Broker gives Petra Diamonds vote of confidence

Johan-Dippenaar.jpg

Numis praises company for aggressive acquisition campaign.

City broker Numis Securities has praised the “aggressive acquisition campaign” of Petra Diamonds as it initiates the diamond mining company with a BUY recommendation and a target price of £2.80.

Analyst Andy Davidson commented: "We believe Petra has, through its aggressive acquisition campaign, built a high-quality asset base with strong value-adding expansion potential. With its depth of technical expertise, relatively lean management structure and adequate funding, we see this entrepreneurial company being well placed to deliver substantial growth over the next eight years as it completes expansion programmes at its main operations. With a structural deficit looming in the diamond market and a bullish for diamond prices, we see Petra as the stand-out pure play in a limited field."

Petra Diamonds, which is the largest diamond producer on London’s junior AIM market, said it expects diamond prices to level off over the next few months which it believes will kickstart buying after a year of steadily rising prices. In an interview with Reuters, Petra Diamonds chief executive Johan Dippenaar said: "Towards the end of 2008, with the crash, we saw prices decline by as much as 60%. I would say we’re now back to prices we saw in 2008 and even probably 5% to10% above those prices, but I think some (price) consolidation is probably on the cards for the next few months."

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The Channel Islands-based Petra Diamonds said that it is on track to produce about 1.3 million carats this financial year, which is a 12% rise on production levels in 2010.

 

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