Shares in Petra Diamonds lose their shine due to lower production

 
Courtney Goldsmith
Follow Courtney
BRITAIN-ROYALS-POLITICS
The diamond miner expects production to be lower than anticipated (Source: Getty)

Shares in Petra Diamonds tumbled today after the miner warned production was expected to be lower for the year to 30 June.

Petra's stock fell as much as 10 per cent at the market open. In early afternoon trading, shares in the FTSE 250 firm were down 7.41 per cent at 105p.

The company expects full-year production to be eight to nine per cent lower than guidance of around 4.4m carats due to "slower than anticipated" build-up of its expansion programmes.

Read more: Petra Diamonds warns it will be at the low end of production expectations

Lower production means full-year revenue is set to be eight to nine per cent below market consensus, and financial results are likely to be "below market expectations".

In light of this, Petra is likely to be in breach of its banking covenants. However, it said after initial constructive discussions with its lender groups, Petra is "confident" the shortfall will not present an issue.

It wasn't all bad news, though. Petra, which owns the Cullinan mine where the two largest diamonds in the Crown Jewels were discovered, revealed it has now reached an operational run rate that supports its 2018 target of around 5m carats a year earlier than originally expected.

Yuen Low, analyst at Shore Capital Markets, said a steep drop in Petra's shares could present an opportunity to savvy investors.

"We note that the share price had already come off significantly, and any significant fall today could represent a tempting opportunity, as we expect financial year 2018 operational and financial performance to be materially better."

Read more: Petra Diamonds unearths 121 carat white diamond

Related articles