Petra Diamonds forecasts lower output

Petra Diamonds Limited forecast full-year revenue below market expectations as the smaller diamonds mined from late stage ores at its Finsch and Cullinan mines in South Africa have been fetching lower prices.

The miner’s third warning this year sent its shares down as much as 12.4 per cent, making it the second largest percentage loser on the FTSE-250 Midcap Index on Friday. Petra also operates the Williamson Diamond Mine (WDM) in Mwadui in Shinyanga Region.

Petra said it expected revenue of about $430 million for the year ended June 30, almost 9 per cent lower than a year earlier and below an average market estimate of $442 million, according to three analysts.

The company had warned twice earlier this year that its results would be below consensus due to variability in grade and production mix and softness in the diamond market earlier in the year.

Petra has been mining at mature caves at Finsch and Cullinan and has therefore seen a lower incidence of the high quality stones that have traditionally boosted the company’s results.

Cullinan, located in the foothills of the Magaliesberg mountain range northeast of Pretoria, has in particular been the source of many large diamonds.

Petra in 2014 unearthed three large stones at the mine, which is the source of the largest rough diamond ever recovered - the 3,106-carat Cullinan Diamond found in 1905. Petra has not revealed any major discovery at Cullinan in 2015.

Mining at Cullinan’s mature underground area has also meant that the ore mined has been more diluted, costing the company more to move additional waste material.

Petra, however, kept its fullyear production target of about 3.2 million carats and said its reliance on heavily diluted ore would be reduced in fiscal year 2016 as it ramps up production from new areas.

Shares in the company were down 9.9 percent at 154 pence at 0916 GMT on the London Stock Exchange.

As of Thursday’s close, the stock had fallen 10 pct since the beginning of 2015, compared with a 3.7 pct decline in the FTSE-350 Mining index.

Source: Daily News, reported from Dar es Salaam, Tanzania

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