Petra Diamonds guidance disappoints, but Canaccord reiterates 'buy'

18th Aug 2014 12:16

Canaccord Genuity has repeated its 'buy' stance on Petra Diamonds, but has said that guidance from the miner was worse than expected on Monday.Production is forecast to rise by around 3% to 3.2m carats in the 12 months to 30 June 2015, 7% below Canaccord's estimate of 3.4m carats.Meanwhile, capital expenditure (capex) for Petra's South African operations is expected to be around 1.9bn rand this year, 19% higher than previous guidance and 20% above the broker's forecast.Nevertheless, Petra said that capex to 2019 will be fully funded from operating cash flow, existing undrawn debt facilities and the expected sale of the 122-carat blue diamond that was recovered in June at the Cullinan mine in South Africa.Canaccord analysts Dmitry Kalachev and Peter Mallin-Jones said: "Our initial thoughts on the guidance: operational metrics look weaker than expected for 2015 fiscal year (opex, production), while capex has substantially increased in 2015FY. "This means that the company will be more reliant on the continuing strength in diamond prices, the sale of the exceptional stones (including the recently found 122-carat blue diamond) and the available debt facilities in the year."The broker maintained a 255p target price for the shares, which were 1.8% higher at 193.5p by 11:30.BC