Petra Diamonds' turnaround almost complete

A few products of Petra Diamonds’ (PDL) Cullinan mine will soon be back in front of a global audience: two stones cut from the immense Cullinan diamond found in 1905 are part of the Crown Jewels, including the centre stone of the sceptre used at coronations. 

The current owner of the mine is still digging up big rocks: Petra reported a strong tender result of $103mn (£89mn) alongside its 2022 financial year numbers, a fifth higher than the previous sale, which it put down to “a high proportion of high-value gem-quality single stones” from Cullinan. 

The company reported stronger profit numbers overall, for the year ending 30 June, thanks to higher diamond prices and higher production because of the restarted Williamson mine in Tanzania. Petra is now almost two years on from a deal with lenders that handed most of the company over to them. Now it wants to hand those still on the shareholder register some income to go with their holding – while not bringing it in immediately, the miner said it would aim to pay out 15-35 per cent of operating free cash flow. That would equate to $35mn to $81mn using the 2022 cash flow figure of $230mn. 

The balance sheet and portfolio remedial work is not yet finished – Petra is cutting its stake in the Williamson mine in Tanzania, which has long been a difficult asset. The company has paid out millions to locals over human rights abuse claims and the government has proved to be a difficult partner. Petra will hold onto operational control however, even after its mining contractor takes a bigger stake. 

We said last year Petra’s reorganisation would not get rid of the operational risks it has seen in the past at its mines. This is still the case even with a stronger diamond market. Hold. 

Last IC View: Hold, 86p, 14 Sep 2021