Petra Diamonds has reinstated a dividend and launched a debt-cutting drive after strong prices helped by uncertainty over Russian supplies lifted the mining group’s full-year profits.
The London-listed company, which last year completed a painful debt restructuring, reported a doubling of adjusted core earnings to $265mn in the 12 months to the end of June on revenues up 44 per cent to $585mn.
Petra, owner of the Cullinan mine in South Africa, said it would pay a dividend of between 15 per cent and 35 per cent of adjusted free cash flow and launch a tender offer to bondholders to buy $150mn of notes due in 2026 to help cut interest costs.
The company, which also has operations in Tanzania, said like-for-like diamond prices had risen 41.5 per cent over the previous year, a trend that had continued into its first tender of the new financial year where average prices for its diamonds were up 21 per cent on the final sales event of the 2022 financial year.
It said that while the diamond market “is supported by a fundamental supply deficit, with robust demand recovery” as economies emerge from the depths of the pandemic, “some of the price recovery may have been helped by sanctions on Russian goods”.
The results mark a big step forward in Petra’s turnround plan after a tumultuous period for the company. Last year it diluted shareholders almost down to zero and handed the vast majority of the company to creditors to cope with a debt crunch. Its net debt is down to $40.6mn from almost $700mn two years ago, while gross debt stands at $366mn.
Richard Duffy, chief executive, said on Tuesday that the news “caps the turnround begun three years ago” amid a diamond market that “remains broadly supportive”.
Shares in Petra gained 6 per cent on Tuesday, hitting their highest point since June, but remain a tiny fraction of levels before 2019.
Kieron Hodgson, analyst at Panmure Gordon, said the results and dividend policy combined with the tender offer for bonds “clearly signal a more positive outlook for investors to contemplate”.
Diamonds produced by Alrosa, the Russian miner that accounts for about 30 per cent of global supply, have been shunned by some US jewellery shops, helping to support prices.
However, rough diamonds are cut and polished mainly in India, giving mining groups less visibility over the degree to which Russian gems are still managing to enter the market.
Petra Diamonds said: “While some of the price recovery may have been helped by sanctions on Russian goods, it appears that these goods have continued to flow into the market.”
Demand for diamonds was also supported by a catch-up in delayed weddings following pandemic lockdowns, although Petra cautioned that a downturn in the global economy could hit demand.
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