Westhouse upgrades Petra after "another gem of a find" at Cullinan

Petra Diamonds has announced "another gem of a find", according to Westhouse Securities which raised its recommendation for the stock from 'add' to 'buy' after the discovery of a 232-carat (ct) white diamond on Tuesday.

The broker said it has made the rating change on the back of recent weakness in the shares, "which has brought the stock back to an attractive level".

Petra said that the diamond, found at its Cullinan mine in South Africa, is a D colour Type II diamond of "exceptional size and clarity". It did not give an estimated sale price for the diamond, but Westhouse believes it could be worth around $10m-15m.

"Following the recovery of a 122.5ct blue diamond in June, which is currently in a sales process, 2015 [year ending June] looks set to be a strong year for Petra," said analyst Rob Broke.

Cullinan has a strong history of producing exceptional diamonds, Broke said, with more than 750 at over 100ct being found during its history.

Since Cullinan was acquired by Petra in 2008, exceptional diamonds have added $18m to revenues per annum on average, though the analysts see this rising to $20m per annum. As production grows, he said that the recovery of exceptional diamonds will also increase, representing further upside to his long-term target.

Broker said he sees around 30% upside in the stock to his 230p target price and that the investment looks attractive for investors given Petra's "strong management team, attractive long-term growth profile and the planned commencement of dividend payments [next year]".

Petra's share price had risen nearly 7% to 189.1p by 11:36.