Petra Diamonds' Cullinan Diamond Mine, which is famous for producing some of the world's largest and highest-quality diamonds. File picture: Philip Mostert
By Tawanda Karombo
THE NATIONAL Union of Mineworkers (NUM) has expressed deep worry about Petra Diamonds’ plans to retrench 200 employees from its South African operations.
Petra Diamonds’ prospects for free cash flow generation could be reduced by the slow diamond price recovery, analysts from S&P Global recently said.
The company has been restructuring its cost base while it also reported a 9% decline in like-for-like diamond prices for the quarter to end of September 2024.
Its plans to lower costs includes retrenching employees and this has not gone down well with labour unions who are resisting this move.
“The National Union of Mineworkers strongly rejects the purported retrenchments of about 200 workers at Petra Diamond,” said the mineworkers union on Sunday.
“This decision is unacceptable as it will have devastating consequences for the affected employees, their families, the broader community, and the economy.”
Petra Diamonds issued retrenchment notices to employees at its Cullinan and Finsch mines, east of Pretoria and in the Northern Cape respectively, last year. The the Section 189 notices were issued by the company twice in 2024.
The company pointed out that the diamond industry was facing the longest downturn in over 30 years, driven by global economic factors such as the slowdown demand in China and the rise of lab-grown diamonds as reasons for its situation and decision.
Richard Duffy, CEO of Petra Diamonds, said the retrenchments were part of the company’s efforts to meet its “target of net cash generation in fiscal 2025”.
The company is racing to refinance its debt facilities and has a shorter period to do so, according to S&P.
“While the company is focusing on cost control and has announced a reduced capital expenditure (capex) profile, we note that slow diamond price recovery could reduce the pace of free cash flow generation and add pressure on the company's liquidity, heightening refinancing risk,” said S&P.
As of September 30, 2024, Petra Diamonds' weighted-average debt maturity profile was 1.5 years. Most of Petra Diamonds’ debt associated with its $245 million senior secured second-lien notes matures in March next year while its R1.75 billion revolving credit facility matures in September this year.
The NUM said it was concerned that these employees at its Cullinan and Finsch mines could be replaced with contract workers.
Masibulele Naki, the NUM’s diamond sector chief negotiator, said that to retrench any workers above a hundred in a country where the unemployment rate was at 40% in 2025 was unpatriotic and simply a manifestation of the brutality of national and international business to prioritise profits above nationhood.
“We note that for operations to be sustainable, they must align with their vision. However, cutting costs as a consequence does not have to lead to job cuts but to an alignment in how much the executives and shareholders take home,” Naki said.
Petra Diamonds will reduce operating costs by $44 million from its fiscal 2025 year. Additionally, the company has announced a revision of life-of-mine plans and expects annual capex to be about $100m.
Previously, Petra Diamonds planned about $360m in expansionary capex and an additional $90m in sustaining capex over the fiscal years 2024-2025 in real terms.
– BUSINESS REPORT
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