Africa focused diamond mining group Petra Diamonds Limited (AIM: PDL) doubled its attributable resources in the Cullinan mine by upping its ownership from 37% to 74% via an option agreement with its partner Al Rajhi, which in its turn will increase its stake in Petra.
Petra will issue 36 million new shares to Al Rajhi on a value of 80 pence per share and will pay Rajhi a deferred option fee of US$35 million in December 2011. The company will repay the US$20 million Al Rajhi convertible loan along with accrued interest of US$475,000, also assuming responsibility for the US$80 million Cullinan loan plus accrued interest of US$9.6 million due to Al Rajhi.
Should Petra exercise the option, which it can do until 18 December, the company’s attributable resources in the Cullinan mine, which hosts the world’s largest diamond resource of 204.6 million carats, will amount to 151.4 million carats, while attributable production will now stand at 650,000 cpa (carats per annum) from the current 320,000 cpa. The company confirmed its intention to undertake a placing in order to exercise the option and implement development programmes at Cullinan and Williamson to increase production from these mines.
“The consolidation of the Cullinan acquisition and the simplification of the ownership structure will be highly value accretive to us and our shareholders...Petra remains one of the few growth companies in the diamond industry, which is showing clear signs of a strong and sustainable recovery,” said Chief Executive of Petra Johan Dippenaar.
The company simultaneously announced the sale of two diamonds, one 58 carat and one 53 carat from Cullinan for US1.82 million and US$0.96 million respectively, saying the high prices achieved in these sales boded well for the values that could be realised from the 507 and 168 carat white diamonds that were recovered at Cullinan in September this year.
“The rough diamond market has improved significantly in recent months, as evidenced by the strengthening of prices we have witnessed since early 2009. Our recent tenders have been particularly successful and this positive price environment bodes well for the sale of the exceptional 168 carat white Cullinan diamond, as well as for the overall earnings of our operations as we continue to increase Group production,” said Dippenaar.
Shares in the company rallied 13% on the news today.