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The share price of Petra Diamonds Ltd (LSE:PDL) rose by more than 8.6% today to 192.1 after the company had recovered a 232.08 carat diamond of exceptional quality from the legendary Cullinan mine in South Africa, proving that the best way to boost a diamond mining stock is by mining diamonds, especially exceptional ones.
The closing price represents a 64.7% increase in the share price since 02 January. PDL stock had been on the rise for the better part of 2014 until 30 July when the stock fell 12% following Awal Bank’s sale of two-thirds of its shares to deal with its own problems associated with being placed into administration by Bahrain’s central bank. Before the sale of 43 million shares Awal had been the second-largest shareholder in Petra.
While it may not be reality, I view Petra as kind of an underdog in the diamond mining sector. Taking over the operations of the Cullinan mine a century after the discovery of the 3,106.75 carat Cullinan diamond, and after DeBeers was finished with it, Petra was more or less left to pick up what crumbs were left, if I may be permitted to refer to any diamonds as crumbs. Petra’s initial interest in the mine in 2008 was 37%. Petra then raised $120 million in equity funding in 2009 to double the size of its stake to 74%.
Petra’s core objective is to grow to an annual production of five million carats by 2019. Current production is in excess of three million and the company’s resource base is in excess of 300 million carats. Reaching the five million carat goal is a lot easier when Petra keeps recovering stones of this quality and size, this one being a D color, Type II “of exceptional size and clarity.”
If this discovery were singular, it would be significant on its own. But the Cullinan mine has produced four of the top 20 largest, high quality gem diamonds in the world, including the Cullinan diamond that was cut into the 530 carat Star of Africa that sits atop the British Sovereign’s Sceptre – the largest, flawless cut diamond the world has ever seem. It’s companion, cut from the Cullinan also, is the 317 carat Second Star of Africa, mounted in the center of the Imperial State Crown.
In terms of investment, however, that’s old news. What’s important to investors is what is happening now. Here’s some insight into what Petra has been able to produce from the mine:
- An exceptional 122.52 blue diamond recovered in June 2014.
- A 29.6 carat vivid blue stone recovered in January 2014 and sold the following month for $25.5 million ($862,780 per carat).
- A 25.0 carat blue recovered in April 2013 and sold the following month for $16.9 million ($663,114 per carat)/
- The 507 carat Heritage, the 19th largest diamond ever found, recovered in 2009 and sold in February 2010 for $35 million, the largest amount ever paid for a rough diamond.
- The 26 carat fancy vivid blue Star of Josephine, recovered in 2008, yielding a 7 carat cushion stone that sold at auction for $9.49 million ($1.35 million per carat).
The point that I am trying to make is that the Cullinan is from the being tapped out and Petra has continued to prove that is the case, verify the company’s statement in its release today that it is “an increasingly important supplier of rough diamonds to the international market.”
