Petra Diamonds' (LON:PDL) exciting new diamond mining project represents a major step change, according to Fairfax Securities mining expert John Meyer.
This morning the AIM-listed diamond producer unveiled the deal which will see it double production and take its already large resource based beyond 300 million carats.
The company is buying the Finsch diamond mine in South Africa from De Beers for US$210 million. The newly acquired property currently produces more than 1 million carats each year. Finsch will be Petra’s eighth producing mine.
It also announced that it has raised US$325 million in a concurrent fundraising.
“This is an exciting deal for Petra and is clearly a major step change in the asset base, bringing in another flagship asset like Cullinan,” Meyer said in a note to clients.
“The team has demonstrated their ability at turning these assets around and we have confidence that this proposition is significantly value accretive.”
Whilst it was an upbeat write up, the analyst also notes that although it has a large asset portfolio, Petra’s assets do lack geographic diversity.
“It is a shame that this does not diversify the company’s exposure to South Africa which is becoming an increasingly tough place to operate ... however, there are few places in the world with assets like Finsche and management are well experienced with working in the country.”