Shares in Petra Diamonds Limited (LON:PDL) dimmed in early deals Monday after a decline in diamond prices at the group’s flagship mine overshadowed increased revenues for the first half.
In a trading update for the six months ended 31 December, Petra said like-for-like (LFL) rough diamond prices at its Cullinan mine in South Africa had fallen 4% compared to the second half of 2018 due to what it said was “usual seasonal weakness” while the product mix in the period had yielded prices at the lower end of historical ranges.
READ: Petra Diamonds on track to meet full-year guidance after first quarter output rises 21%
The firm also said that as a result of a US$25mln revenue shortfall caused by the diamond price movement as well as around US$29.8mln in advances for funding, its net debt had risen to US$557.2mln from US$538.9mln in September.
However, the company added that overall its first-half production was up 10% year-on-year (YOY) at around 2mln carats, with revenues rising 8% to US$207.1mln as the number of diamonds sold jumped 15% to 1.7mln carats.
Petra’s lost time injury frequency rate (LTIFR), the number of lost time injuries in a workplace per 1mln hours worked, also fell YOY to 0.16 from 0.24.
Full year production guidance was maintained at between 3.8mln-4mln carats.
The firm also said it had recovered two “good quality” pink stones from its Williamson mine in Tanzania post-period end that were expected to be sold in February.
Johan Dippenaar, chief executive of Petra, said the firm had delivered “solid production” in the period underpinned by the improved safety performance, adding that the company’s focus remained on “the delivery of operational and capex efficiencies in order to generate positive free cash flow and subsequent debt reduction”.
Diamond price stagnation revives debt question, says analyst
Analysts at broker Liberum, however, were less impressed, saying that there had been an expectation that the Cullinan mine would see better prices as it moved into “undiluted ore in its expansion programmes”, but this hadn’t been the case.
“The market value for lower value goods continues to worsen from oversupply and possibly from increase use [sic] synthetics. Even with a solid production performance, if realised diamond prices do not improve, Petra's debt once again becomes an issue, with US$650mln bond due in 2022.”
Shares were down 8.4% at 41.2p.