Petra Diamonds to resume dividends as Russian sanctions help drive up prices

Petra Diamonds reinstated a dividend and launched a debt reduction campaign after high prices, helped by uncertainty over Russian supplies, boosted the mining group’s profits for the year as a whole.

The London-listed company, which completed a painful debt restructuring last year, reported its adjusted core profit doubling to $265 million in the 12 months to the end of June on revenue up by 44% to $585 million.

Petra, owner of the Cullinan mine in South Africa, said it would pay a dividend of between 15% and 35% of adjusted free cash flow and launch a tender offer to bondholders to buy 150 million dollars of notes due in 2026 to help reduce interest charges.

The company, which also has operations in Tanzania, said comparable diamond prices rose 41.5% from a year earlier, a trend that continued in its first round of tenders. new year in which the average prices of its diamonds were on the rise. 21% on the final sale of the 2022 financial year.

He said while the diamond market “is supported by a fundamental supply shortfall, with a robust recovery in demand” as economies emerge from the depths of the pandemic, “some of the recovery in prices may have -be helped by sanctions on Russian products”.

The results mark a big step forward in Petra’s turnaround plan after a tumultuous time for the company. Last year, he diluted shareholders to almost zero and handed over the vast majority of the company to creditors to deal with a debt crunch. Its net debt has fallen to $40.6 million from nearly $700 million two years ago, while gross debt stands at $366 million.

Richard Duffy, chief executive, said on Tuesday the news “caps the turnaround that began three years ago” amid a diamond market that “remains broadly supportive”.

Shares in Petra gained 6% on Tuesday, hitting their highest level since June, but remain a tiny fraction of pre-2019 levels.

Kieron Hodgson, an analyst at Panmure Gordon, said the results and dividend policy combined with the bond tender offer “clearly signal a more positive outlook for investors to consider.”

Diamonds produced by Alrosa, the Russian miner which accounts for around 30% of the world’s supply, have been shunned by some US jewelers, helping to support prices.

However, rough diamonds are cut and polished primarily in India, giving mining groups less visibility on the extent 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 products, it appears that these products have continued to flow into the market.”

Demand for diamonds was also supported by a catch-up in weddings delayed following the pandemic shutdowns, although Petra warned that a slowdown in the global economy could affect demand.

Sarah C. Figueiredo