South Africa- and Tanzania-focused diamond producer Petra Diamonds is targeting free cash flow generation starting next year despite difficult market conditions currently dogging the industry after the company accrued $44 million (R755m) yearly cost reductions.
Petra Diamonds owns the Williamson mine in Tanzania and operates two diamond mines in South Africa. It has transitioned the Finsch mine in SA from a 2.8 million tons per year operation to a 2.2m tons per year, with greater emphasis on planning and maintenance, said Richard Duffy, CEO of Petra Diamonds.
With a smoothed capital profile and $44m reduction in annual operating costs going forward ($30m at our SA operations and $14m at Williamson), we are targeting free cash flow generation from FY 2025. We acknowledge the difficult market conditions through FY 2024 and believe that prices will stabilise through to the end of FY 2024 with some improvement expected in 2025, explained Duffy.
He added that Petra Diamonds had throughout the full year to June 2024 demonstrated its agility in responding to a weaker pricing environment by building resilience. This included reduction of cash expenditures by $75m through deferment of capital expansion programmes and cost reduction.
This kind of approach was also being instituted by other producers that are having to rebalance inventory across the pipeline. Duffy continues to see supportive market fundamentals in the medium and longer term outlook.
