Petra Diamonds reinstated its dividend and launched debt-reduction efforts after strong prices, fueled by uncertainty over Russian supplies, lifted the mining group’s full-year profits.
The London-listed company, which completed a painful debt restructuring last year, reported a doubling of adjusted underlying profit to $265 million in the 12 months to the end of June on a 44 percent rise in revenue to $585 million.
Petra, the owner of the Cullinan mine in South Africa, said it would pay a dividend of 15 to 35 percent of adjusted free cash flow and open a tender to bondholders to buy $150 million due in 2026 to help reduce interest costs.
The company, which also has operations in Tanzania, said like-for-like diamond prices rose 41.5 percent from a year earlier, a trend that continued in its first tender of the new financial year, when average prices for its diamonds rose. 21 percent on the last sales event of the 2022 financial year.
It said that while the diamond market “is underpinned by a fundamental supply deficit with a massive recovery in demand” as economies emerge from the depths of the pandemic, “some of the price recovery may have been helped by sanctions on Russian goods”.
The results mark a major step forward in Petra’s turnaround plan after a turbulent period for the company. Last year, it diluted shareholders to almost zero and handed over the vast majority of the company to creditors to deal with the debt crisis. Its net debt fell 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 “completed a turnaround that began three years ago” amid a diamond market that “remains broadly supportive”.
Shares in Petra rose 6 percent on Tuesday, hitting their highest point 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, a Russian miner that accounts for about 30 percent of global supply, have been shunned by some U.S. jewelers, helping support prices.
However, rough diamonds are mainly cut and polished in India, so mining groups are less able to see the extent to which Russian gems still manage to penetrate the market.
Petra Diamonds said: “While sanctions on Russian goods may have helped some recovery in prices, it appears that these goods continue to flow into the market.”
Demand for diamonds was also boosted by catching up with weddings postponed following pandemic restrictions, although Petra warned that a downturn in the global economy could hit demand.