Petra Diamonds and South Africa’s National Union of Mineworkers (NUM) have finalised a five-year wage agreement, effective from 1 July 2024 until 30 June 2029, applicable to Petra’s South African operations, including the Cullinan and Finsch mines.
Details of the Agreement
The wage deal ensures annual salary increases for employees in the A and B Paterson bands. Specifically, the agreement stipulates:
- Year 1: A 6.25% increase or Consumer Price Index (CPI), whichever is higher.
- Years 2 and 3: A 5.75% increase or CPI, whichever is higher.
- Years 4 and 5: A 6.5% increase or CPI, whichever is higher.
Petra CEO Richard Duffy commented, “We thank our partners in the NUM for their positive and constructive engagement in concluding this agreement against the backdrop of a challenging period for the industry. This allows for continued certainty on fixed labour costs at our South African operations and enables us to renew our focus on operational delivery as we continue to build further resilience in the business.”
Economic Context and Implications
This agreement comes at a crucial time for Petra Diamonds, which has faced significant financial challenges. In recent months, the company has been dealing with a cash crunch due to poor diamond prices. In April, Petra issued a restructuring notice to employees at its Finsch mine, aiming to reduce operating costs by $30 million annually starting from the 2025 financial year.
Financial reports for the six months ended December 2023 highlighted several critical issues:
- A basic loss per share of 4.87 US cents, compared to a restated loss of 9.86 US cents per share in the previous comparable period.
- Consolidated net debt increased to $212.4 million from $90.2 million.
- Operational free cash flow turned negative, with a deficit of $21.2 million compared to a positive $12.5 million previously.
In an effort to manage its financial obligations, Petra has repaid $23 million of its revolving credit facility to reduce interest costs. Additionally, the company anticipates avoiding costs of $15 million to $18 million related to environmental liabilities associated with the Koffiefontein mine, which has been sold.
Broader Industry Context
The agreement between Petra Diamonds and NUM is part of a broader trend within the mining sector, where labour unions are securing above-inflation wage increases. Recently, the NUM also signed wage agreements with South32’s Hotazel Manganese Mines and gold miner Pan African Resources.
The ongoing efforts by labour unions to secure significant wage increases reflect the negotiations and adjustments within the mining sector, aiming to address economic pressures and ensure fair compensation for workers. For professional jewellers, this trend underscores the importance of understanding the dynamics of the mining industry, as wage agreements can impact production costs and, subsequently, the pricing and availability of diamonds.
