(Adds CEO, analyst comments, updates share movement)
Jan 29 (Reuters) - South Africa-focused miner Petra Diamonds lowered its full-year production target by about 7 percent, citing volatility of recovered grades, particularly at its Finsch and Cullinan mines.
Petra, which has seven operating mines in South Africa and one in Tanzania, said it to expects to produce about 2.65 million carats for the year ending June 30, down from its previous forecast of 2.85 million carats.
The company said the management of run-of-mine grades, which is the raw mined material as it is delivered and prior to any treatment, specifically at Finsch and Cullinan remained a challenge due to the mature nature and dilution of current mining areas.
Petra bought the Finsch mine - South Africa's second largest diamond operation by production - from De Beers in 2011.
"Management has demonstrated their ability at making these assets work," Investec Securities said in a note.
"Near term production appears a little disappointing but not major."
Production rose 31 percent to 1.25 million carats for the six months ended Dec. 31, mainly due to the inclusion of output from the Finsch mine. Petra produced about 2.2 million carats in fiscal 2012.
"We expect to be cash positive from our 2016 financial year, so we will look at paying dividends before 2019," Chief Executive Johan Dippenaar said.
Petra said its production target of 5 million carats per annum by fiscal 2019 remained on track.
CEO Dippenaar said the rough diamond market was flat for the majority of the first half. However, with the market firming and prices increasing slightly towards the end of the period, he was optimistic prices could pick up by year end.
Shares in the company were down about 5 percent at 114.17 pence at 0846 GMT on Tuesday morning on the London Stock Exchange. (Reporting by Brenton Cordeiro in Bangalore and Sherilee Lakmidas in Johannesburg; Editing by Roshni Menon)