Petra Diamonds Ltd (LON:PDL) was downgraded to ‘neutral’ by Citigroup on Tuesday as the miner’s struggle to cut debt is taking longer than expected with “no signs of deleveraging”.
At its 31 December half-year point, the company reported cash of US$53.6mln and net debt of US$632.9mln, compared to a market cap of less than £75mln.
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With around 90% of the value wiped off the shares over the past three years, Citi’s analysts said Petra “remains in a tough spot”.
“This has resulted from a mix of poor capital allocation decisions, persistent operational challenges, tough market conditions for the kind of diamonds the company produces, as well as a general small-cap de-rating.”
The downgrade was accompanied by the analysts removing their share price target “as we find the range of valuation outcomes too wide for the stock to have a point estimate for target price”.
However, looking forward, the analysts acknowledge that the group is making “consistent efforts to improve business fundamentals” and expects to see the results of this “over time”.