🕐29.07.14 - 09:54 Uhr

INVESTEC: PETRA DIAMONDS : SOLID YEAR END PRODUCTION REPORT - BUY




Petra Diamonds (Price: 211p | Target: 245p | Rec: Buy) Petra’s full year production report reflected a solid performance, delivering 3.11m carats (Investec 3.072) leading to sales of 3.13m (Investec 3.13m) and revenue of US$472.6m (Investec US$435m) as realised diamond prices exceeded guidance.

The company is in good financial shape with results broadly inline.

We note that the company is due to provide updated analyst guidance next month that should provide greater clarity.

We maintain our TP of 245p and our Buy recommendation. * Debt at the end of the period stood at US$170.5m comprising of bank loans of US$158.9m and US$11.6m in foreign exchange settlement lines.

The company had cash of US$33.3m leading to a net debt figure of US$125.6m.

The company also had US$39.9m in undrawn facilities.

Petra is going through a peak capex period and spent US$210m in the year to June.

We assume a further c.

US$189m (excluding capitalised interest) in FY15E, although the ZAR could impact on this figure.

We have updated numbers, with EPS for FY14E moving from 12.1cps to 13.6cps, and FY15E from 23.8 to 24.3cps.

This figure includes an assumed US$20m for the 123carat blue diamond recently recovered and expected to be sold this financial year (FY15E).

We await the preliminary results to update our balance sheet forecasts. * Operationally, Finsch has seen volumes rise 33% to 1.9m carats, however Cullinan suffered weaker than expected grades seeing production fall 5% yoy to 824k carats.

From FY16 Cullinan will be mining fresh ore that will improve the economics.

Diamond market conditions continue to improve helping to support rising revenues.

There is some variability mine by mine due to mixes of fresh ore and tailings treatment. * Our TP for Petra is based on a combination of NPV and P/E multiples.

Key risks include technical underground mining risks, union strike action and South African political risk.
To access the full note please click here Analyst: Marc Elliott +44 (0)20 7597 5189
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