Petra Diamonds warns over full-year results

Petra Diamonds warned on Wednesday that its full-year results are likely to be below market expectations, with revenue around 8% to 9% below consensus on the back of lower production.

The company said it is on track to achieve record revenue and production figures in FY2017. However, slower-than-expected build-up of its expansion programmes across its operations means production is now estimated to be around 8% to 9% lower than guidance of approximately 4.4m carats.

Petra said it has now reached an operational run rate across the group which supports FY 2018 production guidance of around 5m carats. While the ramp-up of production from the sub level cave at Finsch took longer than expected, it is now operating at the required levels. At the new Cullinan plant, both mills and crushing circuits have now been commissioned, with the first mill and crushing circuit having been run very successfully for over a month.

The company also said it was likely to be in breach of its banking covenants, but added that this was not expected to be an issue.

"With respect to the covenants relating to its banking facilities, the company has had initial constructive discussions with its lender group and is confident that the likely shortfall in the upcoming ratio measurement, arising from the lower production levels, will not present an issue."

Shore Capital said: "All things considered, we would not be surprised to see Petra’s shares sharply down today. However, we note that the share price had already come off significantly, and any significant fall today could represent a tempting opportunity, as we expect FY2018 operational and financial performance to be materially better."

RBC Capital Markets said: "A difficult operating year comes to a close with a guidance downgrade; while challenges have now been addressed, we think the market will likely wait to see delivery of operational outperformance before adding to positions. A disappointing trading statement but we look to FY18E with a more optimistic view as free cash flow generation should increase driven by better throughput, grades and mix."