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Petra's profits sparkle

London - Petra Diamonds, the largest diamond producer on London's junior AIM market, posted better-than-expected annual results, boosted by the sale of the 507-carat Cullinan Heritage diamond.

It swung to a record net profit of $70.2m for the year to end June from a loss of $89.0m the previous year. Revenue jumped 88% after it received $35.3m for the Cullinan Heritage, a record price for a rough diamond, and on a recovery in gem prices.

The company said "substantially" improved prices were achieved for the first two tenders in the 2011 financial year versus fiscal 2010 averages.

It expects diamond prices to be firmer for the 2011 financial year should the market and global economy remain stable.

Demand from the United States, which makes up about half of the global diamond jewellery market, has improved. Consumption from China and India is expected to continue to grow and will also be supported by rising diamond content in jewellery as those markets develop.

"Echoing the thoughts of other diamond producers, Petra forecast increased diamond demand in the mid term, with a significant shortfall to emerge within three to five years supported by Chinese and Indian double-digit demand growth," said Liberum Capital in a note.

Petra's shares were up 6.9% at 10:14, after earlier touching a four-and-a-half-month high, outperforming a 1.0% rise in a British mining index.

The company produced 1.16 million carats and said expansion plans are on target to more than double production by the 2014 financial year and more than triple output by FY 2019.

Chief Executive Johan Dippenaar told Reuters the group expects to produce about 1.3 million carats in the current financial year.

He also said Petra is in talks to buy the Finsch and Namaqualand mines in South Africa from De Beers.
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