RE: news27 Mar 2020 13:38
Tanzania
The number of cases of COVID-19 in the country is currently low and the Government has taken fast action to put containment measures in place. The Company’s open-pit Williamson mine, which is in a remote location in the Shinyanga province, remains in full operation but is being managed in strict accordance with the new procedures outlined above.
However, in light of the depressed market environment, the mine’s liquidity position is being closely monitored, as constraints may impact its ability to continue to operate. Discussions with the Government in relation to various issues, including the overdue VAT receivables and the blocked diamond parcel, are ongoing but have been interrupted by the COVID-19 outbreak.
Diamond Sales
Petra’s fifth diamond sale of FY 2020, with tenders in both South Africa and Antwerp, commenced on Thursday 19 March and was due to close on Thursday 26 March. However, sensing the rapid deterioration of market conditions, particularly due to travel restrictions, factory and retail closures, and the spread of COVID-19 in South Africa, the Company brought forward the closure of its South African sale to Monday 23 March.
During this constrained sales period, the Company saw severely depressed and opportunistic bidding for its goods, particularly in the larger size and higher quality, greater value categories. As a result, Petra chose to sell a portion of its South African goods, representing ca. 75% by volume and ca. 50% by value. These goods saw price decreases of ca. 24% on a like-for-like basis in comparison to pricing achieved at the February 2020 sales cycle. The remaining goods were exported to Antwerp and will be offered for sale when market conditions allow.
The Antwerp tender of Tanzanian goods was also brought forward and closed on Tuesday 24 March. The vast majority of the goods were sold, with only a few strategic, higher-value parcels being withheld, and pricing achieved was on a similar level to that in South Africa.
Petra is due to hold two further sales in May and June before the end of the financial year, but the outlook for both sales is highly uncertain and will depend on travel and export conditions at the time, as well as activity levels in the key diamond buying centres, being India, Israel, China and the US.
Liquidity and Capital Structure
As at 31 December 2019, the Group had bank debt facilities undrawn and available of ZAR 1.5 billion (ca. US$107.2 million), in addition to diamond debtors of US$12.8 million and cash at bank of US$53.6 million. Petra is in close contact with its South African lender group, which remains supportive of the Company.
Petra continues to closely monitor and manage its liquidity risk. Cash forecasts are regularly produced and run for different scenarios, which now include the aforementioned potential impact of protracted production shutdowns and uncertainty around diamond sales in the short-term. The impact of weaker diamond prices is part
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