Petra Diamonds Crashes After Warning It Will Dig Up Fewer GemsBy
Petra Diamonds Ltd. tumbled in London after the African miner cut its forecast for the number of gems it will mine this year and said a stronger South African rand would hurt profit.
Petra said Monday its 2018 financial-year earnings would be as much as 15 percent lower than the analysts expect after the rand strengthened against the U.S. dollar, making the cost of mining more expensive. The company also said it will produce fewer diamonds as it focuses on recovering larger, more expensive stones.
The stock fell as much as 21 percent, the steepest intraday decline since September, and traded at 65.8 pence at 12:11 p.m. in London. The stock lost more than half its value last year.
It’s been a difficult 18 months for Petra as the company redeveloped its flagship Cullinan mine, where the world’s biggest-ever diamond was found in 1905. It’s battled with weak prices and there have been concerns from investors about the debt pile that the company has built up. Petra said it expects to be in breach of its debt covenants and is holding talks with lenders.
Petra is not the only diamond producer that has struggled recently. New producers Firestone Diamonds Plc and Mountain Province Diamonds Inc., have also stumbled as their new mines produced stones that sold for less than expected. Gem Diamonds Ltd. and Lucara Diamond Corp. also fell last year.
South African miners have been wounded by a recovering rand. Last week, the currency traded stronger than 12 per dollar for the first time since May 2015, extending a rally sparked by Cyril Ramaphosa’s election as leader of the ruling African National Congress.