Shares in Petra Diamonds (LSE: PDL) have fallen by around 9% today following the release of its first-quarter update. Production is now at record levels, with it increasing by 1% versus the first quarter of 2014 and, looking ahead, Petra is on target to meet its guidance on full-year production.
Of course, Petra’s share price has come under severe pressure during the course of the year, with it falling by 61% year-to-date. That’s at least partly due to a sharp fall in the price of diamonds, with Petra today confirming that they have fallen by an additional 9% from June to September. However, with the South African Rand also weakening, this has somewhat offset the fall.
For the full-year, Petra is forecast to increase its bottom line by 26% versus last year which, when combined with a price to earnings (P/E) ratio of 11.4, means that it offers a price to earnings growth (PEG) ratio of just 0.4. This indicates that its shares offer good value for money and, while the outlook for diamond prices is highly uncertain, Petra Diamonds seems to offer a sufficiently wide margin of safety to make it an appealing, albeit volatile, buy for the long term.
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Similarly, copper miner Antofagasta (LSE: ANTO) has fallen by over 3% today after it cut its production guidance for the full year. This follows delayed ramp-up in production at Centinela Concentrates and also a minor pit wall slide at Centinela Cathodes. And, while net cash cost guidance has remained unchanged, the company’s profitability is likely to come under pressure due to falling commodity prices as well as lower than expected production.
Of course, Antofagasta appears to have a sound strategy to cope with the current downturn in the resources sector. For example, it is focusing on reducing costs in order to maintain its competitiveness and is also taking advantage of distressed asset prices via the purchase of a 50% stake in the Zaldivar copper mine in Chile. Trading on a PEG ratio of 0.4, it appears to offer a relatively wide margin of safety and, while its future is relatively uncertain, for less risk averse investors it appears to be a strong buy at the present time.
Meanwhile, Rockhopper Exploration (LSE: RKH) has also experienced a share price fall, with its valuation declining by 40% since the turn of the year. This is, on the one hand, rather surprising since Rockhopper has enjoyed better than expected results from its drilling campaign and, at a time when there is concern among investors regarding the financial stability of oil exploration companies, has a cash pile of $160m which should easily fund future projects.
On the other hand, though, Rockhopper has suffered from the falling oil price. With it seemingly unlikely to rise significantly in the short run, Rockhopper’s share price could continue to disappoint. But, for long-term investors, its diverse operations, potential for further drilling success and relatively strong balance sheet make Rockhopper a worthwhile purchase at the present time.
