UK Markets closed

Petra Diamonds vows to regain trust after securing £127m from investors

Jon Yeomans
man holding a diamond - Image © Petra Diamonds Limited

Petra Diamonds has promised to regain the trust of investors after successfully tapping them for $170m (£127m) in a discounted rights issue.

The miner, which operates predominantly in South Africa, secured support from 99pc of shareholders at a special meeting in London today to raise funds by issuing new shares.

Petra needs the cash to slash its debt pile after borrowing heavily to expand its venerable collection of mines.

“Our priority now is to rebuild the trust of our shareholders,” said Johan Dippenaar, chief executive. “We want to continue delivering the business plan we’ve set out. The last three quarters have seen a very solid performance by the mines.”

Mr Dippenaar insisted the funds raised would be sufficient to cover Petra’s needs. Announcing the rights issue last month, it warned that without it, it may not have enough working capital to last beyond the next 12 months. The move surprised some investors, as the company had said earlier this year it had enough capital for its needs.

Petra has been hit by the strengthening of the South African rand against the dollar, adding to its costs.

The company will issue five shares for every eight already in existence, at a knockdown price of 40p. The vote in favour means that investors – including management, which has a 4pc stake – will stump up the cash to buy the new shares.

Mr Dippenaar also dismissed the threat posed by De Beers’ recent announcement that it would begin selling jewellery featuring lab-grown diamonds. Analysts have suggested these diamonds, priced at the cheap end of the market, could pose a threat to smaller producers such as Petra.

“We’ve always maintained that synthetic diamonds will find their place in the market,” he said. “This will just make that process quicker.”

Petra acquired all five of its mines from industry leader De Beers, including the historic Cullinan mine, which produced gems now in the Crown Jewels.

But it has encountered challenges in some of its operations and last year became embroiled in a row with the government of Tanzania, where it runs the Williamson mine. As a result Tanzania impounded a parcel of diamonds, hitting Petra’s revenues.

The new shares will be issued tomorrow.