Petra Taps Shareholders to Tune of $25M

Petra Diamonds has launched a rights issue in an effort to raise funds, which it will use to keep the business running amid weak market demand.

The rights issue, for which the company is seeking approximately GBP 18.8 million ($25.1 million), will allow Petra to raise capital by offering new shares to its existing shareholders at a discounted price. The deal is part of a refinancing agreement that extends the date of return for its debt by up to four years, the miner said Friday.

The company has also introduced a “payment in cash or equity” mechanism, which allows it to pay interest on its loan notes in company shares instead of in cash. If Petra makes the payments in equity, the interest rate on the notes will increase to 11.5%, rather than 10.5% by cash, it explained.

Implementation of the rights issue will be subject to shareholder approval, which Petra hopes to gain at its November 6 special general meeting. Trading of new shares is scheduled to begin on November 7.

Petra is urging shareholders to approve the resolutions, noting that if they are not passed, the company will not have enough working capital to meet its output requirements for the next 12 months.

“Today marks the final leg of Petra’s refinancing,” said interim joint CEO Vivek Gadodia. “Petra has undergone immense change over the past 18 months in order to become a streamlined business.”

Petra, along with the mining industry at large, has been dealing with market challenges stemming from a difficult economy, tariffs, competition from lab-grown diamonds and waning luxury demand. In August, the miner reported that sales fell 33% for the full fiscal year, while sales at its seventh tender decreased 46% compared to the previous one. Meanwhile, its net debt increased to $264 million from $258 million at the end of the third quarter.

Image: A blue diamond from Petra’s Cullinan mine. (Petra Diamonds)