South Africa’s Petra Diamonds (LSE: PDL) is contemplating promoting its Williamson mine in Tanzania, even because it continues to work on bringing the operation again on-line within the second half of 2021.
Delivering its year-end results, Petra mentioned that Williamson had been labeled as a discontinued operation, which is able to imply an accounting lack of US$52.1 million for the corporate. The mine was mothballed in April final yr after diamond costs dropped following the Covid-19 outbreak.
BMO analyst Raj Ray mentioned that whereas a sale may very well be considered positively by the market, he sees potential dangers when it comes to realizing the worth of US$84 million (internet ebook worth of about US$26 million at fiscal 2021 year-end) the financial institution ascribes to the asset given the current challenges.
“Latest efforts to acquire a US$25 million working capital facility with an area financial institution for the restart have to date been unsuccessful,” Raj wrote in a observe to buyers.
Petra has confronted allegations of human rights abuses on the mine, ensuing from the actions of its safety guards.
The miner formed in February an internal committee to supervise the investigation, which concluded that “regrettable” incidents did happen on the mine up to now. Shortly after, it reached a £4.3 million (about US$6 million) settlement with claimants, despite the fact that it did not admit legal responsibility.
The corporate is presently engaged in talks with Tanzanian authorities over a revised regulatory framework, which might result in Williamson’s re-opening.
A key concern in these discussions issues a parcel of 71,654 carats of diamonds successfully positioned in limbo after deceased President John Magufuli blocked their export in 2017.
Turnaround
Regardless of Covid-19 and points at Williamson, Petra has staged a pointy turnaround in fortunes over the previous monetary yr. It minimize internet debt by two thirds within the yr ended June 30 after a capital restructuring completed in March and rising gross sales drove robust progress in free money stream.
Petra ended fiscal 2021 with internet debt of US$228 million, down from just below US$693 million final yr. Internet revenue reached US$196.6 million, reflecting a US$213.3 million acquire after the profitable debt restructuring.
Income rose 65% to US$402.3 million on the again of upper gross sales of outstanding stones.
As for fiscal 2022, Petra reaffirmed manufacturing steering of three.3 million-3.6 million carats, with capital expenditure of US$78 million-$92 million.
