Petra Diamonds (PDL) is on track to become cash flow positive over the next nine months as capex commitments reduce.
Analyst Nick Hatch at investment bank Canaccord Genuity is leaving full-year production and earnings estimates on hold following a first quarter update which revealed production increased 30% to 1.1m carats (Mct), in line with expectations.
Cash flow is expected to step up in the second half of Petra's financial year, which runs to 30 June 2017, according to Hatch at Canaccord.
Despite solid profitability, net debt at Petra increased from $385m to $464m over the three months to 30 September because cash receipts from a recent diamond tender have not yet been received.
After the receipts, net debt is expected to be at around $445m. And borrowing is expected to start falling over the next nine months as capex requirements fall.
‘Petra says that it remains on track to become cashflow positive from the first half of its 2017 financial year onwards as capex requirements reduce from its third quarter in fiscal 2017,’ adds Hatch.
Full-year earnings before interest, tax, depreciation and amortisation (EBITDA) is estimated by Hatch at $274m (£225m) with net profit at $82m and earnings per share of 15.2 cents.
Increased production is mainly the result of a new joint venture at the Kimberley Ekapa mine in South Africa, which delivered 238,000ct over the three months to 30 September, the first quarter of Petra’s new financial year. That compares to 49,000ct in the same period last year. Petra also saw a 44% increase in its South African mine at Cullinan, to 209,000ct.
Production guidance is being maintained at 4.4 million carats to 4.6 million carats for the full year and pricing is in-line with the first half of 2016, says Petra chief executive Johan Dippenaar.
