes on stream. Output at Finsch is expected to reach 125,000 carats per month once the deal closes in the coming weeks which will help boost annual production to around 3 million carats.
Petra’s sales volume rose 4 percent to 1.174 million carats during the year with the average price of total production sold up approximately 19 percent from fiscal 2010. The average price of production rose significantly in the second half of the fiscal year compared with the first half with output from the Cullinan mine rising 48 percent between the periods to $178 per carat. The average price of production from the Koffiefontein mine rose 60 percent in the half year to $756 per carat.
Petra said it sold 12 diamonds for more than $1 million per stone during the year, with 11 coming from Cullinan.
Shares in Petra Diamonds rose 2 percent to 152 pence a share in early trade on London’s Alternative Investment Market (AIM). The share is scheduled to move to trading on the main London Stock Exchange by the end of 2011.
Petra’s full financial results are scheduled for release in September.