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Not sure about M&A, but it’s interesting to compare GEMD to other diamond companies, including LUC.
LUC:
Annual revenues ~ £110m
Positive cash inflow
Minimal debt
Market cap ~ £125m
GEMD:
Annual revenues ~ £150m
Similar positive cash inflow
Minimal debt
Market cap ~ £50m
GEMD also in a stronger position than any other diamond company in terms of quality of diamonds. The top end of the market is being protected much more than the bottom end during the pandemic, and GEMD have the highest dollar per carat diamond mine in the world (~ $1500 / carat, compared to ~ $400 / carat for LUC and < $100 / carat for most others).
LUC have cut their dividend while they undertake an underground development plan for their mine, whereas GEMD are on the opposite trajectory, expecting to commence dividends before too long if the current rate of cash inflow continues.
It will be interesting to see where the relative market caps are for these two companies in 6-12 months’ time.
Larger stone diamond market does seem strong at the moment. It’ll be interesting to see what GEM get for all their recently found 100+ carat stones, including the “remarkable” 442 carat stone. Hopefully update on tenders / Q3 progress soon.
https://www.diamonds.net/News/NewsItem.aspx?ArticleID=65546&ArticleTitle=Rough%2bSales%2bPick%2bUp%2bas%2bMarket%2bBegins%2bRebound
More signs that the diamond market is picking up nicely.
Looking forward to September tender results here.
Next few tender results should send this soaring IMO. Definitely looks like they’re hitting a sweet spot at the moment, having recovered 5 separate 100+ carat stones in the last month (compared to 11 in total for the whole of 2019), one of which is the 442 carat stone that is likely to be worth in the region of $15-20m on its own. Market definitely sleeping here. Current £50m market cap looks way too low IMO. I expect to see dividends / share buybacks starting up later this year / early 2021. Several larger shareholders have been pushing the board for it, and with the rates of large stone recovery as they are now, I can’t see them holding off much longer. GEMD a very strong buy for me at these levels. Nice to see someone agrees strongly as well, with the late reported £100k / 250k share buy today. Onwards and upwards from here.
I agree, looks massively undervalued at current £13m market cap.
Revenues ~£25m
Cash £9m
No debt
Now achieving positive cash inflow (cash level increased from £8m at end of December 2019), even during pandemic.
Second wave will only push more customers to online purchases.
Launch of new products with Boots pre-Christmas.
Strong buy at these levels for me.
Looks leaky to me.
I wouldn’t be surprised if we see debt restructuring / September tender news soon...
More signs that the global diamond market is starting to pick up as other companies release results of recent diamond tenders...
https://www.thediamondloupe.com/rough-market/2020-09-08/grib-tender-results-reach-pre-covid-levels
Hopefully next Petra update is positive results of their September tender.
Thanks Dave, good find.
Because the pandemic forced tenders to be cancelled this Spring, Petra had an inventory build up of 1.35 million carats of diamonds as of 30 June 2020. They sold 580k of those for $40m in July, leaving around 800k in the inventory. With production levels in July and August, they should have had an inventory of over 1 million carats again for the tender at the end of August / start of September. That would have a value of around $80 million. They won’t have put it all in this recent tender, but the clear signs of the diamond market picking up bode well for their tenders booked throughout the rest of the year.
Not all doom and gloom here.
A professional response to allegations at the WDL-operated Williamson mine in Tanzania.
In other news, they put out a job advert yesterday for an additional underground mine planner at the Cullinan mine in SA. Another positive sign regarding production there and not the actions of a company facing liquidation IMO.
https://za.indeed.com/m/viewjob?jk=c650b48dc70d27ba&from=serp
Antwerp world diamond centre calendar had Petra tender running from 27th August to 3rd September, so results should be announced soon.
Petra also have further tenders scheduled for 14th to 21st October and 27th November to 4th December, so signs looking very positive that the diamond market is picking up significantly...
https://www.awdc.be/en/calendar/
Agree that the rise had to cool off a little, but hopefully now looks set for more blue from here.
