Petra Diamonds share price (PDL) rocked as the miner slashes full-year forecasts
Shares in Petra Diamonds have tumbled as much as 20 per cent today as the company cut its full-year earnings expectations after it was dealt a number of blows in the first half of the year.
Petra slashed its guidance on full-year earnings before interest, tax, depreciation and amortisation (Ebitda) by 10 to 15 per cent against its current consensus, mostly due to the recent strengthening of the South African rand, which is up 20 per cent since November.
The company also cut its production guidance for the full year to between 4.6m and 4.7m carats from a previous estimate of 4.8m to 5m carats because of lower grade diamonds from its Cullinan mine in South Africa and strike action in the first quarter.
Petra said it would focus on uncovering fewer diamonds of a higher value from Cullinan.
Shares in the firm were down 16.25 per cent at 65.95p at the time of writing.
The firm was also rocked earlier this year when a parcel of diamonds was blocked for export by the government of Tanzania, leading it to warn in October that it was likely to breach conditions on two of its debt covenants.
The firm is at peak debt levels of $644.7m (£458.4m) and has started formal discussions with its lenders, which it expects to be concluded in the third quarter.
“Petra remains confident that the lender group will continue to support the company as it progresses towards its targeted production profile,” the firm said.
Revenue for the first half was down one per cent to $225.2m due to the blocked parcel, but the firm expects full-year sales to remain in line with the current consensus.
“A reminder that mining in Africa remains as much about politics as it does about what you can get out of the ground. A breach of end-December debt covenants is still expected and the company is in discussions with lenders which it of course hopes will be positive,” said Mike van Dulken, the head of research at Accendo Markets.
AJ Bell’s investment director Russ Mould added: “All of these issues have forced Petra to be in regular contact with its lenders as it tests debt covenants. This has been going on for a long time, so it begs the question of how long its shareholders will stay supportive.”
Read more: Miner Petra Diamonds’ revenue has been hit by a row with Tanzania