Ads
By
Reuters
Published
Feb 22, 2010
Reading time
2 minutes
Download
Download the article
Print
Text size

Petra says interest strong in 507 carat diamond

By
Reuters
Published
Feb 22, 2010

By Julie Crust

LONDON, Feb 22 (Reuters) - A 507-carat diamond, one of the biggest ever found and worth an estimated $25 million, is expected to be sold on Friday 26 February after attracting more buying interest than expected, seller Petra Diamonds (PDL.L) said.



The level of interest in the "Cullinan Heritage" stone reflects a recovery in the diamond market which began in early October as jewellers started restocking and the fact that it is rare for a diamond of such size and quality to be sold through competitive tender.

"There has been a very strong level of interest in viewing the stone and in being involved in bidding," Petra's finance director, David Abery, told Reuters on Monday 22 February. "We have been very pleasantly surprised to see the level of interest."

Analysts have estimated the value of the white diamond, one of the 20 biggest high quality rough diamonds ever found, at about $25 million and see it boosting Petra's full-year results.

The South African miner will announce the result on Feb. 26.

"We are very confident for second-half earnings," said Abery. "We are looking forward to some nice strong full-year numbers."

Earlier on Monday 22 February, the London AIM-listed company said it swung to a first-half profit on higher production and sales and an adjustment related to its bigger stake in the Cullinan mine.

Shares in Petra, which lost a quarter of their value in 2009, were up 1.7 percent at 59.5 pence at 1054 GMT, valuing the company at 210 million pounds ($325 million).

"These results were a mixed bag", said Brock Salier, analyst at Ambrian Capital. "Overall we think the amount of profit that relates to the single stone will hold back the market from re-rating the shares more than a few pennies ... However, the longer-term prospects are looking excellent."

Petra made a half-year net profit of $37.9 million, having lost $88 million in the same period of the previous year when it took a $75 million impairment charge, while revenue rose 43 percent.

PICK-UP IN DEMAND

Shares in diamond producers, which failed to join a mining sector rally last year as consumers shunned luxury, are expected to get a boost from a recovery in gem prices. [ID:nLDE60P0UM]

Petra said rough diamond prices are close to the averages recorded in the 2008 financial year before the economic slump and noted a pick-up in demand from emerging markets.

"Whilst there are positive signs of recovery in the US market, the growth in demand for diamonds is primarily being driven by India and China," said Chairman Adonis Pouroulis. China is the world's second-largest consumer of diamonds after the United States and tends to favour higher value and better quality diamonds, the company said.

The company has five producing mines in South Africa and like many in the country has seen the strong rand and higher labour and electricity prices put pressure on costs.

Its costs in rand have grown about 11 percent, in line with expectations, but it did not have a comparison for dollar costs. ($1=.6469 pounds) (Editing by David Holmes, Greg Mahlich)

© Thomson Reuters 2024 All rights reserved.