[miningmx.com] – UK-listed Petra Diamonds said it had agreed with its empowerment partners and two South African banks to have loans worth $98m in two mines refinanced – a development that analysts said raised hopes of a dividend.
In terms of the agreements, vendor-financed loans between Petra and its black economic empowerment (BEE) partners in the Finsch and Cullinan mines would now be financed directly with Absa and FirstRand.
“The repayment of these loans significantly strengthens the company’s balance sheet, enhances flexibility and places Petra in a strong position financially,” said Petra CEO, Johan Dippenaar in an announcement today.
Petra said in its statement that it would commence paying dividends in the current financial year which closes on June 30. Shares in the diamond company were 1.4% higher having already gained 82% on a 12-month return basis.
“Good news for Petra Diamonds,” said Investec Securities in a morning note. It said the loans had been settled three to four years sooner than expected which would provide it with “… an immediate c.12p per share”.
“Given that the banks will have performed stringent due diligence, this is also a tick for the projects,” it added.
Dippenaar said in September that company might accelerate the start of dividends after committing itself to a 5 million carat-a-year production target.
“The conditions already exist for us to consider bringing forward the dividend,” he said in an interview with BDLive. “If there are no opportunities out there we will follow a policy of returning cash to shareholders,” Dippenaar said.
Petra had agreed to finance the BEE Partners’ 26% share in each mine when it bought the assets from De Beers. The loans were due to be repaid to the company out of the Finsch and Cullinan mine free cash flows.
The BEE partners are Senakha Mining Investments, Thembinkosi Mining Investments, and the Petra Diamonds Employee Trust. The latter is due to receive its maiden trust distribution in December 2014 as a result of the refinance.
“This should boost cash from $45m to c.$143m and reduce net debt from $107m to a mere c.$10m,” said Numis Securities.
The debt restructure would also provide more headroom through Petra’s peak capital expenditure years which were expected to be in its 2015 and 2016 financial year with less reliance on turning up exceptional stones, said Numis.
