Petra Diamonds appoints new CEO, share price rises
Feb 18 (Reuters) – African miner Petra Diamonds named a new chief executive on Monday as it works to cut debt and generate free cash flow after first-half core earnings were hit by lower diamond prices.
The news helped lift its shares more than 8 percent by 1010 GMT. The broader mining market was little changed.
Analysts said appointing Richard Duffy, who has held finance posts in his 27 years in the mining industry, would benefit the company as it sought to cut debt. He has previously worked at Anglo American and AngloGold Ashanti.
Petra’s stock had fallen about 30 percent this year as the company sought to cut borrowing after heavy capital investment in infrastructure and opening up a new section of ore at its flagship Cullinan mine in South Africa. Diamond prices meanwhile have dropped below historical annual averages.
The company said on Monday adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6.4 percent to $75.6 million in the six months to Dec. 31, from $80.8 million in the same period a year earlier.
The company stuck to its production forecast of 3.8 million to 4.0 million carats for fiscal 2019.
“The focus to generate free cash flow remains paramount for the company,” said outgoing CEO Johan Dippenaar, whose departure was announced in September.
Duffy takes over on April 1.
Dippenaar said the company had delivered “solid production” but recognised the impact lower value diamonds had in the six months to the end of December and said the company was working to boost production from a new section of ore.
The aim was to lower the net debt to EBITDA ratio to 2 by the middle of 2020 from 3.3, he said.
A low ratio is seen as an indicator of financial health in the capital-intensive mining industry.
Petra Diamond’s chief financial officer and chief operating officer are expected to stay in place. But Dippenaar said the company was “committed to further changes in the board during this calendar year”.
RBC Capital Markets, which rates the stock “sector perform,” welcomed the appointment of Duffy and noted “positive pricing improvements” as provisional results from a February diamond sale showed a 1 percent rise on the previous six months.
Analyst Tyler Broda said Duffy was “a very solid hire” with experience including in finance roles. Broda said Duffy’s experience “should be an asset as PDL (Petra) delivers on its investments and begins to de-lever the balance sheet”.
(Editing by Gopakumar Warrier and Edmund Blair)