Thanks for your reply ColonelDrake. I certainly agree that this could go either way from here, but I am a little more hopeful on the future prospects for Petra and the reasons for the recent share price rise. I do think it has something to do with operations / diamond sales. A few months ago operations and diamond tenders were suspended, so with Petra’s debt commitments, the future looked very bleak indeed and the share price plummeted as a result to a market cap of £10m (priced to go bust). Now we have had operations back up and running for a few months, coronavirus cases in SA are falling, and travel restrictions have eased enough to allow for a diamond tender this month. There are signs that the diamond market is picking up with recent tenders from the big producers. Petra themselves even managed to sell $40m worth of diamonds on June and July. So things are hopefully looking up for the September tender. It is possible that the global diamond market picks up later in 2020 from pent up demand during the pandemic.
The question for me is whether Petra will be allowed the time to try to get things back on track or not. This would of course be made easier by a part asset sale reducing the level of debt. But a reorganisation / renegotiation of the debt would also be possible, most importantly the $650m loan note.
The market cap is important to me because it shows the level of possible share price movements. If Petra goes bust then all shareholders lose. But if they manage a part asset sale / debt reorganisation and the diamond market picks up in Q4 2020, then the market cap could be £100m+. So the fact that the market cap is currently sub £20m is significant to me.
It will certainly be an interesting month here, one way or the other.
I am sorry that longterm holders have had a rough time here and I definitely echo some of the comments on here that this is very high risk, so for speculative amounts only if anyone is buying shares now. But for me the risk-reward ratio looks good for the speculative part of my portfolio and I will look forward to updates later with month with anticipation.
Third highest volume day ever, and on no news. Looks like something’s afoot.
Market cap still only £20m at current 2.3p levels.
Everyone knows the risks; mainly in terms of large debt pile and pandemic-related global diamond market slowdown, but if lender discussions go well and the September tender results show an uplift in demand, then I really think a 10-12p share price (£80-100m market cap) is achievable near-term.
Of course, negative lender discussions and poor tender results might jeopardise the future of the company, so any investment needs a certain degree of caution, but recent signs in the diamond market have been positive, so I’m not surprised trading volumes and interest have picked up here over recent days.
The next few days and weeks look set to be even more interesting still.
Good luck all.
Share price has been decimated by talk of a possible equity raise. Currently down by over 50% since that announcement. But I agree with the previous poster on here that any equity raise seems much less likely now that the share price is so low and that HSBC have since bought in. The maximum the board is authorised to raise in a placing is £5.2m, which at 5p would be around 30% dilution. That would be worst case scenario, and it still isn’t that bad. The company does not need to raise those funds to continue operating, but if they are to take advantage of all growth opportunities, then they would need open access to their £200m credit facility. They currently don’t have that because it was dependant on performance targets, which understandably were not hit due to the coronavirus pandemic. They are currently negotiating those extenuating circumstances with the lenders. An equity raise might have been needed to unlock that facility again, but now that HSBC are stepping in, I think it’s much more likely that they just enter into a new credit facility than do an equity raise to access the current one. HSBC bought 6.74% of the company since the announcement of a possible equity raise. In my opinion, there is no way they would have bought in unless they had reassurances that they wouldn’t be subjected to dilution through a placing. They are more likely to just provide the credit facility themselves. If we get an RNS of HSBC increasing their stake or of the credit facility being renewed / replaced to allow further growth, then the current £18m market cap could be blown out of the water. £72m cash, £360m loans book, £11.9m cash generation in the month of June alone. Not without risk, but this does have very high reward potential for those willing to take the chance at these levels.
I also think it’s going to get very interesting soon. Ex HSBC North America MD and CEO already sits on the NSF board. Outrageously high calibre for a sub £20m market cap company. And now HSBC are announced as a new significant shareholder, straight in with a 6.74% holding. Something is definitely going on behind the scenes here, and I think it’s going to be big.