* Virus hits demand in China, stores close
* Petra has been working to cut debt
(Adds CEO quote on margins, shares, analyst comments)
By Shanima A and Noor Zainab Hussain
Feb 17 (Reuters) - Africa-focussed miner Petra Diamonds
said the coronovirus outbreak had hit Chinese demand for
diamonds, forcing it to push back targets for cashflow and debt
reduction, sending its shares more than 20% lower.
Petra has been fixing its balance sheet after spending years
investing in its flagship Cullinan mine in South Africa.
On Monday, it said the coronavirus outbreak had dented
demand in the diamond market as stores were forced to close
during the important Lunar New Year holiday period in China.
The company said the impact of the fast-spreading virus
would cause delays in Project 2022, its debt reduction programme
launched last year.
It cut its cash flow target to between $100 million and $150
million by June 2022, from its earlier range of $150 million to
$200 million.
Petra reported a 11% fall in core earnings for the first
half, but said its full-year production outlook was
unchanged.
Coronavirus is a new threat to the diamond industry, which
has already been hit by lower demand from China, the world's
second largest market after the United States, following a
prolonged trade war and pro-democracy protests in Hong Kong.
"Activity across the diamond pipeline is therefore expected
to reduce until the virus is brought under control," Petra said
in a statement.
China has seen retail stores shut and the Hong Kong and
diamond auctions and industry events had been delayed or
relocated.
Petra's Chief Executive Officer Richard Duffy said consumers
were cautious about buying diamonds in the current uncertain
climate, but said the company was working on increasing profit
margins to offset any impact.
"That might have a small impact on the margins, but we
already have a programme, Project2020, aimed at supporting the
margins," he told Reuters.
Apart from problems in China, some analysts have also blamed
the increased importance of laboratory-grown stones for price
weakness in the diamond market.
In South Africa, miners including Petra, have also had to
contend with load shedding because of problems at the heavily
indebted state utility Eskom and Petra said disruption to
production remained a risk.
Petra bought Cullinan in 2008, aiming to breathe new life
into the mine renowned for yielding the largest rough gem
diamond ever found - 3,106 carats - and being the world's main
source of rare blue diamonds.
(Reporting by Shanima A and Noor Zainab Hussain in Bengaluru;
Editing by Shounak Dasgupta and Barbara Lewis)
Petra Diamonds (PDL)
