African miner Petra Diamonds is likely to strike a deal with its lenders that could include a waiver or a reset of its debt covenants within the next month, CEO Johan Dippenaar says.
The London-listed mining company said last week it had started negotiations with its lenders for debt agreements relating to its earnings before interest, tax, depreciation and amortisation (ebitda) for December 2017 and June 2018.
The confiscation of a consignment of its diamonds in Tanzania and a labour strike at its South African mines were the main reasons Petra flagged in October that it was likely to fall short of its loan obligations.
"We are too tight with the covenants but we discuss with the banks all the time and we are confident that in a month or so we will have solutions to it," Dippenaar told Reuters on the sidelines of the Mining Indaba in Cape Town.
"We have illustrated a business that keeps on growing and is able to service its debt, we are just at a turnaround point."
Petra, which operates five mines in SA and Tanzania, reached peak capital expenditure in its last financial half-year after seven years of investing more cash than it generated into expanding its operations.
The company has spent nearly $1.5bn over the past seven years at the Finsch and Cullinan mines.
Dippenaar said Petra would now focus on cutting its debt. Acquisitions and explorations were not on the table, he said.
Net debt at the end of December stood at $644.7m but is expected to fall to $560m-$600m by the end of June. The company has a syndicated loan of about $120m with South African banks.
Petra, which was accused of under-declaring the value of the stones, is caught up in an industry-wide crackdown by the Tanzanian government in an effort to reap more mineral revenue.
Petra has denied the accusation.
The consignment, which was confiscated in September, has not yet been returned but the company resumed exporting other diamond packages after a brief government-mandated stoppage.
Dippenaar said the Tanzanian government had concluded questioning its employees but it was unclear whether the full investigation was over.
"We are hopeful that a resolution will come out in the six months to June," he said.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.