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Something to chew on. Ended with a line from the Berenberg dude.
The Elite Club That Rules the Diamond World Is Starting to Crack https://www.bloomberg.com/news/articles/2019-07-29/the-elite-club-that-rules-the-diamond-world-is-starting-to-crack
Think it is getting increasingly difficult to buy soon at lower than 9 to 10p price. It would be jubilant to get opportunity to buy at 8p & not to mention 5p. Risk rewards getting increasingly risky to shorters/bots. Require large volumes 500K shares lots to make quick profit. Even Bots on AT will have to consider twice.
The last CEO Johan Dipenaar had PDL initial debts of US$300+ mln, 8.25% coupon rate. Refinance that to US$650 mln with 7.25% coupon after bought Culinan at US$80 mln and the digging Capex began. Debts swell above US$ 600 mln; and right issues ensue after a few quarters of poor to negative FCF. Under Johan during Culinan Capex swell, production lower from 5 mln carats and strikes at mines, all contributed to each quarter fcf negative. Today, production is lower to 3.8 mln carats due to low rough diamond price and i believe Duffy trying to set a lower bar to improve sp; which back fired. The production no doubt can be more than 3.8 mln, probably into 4 mln easily with Culinan & Finsch ramping up. Each incremental carats adds a lot to fcf even under poor rough diamond prices.
Current below 10p is a steal. Duffy will have little to no choice to refinance 2022 bond maturity post debts reduction.
This is not disastrous but common, with caveat good positive fcf each year. Banks will refinance. The only time to panic is when fcf remains unstable and negative; that where debt equity swap can occur. PI wipe out and lenders/banks the winner.
Possibility is remote. For the next one year; fcf is expected to be GOOD positive. Duffy aimed for minimum $50 mln fcf which already include debts payoff $24.6 mln each year to 2022.
The hope is he meets the fcf target and trim down debts below 500 mln next year; followed to 450 mln and then near 400 mln at 2022. Of course, big stones fins will accelerate the debts reduction. 400+ carat fetch US$15 mln while quality 100+ carats fetch US$5-7 mln. These finds are all bonus.
Sp will trace back to 15p; 23p, 26p, 30p and back above right issues 40p ; all on debts reductions and positive fcf. It takes times, make the most of the choppy ride up with buying/keeping and some quick shorting (cfd) when sp catches breathers on way up. One possible quick win case when there is an offer to takeover PDL in a year time. Hopefully some rich Chinese or Russia conglomerate will bid for PDL ; just like Sibanye buys out Lonmin to reduce platinum surplus in market.
Wonder if anyone did a quick cal on PDL intrinsic value?
The traditional way to value a stock.
I check Simply Wall street is about 56p based on 10 years fcf from analysts. I always give the website a pinch of salt.
In just 90 days, flipped out of mind....hahaha, so call analyst, woke up 3 months later, was already negative fcf with John Dippenar, previous CEO
Berenberg Upgrades Petra Diamonds Ltd. (PDL:LN) (PDMDF) to Buy
April 23, 2019 2:25 AM
Berenberg analyst Richard Hatch upgraded Petra Diamonds Ltd. (PDL:LN) (OTC ...
24July
https://www.google.com/url?sa=i&source=web&cd=&ved=2ahUKEwins_nn-dLjAhUUAGMBHWPnA08QzPwBegQIARAC&url=https%3A%2F%2Fwww.proactiveinvestors.co.uk%2Fcompanies%2Fnews%2F224425%2Fpetra-diamonds-will-need-an-equity-financing-soon-warns-berenberg-as-it-downgrades-224425.html&psig=AOvVaw331pVACTN00srQrAAcmp2g&ust=1564243108685479
In the conference call, Duffy mentioned options to address maturity debt 2022 is being work out. Currently a lot of flux due to ramp up if production at culinary and Finsch. 16Sept will be the conference call. The prat Berenberg will be there definitely. This question will be address on extra funding even if no analyst asked...hahaha. Duffy cornered, must say something concrete and convincing, otherwise he is a laughing stock based on his AAL credentials.
Near 10p, good pickup to all who have just loaded today. Time for a pint of beer to chill out.
Hang in tight for the next few weeks. Rewards for those with great patience.
Looks like ending below 10p today, especially with UT.
Next Monday , lining up at dawn for 9.5 to 9 p.
Duffy must have gone on summer break, like UK parliament.