Petra Diamonds to double stake in Cullinan mine as market prices improve
18 November 2009
Diamond mining group Petra Diamonds has announced plans to increase its stake in the famous Cullinan mine in South Africa by buying out its partner, Al Rajhi Holdings.
In an option deal which expires on December 18, Petra has the chance to take its holding in the mine from 37% to 74% and substantially increase its own revenues and resource base.
In return, the company will pay Al Rajhi 36 million shares at 80p each and another US$35 million in cash in 2011. In addition, Petra will repay a US$20 million loan and take on the responsibility for a US$80 million loan on the mine – US$30 million of that loan will be settled once the deal completes.
The deal will take Petra’s attributable resources at Cullinan from 75.7 million carats to 151.4 million carats and doubles the attributable diamond production from approximately 320,000 carats to over 650,000 carats per year.
Responding to recent press speculation over a potential fundraising, Petra confirmed that it was planning to undertake an equity fundraising, led by Canaccord Adams and RBC Capital Markets.
The news comes as Petra reported that two Cullinan white diamonds of 58 and 53 carats had been sold in early November for US$2.8 million. The company said the strong prices achieved boded well for the values that could be realised from the exceptional 507 and 168 carat white diamonds, which were recovered in the same production series at the Cullinan mine in September this year.
Johan Dippenaar, Petra's chief executive, said that the rough diamond market had improved significantly in recent months.
Johan Dippenaar, Petra's CEO, with the 507.55 carat diamond recovered in September
The Cullinan mine is one of the world's most celebrated diamond mines as it regularly produces large, high quality gems, and is the only reliable source of very rare and valuable blue diamonds. In addition, it contains the world's second largest inferred diamond resource, with a total of 204.6 million carats.
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