Petra Diamonds has announced plans to retrench approximately 200 employees at its Cullinan and Finsch mines in South Africa. The decision is part of the company’s cost-cutting measures in response to challenging market conditions.
Petra cited global economic factors, including reduced demand from China and the increasing market share of lab-grown diamonds, as reasons for the retrenchments. The company has also lowered its rough diamond pricing guidance twice since December 2024 and recently sold its Williamson mine in Tanzania to improve liquidity.
Union Response and Industry Concerns
The National Union of Mineworkers (NUM) has opposed the retrenchments, stating that they will negatively impact workers, their families, and the local economy. The union has raised concerns that retrenched employees may be replaced by contract workers, a trend it claims is becoming more common across the mining sector.
“For our economy to reach projected annual economic growth it needs not guzzle work opportunities but create more jobs to induce economic growth,” said Masibulele Naki, NUM’s chief negotiator for the diamond sector. “While we note the potential adverse impact of the global diamond market currently, it is not justifiable to destroy jobs.”
NUM has urged the South African government and the Diamond Leadership Forum at the Minerals Council of South Africa to hold discussions on the future of the country’s diamond industry, citing concerns that further job losses could occur without intervention.
Financial Pressures and Cost-Cutting Measures
Petra Diamonds faces financial pressures, with analysts from S&P Global noting that slow diamond price recovery may affect its ability to generate free cash flow. The company is working to reduce costs and manage its debt obligations, with a weighted-average debt maturity profile of 1.5 years as of September 2024.
Petra plans to cut operating costs by $44 million in 2025. The company has also revised its life-of-mine plans and reduced its expected annual capital expenditure to approximately $100 million, down from previous estimates of $360 million in expansionary capex and $90 million in sustaining capex over 2024-2025.
Wider Industry Challenges
Petra Diamonds is one of several mining companies facing difficulties due to ongoing market challenges. Anglo American recently reduced De Beers’ production plan by 10 million carats, while other companies, including Gemfields, Lucapa Diamond Company, and Mountain Province, have reported declining revenues and adjusted their operations to reduce costs.
The diamond industry remains under pressure due to economic conditions, changing consumer demand, and competition from lab-grown diamonds, affecting market stability. For professional jewellers, these developments may lead to supply chain disruptions and potential fluctuations in diamond pricing in the near future.
Petra’s retrenchment decision highlights the continued volatility in the sector, underscoring the need for industry stakeholders to adapt to shifting market conditions.
