Petra Diamonds

Petra Diamonds awaits the full impact of recovering rough diamond prices after turning $95m (£61.5m) interim losses into $34m pre-tax profits.

Jersey-based Petra, chaired by second-generation Africa-focused entrepreneur Adonis Pouroulis, increased diamond production nearly 12% to 614,594 carats in the six months to December from five mines in South Africa and one in Tanzania and lifted sales 55% to 572,227 carats. As he awaits Friday’s sale by tender in South Africa of an exceptionally large 507-carat ‘D’ stone said to be worth some $25m, Pouroulis says rough diamond prices have been recovering sharply, helped by Chinese interest, and claims they are on average 70% up from the bottom and within 20% of previous highs, helped by tight supply conditions and rallying demand.

He and Petra’s entrepreneurial chief executive officer Johan Dippenaar plan to capitalise on what they see as a changed market after the severe recession and almost treble output organically over the next decade. They want Petra, which had $65m (£42m) cash at the end of December after raising $120m at 60p as part of a deal to raise its stake in the company’s key Cullinan deal, to increase annual production by 100,000 carats to 1.2m in the year to June and take it to more than 3m carats a year by 2019.

Petra’s mining revenue rose 32% to $62.4m in the first half year, mostly before the sharp rough price recovery’s full impact showed through, and mining costs rose 70% to $40.5m, partly reflecting a strengthening of the South African rand and rising labour costs and partly a fall in production at the Koffiefontein mine, which is expected be reversed.

The interim results reflect a $31m ‘fair value adjustment’ for the Cullinan mine, where Petra doubled its stake to 74% and upped its share of the mine’s resource from 76m to 151m carats by issuing shares to the Bahrain-based, Saudi-backed Al Rajhi group and assuming responsibility for the remaining £50m of a loan from Al Rajhi which funded Petra’s original Cullinan purchase in 2008.

Al Rajhi is now a major shareholder and Cullinan provided the lion’s share of group production and revenue, producing 473,406 carats and contributing revenue up 49% to $40.2m. The average selling price per carat was 5.4% down at $87, but analysts expect it is now strongly on the increase.

Claiming its group assets of 262m carats now make it Number Three in the world after South African gem giant De Beers, Petra hopes soon to complete the £6.6m purchase of De Beers’ Kimberley mine. The company has a major stake in the Williamson mine in Tanzania, which lifted interim production 260% to 68,358 carats and yielded some fancy ‘pink’ stones, including one which sold for $40,000 a carat and has set in train a plan to lift annual production to 600,000 carats.

Petra has been a volatile stockmarket performer since floating on AIM 13 years ago at 85p, especially when its original hopes for the Alto Cuilo project in Angola came to nought. After drifting down to 24p, the shares have rallied to 59.25p and should recover further if the market continues to strengthen.