Petra Diamonds Limited said it has achieved record production for any six month period in its history during the most recent six month period that ended December 31, 2017 (H1 FY 2018). But, revenue remained flat mainly on account of the seizure of an export parcel from its Williamson mine in Tanzania.

Releasing its unaudited H1 Trading Update, the Company reported that production was up 10% to 2,208,056 carats (H1 FY 2017: 2,015,087 carats), but diamonds sold were down 5% to 1,811,154 carats (H1 FY 2017: 1,910,113 carats), mainly due to Williamson’s first parcel (ca. 71,000 carats), which remains blocked for export by the Government of the United Republic of Tanzania, not being sold during the period.

Revenue was down 1% to US$ 225.2 million (H1 FY 2017: US$ 228.5 million) for the same reason, the Company added, with the decline in volume sold partly offset by price changes and also realisation of higher average values at Finsch, Cullinan and Koffiefontein further to the improved product mix associated with higher production levels of undiluted ore and lower contribution of tailings carats.

Petra also reduced its production guidance for FY 2018 to 4.6 – 4.7 Mcts (4.8 – 5.0 Mcts previously), mostly due to the lowered grade guidance at Cullinan, as well as production lost further to the labour action in South Africa in Q1. The Company said that recoveries at Cullinan’s new plant to date indicate that a steady state higher grade can be achieved by recovering larger quantities of small, low value diamonds; however, it is Petra’s initial assessment that it would be uneconomic to do so and would not be in line with the Company’s strategic focus on value rather than volume production.

Nevertheless, revenue is expected to remain in line with current consensus (including the expected sale of the blocked Williamson parcel in H2), but EBITDA is expected to be negatively affected by ca. 10-15% versus current consensus, primarily due to the recent strengthening of the Rand and its potential impact on Petra’s cost base in US dollar terms.

Both the underground expansion projects – at Finsch and Cullinan – continue to deliver increased volumes of undiluted ore from newly established mining areas, the Company reported. It also said that the new Cullinan Plant throughput ramp-up is progressing well. Five stones larger than 100 carats (though of poor quality) were recovered through the new plant in H1 (including a 574.15 carat stone, being the largest stone recovered by Petra at Cullinan to date), along with a number of other higher value stones, in line with the expected increase in special stones as indicated by historical records as mining from the Western side of the orebody increases.

Johan Dippenaar, Chief Executive Officer, commented, “Petra’s stated strategy is to focus on value as opposed to volume production, which is particularly pertinent to diamond operations, as not all carats are of equal value. Our assessment of optimal recoveries at Cullinan has therefore led us to opt for lower carat volumes, due to the positive impact that not recovering the small diamonds has on the average value per carat. This has led to lowered production guidance for FY 2018, but does not materially impact our expected revenue, further to the positive uplift in Cullinan’s average value per carat. Likewise, we have been very encouraged by the recovery of large diamonds and other higher value single stones through the new Cullinan Plant to date, which was in line with our expectations that the incidence of such stones would increase as they are historically associated with the Western side of the orebody.”