Petra Diamonds (LON:PDL) is an entrepreneurial company "well placed" to deliver substantial growth over the next eight years, according to city broker Numis.
The broker has begun coverage of the AIM-listed diamond producer, which has four mining operations in South Africa and one in Tanzania and recommends a "Buy" with a target price of 280 pence.
Analyst Andy Davidson said the growth will come as the firm completes its expansion programmes at its main operations, which are set to deliver strong growth to around 5.5 mln carats in full year 2019.
He expects the C$210million acquisition of the Finsch mine in South Africa from De Beers to be completed soon. This mine currently produces more than 1 million carats each year and will be Petra’s eighth producing mine.
"A focused acquisition programme has seen Petra grow its asset base steadily over the last four years and we estimate it will produce over 1.6Mct in the financial year to June 2011," said the analyst.
"With a structural deficit looming in the diamond market and a bullish outlook for diamond prices, we see Petra as the stand-out pure play in a limited field," he added.
Davidson added that one of Petra's key strengths was its management , which has technical expertise and a strong focus on enhancing shareholder returns.
"We see an ongoing re-rating as the market continues to appreciate Petra's quality and the bright outlook for diamond prices," he added.
The company's share price is currently 172 pence.