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Shares in Petra Diamonds (LON:PDL) climbed more than 12% on Wednesday after the company said the Tanzanian government had authorized it to resume diamond exports and sales from its Williamson mine.
The Africa-focused diamond miner noted the timing and process for the next diamond export to its office in Antwerp and the sale would be finalized between the company and the government.
The stock jumped on the news, closing 12.2% higher at 64.80 pence, after it had fallen on Tuesday to its lowest since late 2015.
Tanzania continues to claim a seized diamond parcel from the Williamson mine was worth $29.5m, and that Petra had under-declared its value.
The announcement eliminates at least one of the headaches Petra has had in the past weeks, as it means it might not breach its banking covenants after all.
However, it doesn’t resolve the issue of the over 71,000 carats in diamonds from the Williamson mine seized by the government earlier this month. Tanzania prevented the parcel — worth about $15 million — from leaving the country alleging that the firm had under-declared the value of the stones by about half. Petra refutes such charge.
The move was part of an ongoing probe into alleged wrongdoing in the diamond and tanzanite sectors led by President John Magufuli.
The troubles Petra has faced in Tanzania mirror those encountered by Barrick Gold-owned Acacia Mining (LON:ACA), which has been the centre of a gold export probe launched by Magufuli earlier this year.
The investigation has taken such heavy toll on Acacia — one of Africa’s largest gold producers — that the company decided earlier this month to reduce operations in the country.
Mining contributes 3.5% to the gross domestic product of Tanzania, which is Africa’s fourth-largest gold producer. The government, however, wants to increase that piece of the pie by requesting more taxes from the sector. It has been on a drive to add value to its exports rather than send raw materials abroad.
Petra, which has also grabbed headlines due to major and recent diamond findings, revealed last week it had been hit by industrial unrest at its two mines in South Africa.
Comments
patentbs
Oh yeah — that is great. The government will ‘let them’ resume operations in a normal manner as they hold about $15m worth of production.
Up 12%. I could care less as I will NOT be holding any company that has operations in this type of nation UNLESS the profits are so huge that costs are paid back almost immediately.
Choking the companies involved in your economy is not the way to increased investment and a higher % of CDP.