Petra Diamonds Ltd said it is withdrawing from the Alto Cuilo project in Angola with immediate effect and is currently reviewing its options with regards to the Luangue project, with the focus at Luangue being on a substantially reduced exploration spend.
This forms part of the actions the company is taking after a strategic review of its exploration activities, which all taken together will reduce exploration spend to US$5 million per annum from approximately US$25 million.
Petra Diamonds has also reviewed exploration in Botswana and will substantially reduce both the level of activity and spend, but will not relinquish any of the licence areas of interest.
It is discussing options regarding the Kono project in Sierra Leone with its joint venture partner Stellar Diamonds Ltd, the focus being on substantially reducing Petra Diamond's monthly cash spend on this advanced exploration project.
There is potential to reduce exploration spend by a further US$4 million depending on the results of the Luangue and Kono reviews, Petra Diamonds said.
The operational reviews at all of its mines were taken in response to the global weakening of rough diamond prices. Petra is confident that - other than Star and Helam, which may need to be placed onto care and maintenance -, the mines will be cash flow positive at current prices.
The company has been transformed by the acquisition of the Cullinan and Koffiefontein mines, and with the Kimberley Underground and Williamson mines adding further production in the next six months it is comfortable in deciding to relinquish the capital intensive exploration projects that have historically been Petra Diamonds' focus.
“The global financial environment requires a change in commercial approach. Our focus now is to continue to build cash-positive production, whilst maintaining rigorous cost control,” it said in a pre-close trading update ahead of interim results.
Gross revenue from rough diamond sales for the first half to end-December 2008 rose to US$48.1 million, a 52 percent increase from the same period a year earlier.
Petra Diamonds announced the recent recovery of a second exceptional blue stone at the Cullinan mine. Early indications are that the 26.58 carat stone is an extremely rare discovery, of even better colour and clarity than the 39.19 carat blue stone sold in October 2008. It will announce how and where the stone is to be sold in 2009.