Petra Diamonds' shares lost their shine today after the miner warned it could breach its debt covenants if it fails to resolve its dispute with the government of Tanzania.
Jacques Breytenbach, chief financial officer, told City A.M. the company will be in a position to make a call on the future of the mine in the "not too distant future".
For the year ended 30 June, Petra's revenue rose 11 per cent year-on-year to $477m (£352m), but pre-tax profit fell to $45.5m from $75.4m the previous year.
Production increased eight per cent to 4m carats but was below guidance fo 4.4m carats to 4.6m carats due to the delayed ramp up of production at the company's Cullinan mine.
Shares in the company slumped 6.59 per cent to 78.47p in early afternoon trading.
Why it's interesting
Petra noted operations at its Williamson mine in Tanzania had resumed after a four-day stoppage earlier this month. The company stopped operations after the government seized a parcel of 71,654 carats of diamonds and questioned Petra personnel amid a probe of the country's diamond sector.
Petra warned that if it is unable to resume sales from its Williamson mine before the end of the year, the company may breach covenants on its loans.
The company said:
Petra will monitor the situation very closely and take decisive action if required to preserve shareholder value.
Breytenbach told City A.M. the company is considering whether to continue production from Williamson.
"We can definitely not risk the larger group for Williamson," Breytenbach said. "Any decisive action we need to take, we will as soon as we can. We will not continue to bleed cash on that front."
The company's parcel of 71,654 carats of diamonds has still not been released for export, and discussions with government are ongoing.
Petra is on track to meet its 2018 production guidance of 4.8m carats to 5m carats and its 2019 target of 5m carats to 5.3m carats - but that includes Williamson in normal operation.
What Petra Diamonds said
Johan Dippenaar, chief executive, said:
While Petra remained in growth mode in FY 2017, achieving record production and revenue, the shortfall against guidance, in conjunction with the significant strengthening of the rand on our predominantly rand-denominated cost base, impacted our financial results for the year.
However, the challenges related to the commissioning of the Cullinan plant have now been overcome and it is ramping up in line with expectations, plus the new mining areas at our two biggest mines, Finsch and Cullinan, are set to deliver double the amount of undiluted ore in FY 2018.