Petra Diamonds Ltd (lon:pdl)
Petra Diamonds – Are They Still Going?

Petra Diamonds Ltd Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period6 Months6 Months
Revenue$194m$207m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit($10m)($58m)
Adjusted Profit
Total Debt$652m$649m
Net Debt$596m$559m
Petra Diamonds Ltd Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Petra Diamonds – Are They Still Going?
Company: PDL - Petra Diamonds Ltd
Share Price Then: 1.8p
Author: Ian Smith
Date: Fri 01 May 2020
Comments: Petra Diamonds have been listed since at least 1998 with peaks around and above 100p, today they are sitting at around 2p.
So should we all be bailing in and hoping for return of 35 times?

Not surprisingly, probably not, you might be able to argue that COVID 19 and low diamond prices are responsible for a drop from around 8p but it seems that this could be the nail in the coffin

In South Africa PDL are now back up to the permitted 50% labour capacity, in Tanzania the mine is on care and maintenance only.

The trouble is that it seems that every time I read a trading update there is a section on debt and how the company needs to borrow some more or reschedule its debt. In the latest trading update they say that they are not making and interest payment due today as they want to retain capital and are trying to reschedule the payment.

From the 2019 H1 report The Group continues to assess its strategic options in relation to the maturity of its US$650 million loan notes in May 2022. and including possible breaches in its EBITDA related covenants for the December 2019 (measured in March 2020),

With a current market cap of around £17m it is pretty clear that nobody is sensing a bargain and buying in.

All this makes me worry that the game might be up for the company fairly soon and as a risky trading share it seems to be trading with a 10% spread.

Yet Peel Hunt had reiterated its buy rating today.
Read Count: 156

Buy/No Buy In A Nutshell
NegativesExisted for far too long for the amount of debt that they have.
Positives Unless there is a lucky layer of expensive stones I can't see a way out.
Initial Review Price1.62p
Last Review Price1.62p
Last Review Date18-Jul-2020
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Share Commentaries, their purpose.

Previous Commentaries On Petra Diamonds Ltd
Date Share Price Author Commentary
Mon 10 Jul 2017104pIan Smith

Petra Diamonds Is It Mired In Debt Or Am I Missing Something?



I have had Petra Diamonds in my portfolio before and am looking at it again and am getting worried about capex and debt.

For the 6 months to Dec 2016 there was a $35m net profit and net debt of $463m, by the 31st of March 2017 net debt has risen to $508m.

It is often hard to put debt into context but the only year that PDL paid dividends was 2015 and the Q3 2017 trading update had "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."

In other words we are borrowing to much, worrying in an industry like mining where eventually the resources run out!

As a mostly non dividend paying business PDL is a capital growth share and at the moment it appears to be in one of its cyclical drops and is still quite a way from the 55p low seen in the last couple of years.

Although financially safe at the moment there are loan notes due in 2022 so it is not long before this starts to be highlighted as an issue spooking many retail investors.