Petra Diamonds Glitter

PUBLISHED: Jan 29 2013 @ 17:34 | Comments (0) | More info about Lou Gutheil

Petra Diamonds (LSE:PDL) presented a stellar first half performance in a trading update this morning, 29 January 2013. Petra reported a 31% increase in production and an 54% increase in revenue.

Petra mining operations yielded 953,553 carats in the first half of FY2012. FY2013 has begun with 1,247,522 carats. However, the company also said that it now anticipates full year production to fall lower than forecast by about 7%. This would still be a strong production growth for FY2013

The company continues to predict stability in all of its operations across the full spectrum of production-related issues, including the effects of work stoppages in October and continuing labour relations. The company was quick to point out that diamond mining stoppages were not nearly as disruptive as those in the South African platinum mines.

Petra needs to maintain the stability of its operations whilst it continues to develop its expansion programs to hit its 2019 target of production of 5 million carats per year from its broader production base. The company has a $92.1 million cap-ex budget for the expansion projects and claims that the projects are all on schedule to achieve their objectives.

Company revenue rose from $101.4 million in FY2012 to $156.3 million year-on-year for the first six months. Five diamonds during the first half sold for more than $1 million each, including one 68.6 carat white stone that fetched $3.45 million.

The company looks solid financially with $38.8 million in cash on hand and a total diamond inventory of $45.4 million. It has $127.2 million in loans and untapped debt facilities of $122.3 million.

Shareholder seemed to have responded somewhat poorly to the long term news, perhaps hoping for too much too soon. It may be yet another case of responding to headlines without reading the whole story. Petra share price dropped 5.80 pence on the day to 114.20 at closing.

Deciding to invest in a mining company requires a great deal of patience and trust after an intensive due diligence. Diamonds are not harvested off of a gum drop tree. Petra investors need to stay the course to and beyond 2019. Kind of like “second star to the right and on til morning.”

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