Petra Diamonds shares stumble over debt fears
Troubled diamond miner
Petra Diamonds was on the back foot again yesterday after it warned it is heading into trouble with its lenders.
The company said it is likely to breach its banking covenants by the end of the year as a result of strikes at three of its mines in South Africa and a row with the government in Tanzania.
Shares fell 5.4pc, or 4.5p, to 79p as the warning sent weary investors running for the hills.
The stock was changing hands for just over 160p at the start of the year.
Petra, which is known for the quality and the size of the diamonds produced at the famous Cullinan mine near Pretoria in South Africa, has borrowed heavily as it seeks to expand its operations in the country.
but it has suffered a number of setbacks in recent weeks, with workers at three of its mines in South Africa going on strike.
The company last week struck a deal with the National union of Mineworkers with regards to salaries at the Finsch, Koffiefontein and Kimberley ekapa operations, meaning work could finally resume as normal.
Petra has also run into trouble in Tanzania where the government last month seized a parcel of diamonds worth tens of millions of pounds and blocked their export.
The company was forced to temporarily halt production at the Williamson Mine in Tanzania after the seizure of the 72,000-carat parcel amid claims by president John Magufuli that mining companies were not giving the government a fair share of profits.
As a result of these issues, Petra said a ‘likely breach’ of its debt agreements ‘has been flagged to the lender group and the Company will remain in regular engagement with them on this matter’.
Analysts at Investec said: ‘This update is not a surprise in light of the labour disruptions that have taken place and political uncertainty concerning the Williamson Mine in Tanzania. We await the renegotiation of covenants.’
The recovering pound held back the wider stock market as the
FTSE 100 index closed down 14.98 points at 7507.89 and the FTSE
250 fell 63.98 points to 20,102.56. Sterling staged a mini-recovery – rising as high as $1.3183 and €1.1227 – following last week’s slump when economic and domestic political worries weighed heavily on the currency.
Investors piled into DX Group after the parcel delivery and logistics company unveiled plans to raise £24m from shareholders and appoint a new chief executive.
The firm, which failed in a bid to buy the distribution arm of John Menzies over the summer, said the new funds were needed ‘to address the short term cash position of the company which has become weak’.
Nightfreight founder lloyd dunn was appointed as chief executive, while its other co-founder russell black is joining dX as a non-executive.
They both left haulage company Nightfreight in 2001 following a takeover by private equity. dX then bought the business in 2012.
The company also said that ron Series would be appointed as chairman and Paul Goodson as non-executive.
Activist investor Gatemore Capital Management, which is dX’s largest shareholder with a 23.8pc stake and was opposed to the proposed deal with John Menzies, led the fundraising.
Gatemore said the four new appointments marked ‘the successful end’ of an eight-month campaign by Gatemore for change at dX.
Shares in dX jumped 18.2pc, or 1.44p, to 9.35p. The stock listed at 100p in February 2014 and peaked at 145p in May that year before tanking.