An underground tunnel in Petra Diamonds’ mine in Cullinan, outside
Pretoria. The mine is the world’s main source of the pricy blue
diamonds. PHOTO | REUTERS
Diamond miner Petra has paid $4.08 million to the Tanzanian
government in royalties, corporate taxes, and mining fees licence this
year.
The firm also says that it invested a further
$114.3 million in the Tanzanian economy through capital, wages, social
investment, training and supplies.
The tax and
royalties is, however, a drop from its initial estimate of $11.9
million, and last year’s expenditure of $13.9 million.
According
to its Sustainability Report for 2017, the miner paid $47.2 million in
taxes and royalties compared with $49.6 million the previous year.
“Given
the high levels of capital being invested in our expansion programmes
in 2017, Petra Group continues to be subject to varying levels of tax
shields at each of its operations. However, as the capital expenditure
levels continue to fall from their peak in 2016, payments of taxes and
royalties are due to rise considerably, in line with the profitability
of each operation,” the firm said.
“Petra’s
contribution to taxes and royalties in Tanzania will rise in future, in
line with the amendments to the Mining Act 2017 meaning that royalty
contributions have increased to 6 per cent of turnover (previously 5 per
cent) and a rough diamond export levy of 1 per cent has been applied,”
the report added.
Seized diamonds
In
October, the firm reported a fall in its first quarter revenue by 17
per cent to $78.7 million after the Magufuli administration seized its
diamond consignment worth $29 million over accusations of
underdeclaration.
The
miner is also facing negative prospects in the country after President
John Magufuli indicated that he will be seeking to renegotiate the gold,
diamond and Tanzanite mining agreements in a bid to ensure the country
gets better terms from the mining firms as was done with Acacia.
“I
would want to see all other mining firms follow suit and append to this
kind of agreement. Those who don’t want can leave. We would like to see
Tanzania benefit more from its resources and such kind of agreements
will guarantee that,” President Magufuli said.
Petra’s
chief executive officer Johan Dippenaar said that its revenues fell
from $94.8 million to $78.7 million as were diamonds from the Williamson
mine being detained by Tanzania. It is still negotiating with the
Tanzania government about the first parcel of diamonds.
Renegotiation
It
now remains to be seen on how Petra will chart its way around the
country, saddled by a mounting debt, seized consignment, falling
revenues and an expected tough renegotiations with the Magufuli
administration that will likely eat into its full year 2018 profit
margins.
The London Stock Exchange-listed firm said it’s net debt had risen to $614 million, from $555 million as of June 30, adding that the net debt was higher than previously expected levels because of the Williamson case.
The London Stock Exchange-listed firm said it’s net debt had risen to $614 million, from $555 million as of June 30, adding that the net debt was higher than previously expected levels because of the Williamson case.
The company has undrawn bank
facilities of $ 20.9 million up from June’s $5.6 million, with an
additional cash balance of $125.8 million down from $203.7 million in
June.
In October, Petra also announced that it was likely to breach key debt covenants with its lenders as a result of the labour disruptions in South Africa and the seizure of its $15 million consignment by Tanzania.
“The compliance with the two EBITDA related maintenance covenant measurements related to the senior debt facilities for the 12-month period ending December 2017 has been placed at risk,” it said.
In October, Petra also announced that it was likely to breach key debt covenants with its lenders as a result of the labour disruptions in South Africa and the seizure of its $15 million consignment by Tanzania.
“The compliance with the two EBITDA related maintenance covenant measurements related to the senior debt facilities for the 12-month period ending December 2017 has been placed at risk,” it said.
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