Sparkle slowly returning to Petra Diamonds

Miner Petra Diamonds (PDL) made it back to positive earnings territory in its 2021 financial year, ending 30 June. This was helped by moving the Williamson mine into the ‘for sale’ accounting category, given it is not in production, but the numbers also exclude $40m (£29m) from a diamond sold in July. 

This year has represented a turning point for Petra, which diluted its shareholders almost down to zero to deal with a debt crunch, handing the vast majority of the company to creditors. Net debt is down to $228m from $700m at the end of 2020 because of this move. 

Conditions are also improving in the luxury market Petra sells its stones into. Chief executive Richard Duffy believes that $40m for the 39-carat blue diamond is “likely the highest per carat price for a rough diamond ever achieved”. 

Petra’s adjusted cash profit for the year of $135m was double the figure from last year, helped by generally higher prices and more sales of “exceptional stones”, which are sold for $5m and above. 

The miner operates three mines in South Africa and has the Williamson mine in Tanzania, which is under care and maintenance. The plan was to re-open Williamson next year, but Petra  had “decided to review its strategic options” for the mine, while the preparatory work for the restart continues. 

Broker Peel Hunt forecasts Petra’s cash profits to climb more than a quarter this financial year, to $172m. 

Petra has turned a corner, but there are still enough risks to keep us on the sidelines. Hold. 

Last IC View: Hold, 1.8p, 21 Jul 2021