It has proved expensive, but Petra Diamonds' (PDL) push to get better grades and more diamonds out of fewer tonnes of ore is starting to bear fruit. In the six months to December 2016, Finsch and Cullinan - the African miner's two largest operations - both increased their ratio of diamond carats to tonnes treated, once tailings and run-of-mine production are combined.
Unfortunately, the 24 per cent overall increase in like-for-like production came with its costs, both human and financial. Five workers died during the period, an abysmal record that comes just a few months ahead of a triennial wage negotiation with the National Union of Mineworkers. On the financing side, analysts at Investec voiced concerns that the miner may be running close to bank covenant limits, after another $135m (£108m) of capital expenditure helped to push net debt up to $464m by the end of 2016.
Chief executive Johan Dippenaar retorted that with cash earnings starting to motor, lenders have passed the point at which they would start to voice funding concerns. Still, the company will need to bring debt - including a $96.5m black economic empowerment (BEE) loan - to 2.5 times cash profits for the year to June. On that score, FinnCap expects full-year pre-tax profit of $211m and EPS of 12.3¢, up from $164m and 10.4¢ in 2016.
PETRA DIAMONDS (PDL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 146p | MARKET VALUE: | £774m | |
| TOUCH: | 145.8-146.2p | 12-MONTH HIGH: | 174p | LOW: 83p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 11 | |
| NET ASSET VALUE: | 106¢ | NET DEBT: | 75% | |
| Half-year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 154 | 0.1 | -0.72 | nil |
| 2016 | 229 | 51.6 | 5.27 | nil |
| % change | +48 | - | - | - |
Ex-div: na Payment: na £1 = $1.25 | ||||
