Shares in Petra Diamonds (LON:PDL) were on the rise on Tuesday as Citi raised its target price after the African diamond miner updated its production guidance.
Yesterday, Petra said it expects to produce around 3 million carats, which would be an increase of 12% on last year’s 2.7 million carats. The total number of tonnes treated is estimated at 17.5 million, which Citi attributes to increased throughput at the Cullinan, Williamson and Kimberley Underground mines.
Citi now has a target price of £1.64, up from £1.52, with a ‘buy’ recommendation on the company, which has diamond mines in South Africa, Tanzania and Botswana.
The net present value of the company is not the only driver of this recommendation. Its bullish stance also stems from the view that the global diamond market could be headed towards “significant shortages in the years ahead” due to depleted stockpiles and few new major discoveries.
The broker upped its earnings per share estimates from 7 cents to 9 cents, while the 2014 earnings have been trimmed from 19 cents to 16 cents a share.
“We have faith in PDL management in their transformation of this group and we rate Petra as Buy,” Citi said.
The shares rose 4.6% to £1.34 each on Tuesday.