Petra Diamonds restarts Tanzania mine, sticks to output target

* Shares (Berlin: DI6.BE - news) fall 7 pct, down 50 pct this year

* Company says Tanzania volatility could hit Williamson's value

* Full-year EBITDA down 4.3 pct (Updates with share price, analyst, detail)

By Radhika Rukmangadhan and Zandi Shabalala

BENGALURU/LONDON, Sept 18 (Reuters) - Petra Diamonds (Frankfurt: 908093 - news) has resumed operations at its Williamson mine in Tanzania after a four-day stoppage, it said on Monday, adding that its full-year production target remains unchanged.

The London-listed miner halted operations at the mine last week after the Tanzania government seized a consignment of diamonds and questioned Petra personnel as part of a crackdown on the mining sector.

Petra is keeping a close eye on developments at Williamson, CEO Johan Dippenaar said on Monday after the company posted a 4 percent drop in core profit, sending its shares down 7 percent to 78 pence by 1050 GMT.

The shares have lost about 50 percent this year, against an 11 percent rise for the FT350 mining index.

Production guidance was maintained at between 4.8 million carats (Mcts) and 5 Mcts in the year ending June 2018 and 5.0-5.3 Mcts for the following year.

However, the company said its forecast includes the Tanzanian mine in normal operation.

"We are watching things on a week to week basis," Dippenaar said on a conference call. "But we won't allow the mine to endanger the rest of the group."

Petra, the latest miner caught up in a government challenge to the industry, said the seized diamonds had not been released for export and discussions with the government were ongoing.

"Should Petra be unable to resume sales and maintain normal operations at Williamson, this would have a material negative impact on the carrying value of assets of the Williamson mine," the company said in a statement.

Petra also said it was expecting delays in receiving VAT refunds from the totalling $15.8 million because of the current operating environment.

Changes made in July to Tanzania's law on VAT rebates could result in costs at Williamson rising 10 percent above guidance, Petra warned.

Tanzanian prosecutors charged two government officials on Friday with economic sabotage after they were accused of undervaluing an export-bound consignment of diamonds seized from Williamson.

Williamson, Petra's only mine in Tanzania, contributed 12.2 percent of the company's revenue in the past financial year, down 18 percent year on year.

The government owns 25 percent of the mine, with Petra owning the other 75 percent.

The miner said that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4.3 percent to $157.2 million for the 12 months to June 30 because of a delayed ramp-up of expansion programmes and higher costs.

"It has been a tough year for Petra and the situation at Williamson we hope will be resolved and less troubling than the challenges faced by Acacia," Investec (LSE: INVP.L - news) said in a note.

Industry peer Acacia Mining (Frankfurt: 33A.F - news) this month shut all underground work at its Bulyanhulu mine in Tanzania after a government ban on the export of gold and copper concentrates.

(Reporting by Zandi Shabalala; Editing by David Goodman)