There is an awful lot of talk about EBITDA in today’s interim results from Petra Diamonds (PDL) and that, on its own, should be a red flag. But there are many other warning signs too. Well done Lucian Miers for urging folks to add to shorts ahead of the numbers, the shares are down another 16% today to 24.2p but that is still far too high. Arguably by 24.2p.
Two things spring to mind encapsulating the difficulties of short selling, particularly in the US. First is the recent retirement of Hindenberg Research, aka Nate Anderson, who has had a superb track record over the last few years as Tingo, the Adani empire, Karl Icahn and Super Micro Computer discovered to their cost as well as a host of smaller outright frauds.
We are due a trading update on the 21st. But surely by now Petra Diamonds (PDL) knows whether it has breached its banking covenants for the year ended December 31. And you cannot just sit on bad news.
Diamond miner Petra Diamonds (PDL) has issued a “Q4 and FY 2024 Operating Update” including noting some recent net debt reduction and that it is looking forward to addressing the challenges ahead from a position of strength. However, it also notes now continuing diamond market weakness and Lucian Miers recently noted its management has been consistently over-optimistic in its assumptions and…
Petra Diamonds (PDL) is one of those mining companies which is drowning in debt and could very easily have gone bust, had it not recently announced a restructuring with its lenders.
Yesterday, Petra Diamonds (PDL) issued an RNS which sounded like good news: “Recovery of Five High Quality Blue Diamonds”. Feck FYB thought the morons and the shares jumped by 10%...but this was dissembling. For beneath the bullish headline was not such good news:
Buying bombed-out shares in companies that have previously run as successful businesses can be very lucrative if they somehow manage to turn things around, but it also offers a very high chance of losing all your money if you are proven wrong and hold to the bitter end. There are plenty of companies on the stockmarket that have been at death’s door but have managed to survive and have subsequently gone on to do quite well, but there are also a large number of others that went bust and where investors lost all their money, and there is a very fine line between the two if you do decide to take a risk on a company that finds itself in this situation.
I have repeatedly warned you on this website that Petra Diamonds (PDL) is an accident waiting to happen. It is happening and this is one where the shares have a clear end game of 0p. Let’s start with the three top golden rules of investing in mining companies…
Whenever you buy a share which you view as a potential recovery play, you have to accept the risk that of them will do everything but actually recover, and if the situation worsens then it is time to cut your losses and sell.
As at June 30 2019 Petra (PDL) had net debt of of $541 million. The shares, 45p a year ago are now 8.735p valuing the company at just £75.6 million. The question is: will Petra go bust?
When a share keeps on falling you have to decide whether the decline is terminal or how good the chances are of a recovery at some point. In some cases you will just be throwing good money after bad, and just because the shares have traded at a higher level in the past doesn’t mean that they will necessarily do so again if the fundamental changes to the business are terminal. But we also see cases where there is a temporary decline followed by quite a strong recovery, especially where the business is reliant on factors that are cyclical – such as in the natural resources sector as commodity prices fluctuate – or where it has suffered from shorting or a persistent seller, or even a combination of all of these...
Petra Diamonds (PDL) is a company that I covered back in March and so far I have been wrong about it having potential as a speculative investment, as the share price has just taken another big drop.
Diamond miners have performed very poorly of late, but that doesn’t mean that trend will continue indefinitely - and now could be a good time to buy with a longer term view. Petra Diamonds (PDL) is definitely one in this sector which has caught my eye lately, and is one of several diamond miners which I have kept an eye on over the years...
