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Failure to hit full year production guidance wouldn't be a major issue
Thursday 23 Feb 2017 Author: Daniel Coatsworth

Petra Diamonds (PDL) 152.5p

Gain to date: 78%

Original entry price: Buy at 85.5p, 25 February 2016

Investors should look past the risk that Petra Diamonds (PDL) won’t hit its full-year production guidance. The miner is confident of playing catch up in the near term, should it not hit the target.

PDL - Comparison Line Chart (Rebased to first)

Petra said on 20 February that delays to starting a new processing plant would mean its annual production would come in at the lower end of previous guidance. That could lead investors to worry about a potential earnings miss if Petra can’t hit that lower figure at the year-end in June.

It is perfectly normal for miners to experience delays with testing new equipment. Petra’s chief financial officer Jacques Breytenbach tells Shares that actual mining is unaffected, so there is a growing stockpile of material to process once the new plant is ready, plus plenty of spare capacity to run the plant at higher than normal levels.

Breytenbach says Petra should start to see ‘strong positive operational cash flow’ from April this year. That should help alleviate any fears about the miner’s ability to service its large debt position.

Our tip on Petra is up 78% over the past year. We remain fans of the company and see further upside for the share price over the medium to long term. Keep buying. (DC)

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