Petra Diamonds has announced it plans to increase production. The announcement followed a recovery in diamond process. Future profits look optimistic with new exploration areas in the plans.
Petra announced they will concentrate on boosting production to increase cash generation. They have to double production by more than 2 million carats by the year 2014. This should allow them to achieve the goal of becoming the world’s biggest independent diamond producer by carats.
Pre-tax profits are up to $69 million, up from a prior $94 million loss. Profits were helped along with the sale of a 507 carat white diamond, the largest diamond in the company’s history. The 19th largest diamond ever discovered, it was named the “Cullinan Heritage”. A Chinese buyer bought the diamond for $35.3 million.
Johan Dippenaar, chief executive for Petra Diamonds said: “[Growth] at the moment is mainly driven by Chinese and Indian demand for jewelry. The Chinese market has a high number of wealthy individuals – they have taken two of the biggest sales we’ve had in the past two years, with a combined worth of $45m. Also the huge numbers of middle class households have become consumers of the smaller stones – so it’s a nice mix.”
The diamond exploration company has made several logistic changes. Petra withdrew from an expensive exploration location in Angola. In December it raised $120 million through a share issue to acquire a former DeBeers mine outside Johannesburg. Petra added in May the DeBeers’ Kimberley Underground mine. The mine has been successfully producing since the late 19th century.
An analyst with BMO Capital Markets, Edward Sterck, said Petra’s 2 million carat target goal is achievable. “At end of day its still US that drives diamond prices – demand in India and China is overestimated a bit,” he said. “But in terms of Petra’s operational results everything looks OK and it is setting a good platform for future growth.”