Tough times dull stocks
on prowl in sector as share prices collapse and investors lose interest
Though both Kilalea and BMO Capital Markets analyst James Picton rate Petra an “outperform but speculative” stock, its share price has continued to fall. Petra’s price sat at around 150p at end-2007 but dropped to a low of 73,5p/share on 22 August. Its price then recovered to 107p on news of the Williamson deal but has started sliding again to sit currently at 102p/share.
De Beers is now in discussions with Trans Hex about its Namaqualand mines division, which it had previously indicated it wanted to merge with Alexkor, a joint venture between the SA Government and the Richtersveld community.
That’s the best news to emerge about Trans Hex in years, as the company’s share price was beaten down mainly due to operating problems in Angola that have had severe financial consequences. Trans Hex has also sold off its Saxendrift operation along the Middle Orange River to Rockwell and discontinued its deep-water marine diamond mining operations off Namibia’s coast.
That currently leaves Trans Hex overwhelmingly dependent on its Baken and Richtersveld alluvial mining operations. Baken mined 71 856 carats of the total 107 305 carats Trans Hex produced in the year to end-March.
De Beers estimates 2008 production from its Namaqualand mines at 330 000 carats and, as spokesman Tom Tweedy says: “Trans Hex has successfully mined alluvial diamond deposits in the area that are lower margin than our own.”
An executive at another diamond producing company says: “Trans Hex should be able to make a go of this. It’s their kind of mining in the same region where they are already operating successfully.”
Yet Trans Hex’s price has dropped from around 875c when the news was announced early in September to current levels around 750c/share, just above its 12-month low of 720c.
AIM- (and JSE-listed) DiamondCorp has also seen its price plunge from a 12-month high of R15 to R9/share currently. However, DiamondCorp is in the fortunate position of having already raised all the funds it needs to bring the Phase 2 underground development of its Lace kimberlite diamond mine in the Free State into production.
DiamondCorp CEO Paul Loudon says his priority is to get the mine into production and he’s not being tempted to expand by going after some of his distressed fellow diamond miners.