30th Jul 2019 10:45
(Alliance News) - Petra Diamonds PLC on Tuesday said it has no plans to raise any equity or increase spending, following the publishing a week ago of a three-year plan.
Petra made Tuesday's statement in response to the diamond miner's recent share price performance. Shares were 28% higher Tuesday morning in London at 13.10 pence, but they are still 35% lower than a month ago and 20% lower than on July 22, when Petra set out its new plan.
Petra unveiled "Project 2022" in the update earlier this month, which will look to improve all aspects of the business so it can deliver an initial target of USD150 million to USD200 million of free cash flow between 2020 and 2022.
The firm will also look to reduce net debt, by refinancing a bond, and Petra has confirmed Tuesday it will not look to raise any equity to do this.
The cash flow target was made assuming flat diamond prices over the next three years, not finding any "exceptional" diamonds, and a 14-to-1 South African rand to dollar exchange rate.
"Therefore, the initial target of USD150 million to USD200 million of net free cashflow in the years 2020 to 2022 has potential upside in additional cash generation from improved rough diamond prices, a weakening in the rand beyond assumptions, and the continued recovery of exceptional diamonds from Cullinan," said Petra.
"Some third-party commentary in relation to the capital expenditure guidance published in the financial 2019 trading update has raised concerns around potential increases in capex spend beyond financial 2020. We have been able to lower our capex budget for financial 2020 by bringing forward some spend to financial 2019 as well as re-prioritising all projects across the group's operations," continued the company.
"The reduction in the financial 2020 capex guidance nevertheless provides for the ongoing sustainability of the business. Moreover, now Petra has effectively completed its significant capital expenditure programme across the group's diversified asset portfolio, there is no requirement to invest any significant expansionary capital between financial 2020 and financial 2022."
The business is in robust health, Petra said, and given it has the third largest diamond resource in the world, there are organic growth opportunities "well beyond" 2030.
Chief Executive Richard Duffy said: "We are executing our plans and delivering to budget as we launch Project 2022. We expect that this will deliver significant incremental cashflow over the next three years, further improve our net debt position and provide us with future growth options."
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