Charlotte Mathews
8 July 2009
Johannesburg — SOUTHERN African diamond producer Petra Diamonds, which is listed on London's AIM exchange, expects diamond prices to continue strengthening gradually, it said in a trading update yesterday.
In the final quarter of last year and into early this year, rough diamond prices dropped 65% but had since recovered about 25%, Petra CEO Johan Dippenaar said.
Liquidity had returned to the market since April and sentiment had improved. Demand had improved after cutbacks in production by De Beers and external sales by Alrosa.
But Reuters reported Liberum Capital analyst Dominic O'Kane saying in a note to clients that the recovery in prices could be knocked back if De Beers and Alrosa resumed supplies.
Fairfax analyst Marc Elliott said he expected market conditions to remain tough for some time, although it was hoped the worst was now over.
Petra owns the Cullinan, Koffiefontein and Williamson mines bought from De Beers as well as fissure mines Star, Helam and Sedibeng.
It negotiated the purchase of Kimberley Underground from De Beers almost two years ago but the transaction was complex and had not yet been finalised because of mining rights conversions and related matters .
Petra grew production fivefold to 1,1-million carats in the year to last month compared with last year because of the new contribution from the Cullinan mine. But the average price received per carat dropped to 93 from 336 because of the large number of lower-carat stones produced by Cullinan.
Cullinan is also noted for occasional exceptional diamonds. In the past year one of its stones was sold for $8,8m or 225934/carat and a second for $9,4m or $1,3m/carat.
Petra's revenue for the year dropped to $69,1m from $76,9m, reflecting tough market conditions. It will release detailed financial statements in September.
Petra said it was renegotiating the payment date and strike price of its $20m of convertible bonds held by Al Rajhi Holdings, which will be due in September at a strike price of 130p. Petra's shares gained 6% to 46p on AIM yesterday.
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