Petra Diamonds plunges on profit warning

Shares in Petra Diamonds plunged early on Thursday as the diamond mining group said its annual results are expected to fall below market expectations.

The group blamed the expected shortcomings on the poorer diamond grades it found at its Cullinanin mine in South Africa, where production areas are increasingly mature and diluted, which means the company has to deal with high-density waste material.

The London-listed company said it was taking steps to improve the grade profile at its South African mine, though it was forced to cut its annual production guidance from 3.3m carats to 3.2m carats.

The FTSE 250 group said production rose 1% to 2.44m carats in the nine months to the end of March and it registered a 6% increase in output to 791,443 carats in the third quarter.

However, the earlier timing of the March tender led to smaller volumes of sales, which dragged third quarter revenue down 30.5% to $96.1m (£64.8m).

“The current reliance on production from the mature mining areas at our underground mines is expected to change over the coming quarters as the company passes through this transitional period and starts to access undiluted ore," said group chief executive Johan Dippenaar.

Meanwhile, Petra said that the cutting and polishing of the 122 carat blue diamond it sold last September was completed and it had produced four polished stones “of significance”, adding it was exploring how to best market the stones.

Analysts at Investec said that despite a “mildly disappointing” performance, the current year was a transitional one for the group.

“The weakness in the diamond market we believe to be a temporary phenomenon caused by the credit constraints and excess polished inventory in the chain that needs to be worked off,” they said in a note.

Petra Diamond shares were down 11.73% to 162.68p