Petra Diamonds' sales took a hit in the first quarter after the government of Tanzania seized a parcel of diamonds amid a probe of the sector.
In a trading update for the first quarter, Petra Diamonds revealed its revenue dropped 17 per cent to $78.7m (£59.6m), from 711,277 carats sold.
"No sales from Williamson in Tanzania were included, due to a parcel of diamonds from the mine being detained by the government of the United Republic of Tanzania," Petra said.
However, Petra revealed it was still in talks with the government to "reach a satisfactory solution" with regards to the parcel of 71,654 carats of diamonds.
Petra took another hit earlier this month after it said it was likely to breach conditions on its banking agreements. Today it said it was in "regular engagement with its lender groups" on the matter.
Shares in the company rose 3.67 per cent to 84.75p in early trading.
Petra, which owns the Cullinan mine in South Africa, where the two largest diamonds in the Crown Jewels were discovered, said production fell four per cent in the period to 1,053,817 carats, mainly due to planned reductions at its Finsch mine and Kimberley joint venture with Ekapa Mining (KEM JV).
Net debt stood at $613.8m at the end of September.
The miner maintained its full-year production guidance of around 4.8m carats to 5m carats.
Johan Dippenaar, chief executive, said:
Despite the labour disruptions at Finsch, Koffiefontein and KEM JV, the group has made a strong start to... 2018, delivering close to 1.1m carats [in the first quarter]. The group is continuing its production build up and it is encouraging to see the increasing contribution of ROM [run-of-mine] production.