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New carats for Petra investors

Petra Diamonds has started shift towards newer mining areas, which should boost production
September 21, 2015

Petra Diamonds' (PDL) South African mines were heavily reliant on mature, diluted mining blocks in the year to June, reducing the quality and size of diamonds recovered. In addition, its Cullinan mine was hampered by its handling of high-density development waste material through the plant. This, along with weaker diamond prices, dampened the group's performance, with adjusted cash profits down a quarter to $139m (£89.3m).

IC TIP: Buy at 107p

However, chief executive Johan Dippenaar said the current financial year marked a turning point for the group. Petra has now started mining from undiluted kimberlite blocks, and management said it expected ore from these new mining areas to begin contributing to its production in the second half of the current financial year.

The miner sold two exceptional diamonds, including a 232-carat white diamond for $15.2m. Despite the challenging trading environment, production was up 2 per cent at 3.2m carats, putting the group than half way towards reaching its 5m carat production target by 2019. Management is also installing a new processing plant at Cullinan that will improve the group’s chances of recovering large and exceptional diamonds. The kit is due to become operational at the end of FY 2017.

Bloomberg analysts expect consensus adjusted EPS of 13.6¢, compared with 10.1¢ in 2015.

PETRA DIAMONDS (PDL)

ORD PRICE:107pMARKET VALUE:£554m
TOUCH:106.8-107p12-MONTH HIGH:211pLOW: 106p
DIVIDEND YIELD:2.8%PE RATIO:18
NET ASSET VALUE:113pNET DEBT:28%

Year to 30 JuneTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201122164.412.8nil
20123178.4-0.5nil
201339374.010.4nil
2014472124.412.8nil
201542585.09.53.00
% change-10-32-26-

Ex-div: 15 Oct

Payment: 7 Dec

£1=$1.56