Acquisition of CDIH

Petra Diamonds Ld
27 November 2006

For release 27 November 2006





                             Petra Diamonds Limited


                       Acquisition of Calibrated Diamonds


Petra Diamonds Limited ('Petra' or 'the Company'), the AIM-quoted and ASX-listed
diamond group, announces that it has acquired the entire issued share capital of
Calibrated Diamonds Investment Holdings (Pty) Limited ('CDIH' or 'the CDIH
Group') ('the Transaction').


CDIH is focused on the cutting and polishing ('beneficiation') of rough diamonds
utilising what Petra believes to be a unique process developed by the CDIH Group
and which enables CDIH to produce polished diamonds of a very high and
consistent standard. The initial cash consideration in respect of the
acquisition is R16.3 million (US$2.28 million) which has been funded from
Petra's existing cash resources. A deferred consideration of warrants and cash
is payable subject to the achievement of certain production threshold levels, as
set out below.


The Transaction represents a significant step forward in Petra's objective of
growing its diamond revenues, as CDIH will provide Petra with the potential to
significantly enhance its overall revenues due to the value added from the
beneficiation of rough diamond production. The addition of CDIH's beneficiation
business to Petra's production and exploration portfolio makes Petra AIM's first
fully integrated diamond mining group.



Reasons for and benefits of the Transaction


  • The progression of diamonds through the 'diamond pipeline' takes global
    rough diamond production of around US$12.7 billion to around US$19.3 billion
    at polished wholesale prices (an increase of approximately 50%); as a
    producer of its own regular run of mine production, Petra is now able to
    participate in this value-add pipeline by beneficiating certain of its own
    production in line with Petra's stated objective of building a true mid-tier
    diamond group


  • The Company believes that such beneficiation and value add has the
    potential, as the initial capacity of Petra's new diamond cutting division
    is developed over time, to significantly enhance Petra's revenues. Petra
    will be able to tailor the production process to optimise the potential
    returns, and having the benefit of regular and reliable run of mine supply
    is a key factor in that business model


  • Petra plans to invest around US$4 million in CDIH (to be funded from
    Petra's existing cash resources) in a staged approach over the next 18 to 24
    months with the objective of building up CDIH's production capability; given
    the potential revenue growth noted above Petra believes the transaction also
    has the potential to significantly enhance Petra's operating cash flows when
    production capacity has been increased


  • Many of the African diamond producing countries are making changes to
    their diamond and mineral legislation, one of the objectives being to
    increase the level of beneficiation of diamonds within these  producer
    countries; Petra is committed to the ethical exploration for and production
    of diamonds in Africa,  ensuring that all stakeholders benefit, and this
    acquisition will enable Petra to be involved in the beneficiation programmes
    of the countries in which it operates


  • Petra's unique ability to supply its run of mine production to CDIH will
    enable Petra to produce polished diamonds that will, due to the transparency
    of Petra's production profile, be guaranteed to the diamond market as being
    conflict free; in time, this will give Petra the potential to build on this
    'mine to finger' supply chain in the diamond market, which the Company
    believes is becoming increasingly important given the renewed commitment by
    the diamond industry to ethical and legal compliance issues



Adonis Pouroulis, Chairman of Petra, comments 'As the diamond industry evolves,
giving more autonomy to African producer countries, Petra is adapting its
business model to suit the needs of the current market.  We are excited by the
opportunity CDIH brings to Petra's business; test results received to date are
highly encouraging and over time we expect to see value add directly affecting
our bottom line. This initiative addresses the changing beneficiation policies
of the various African countries in which we operate, and Petra is proud to be
involved in such important developments to our industry.'



Details of the Transaction


Petra has acquired the entire issued share capital for an initial cash
consideration of R16.3 million (US$2.28 million), this amount being funded from
Petra's existing cash resources. A deferred consideration will also be payable
should agreed production threshold levels be achieved using the CDIH cutting
technology.


The deferred consideration is triggered in four stages, when CDIH cuts rough
input of four threshold levels, being 2,500, 5,000, 7,500 and 10,000 carats per
month, for a consecutive period of two months in each case and will be settled
by;


(i)           the issue of warrants over 750,000 Petra shares per threshold 
              level at an exercise price of 114.5 pence per share (the closing 
              mid market price on 2 October 2006, the day prior to the signing 
              of the heads for the transaction) (subject to the approval of the 
              granting of such warrants by the South African Reserve Bank), or 
              at Petra's election (or if Reserve Bank approval is not received),
              by way of a cash amount equivalent to the notional gain in the 
              value of the warrants had they been granted; and


(ii)          the payment of an amount based on the EBITDA of CDIH. This amount 
              will be calculated as a three times multiple of 28.36% of the 
              EBITDA of CDIH when each of the above threshold levels is met, 
              less any such EBITDA payments already made in respect of meeting 
              earlier thresholds. Diamonds from Petra's production will be sold 
              by Petra to CDIH for beneficiation at market value; Petra will use
              an independent valuator to ensure that market value is 
              consistently applied.


 Ends


Note: For the purposes of Schedule 4 of the AIM Rules, the terms of the
Transaction provide for a maximum deferred consideration of 3 million warrants,
which, as at 27 November 2006, would represent approximately 2% of Petra's
issued share capital, plus the payments based on CDIH's EBITDA.  The ultimate
value of the warrants will subsequently be dependent on the future performance
of Petra shares. The precise cash consideration cannot be calculated due to the
method of deferred consideration calculation. In the case of an extreme
appreciation of the Petra share price and value of the warrants, in order to
ensure that the Transaction does not trigger the Consideration Test of Schedule
Three of the AIM Rules, a nominal maximum consideration of £100 million is a
term of the Transaction.  In the opinion of the Directors, the likelihood of
this cap being achieved is remote.


For further information, please contact:

Justine Howarth / Cathy Malins                   Telephone: [phone]
Parkgreen Communications, London



Notes to Editors:


Overview of Petra's Operations


O       Petra is focused on the exploration, mining and beneficiation of
        diamonds in Africa. Petra's strategy is to continue to build its 
        portfolio of revenue producing and exploration assets, achieving the 
        objective of becoming a true 'mid-tier' diamond group.


O       Petra has operations in Angola, South Africa, Botswana and Sierra Leone.
        Petra is well placed to achieve high yielding results from the 
        increasingly robust market for diamonds.


O       Petra's exploration activities at Alto Cuilo in Angola continue to
        deliver ever more exciting results and the joint venture with BHP 
        Billiton has expedited exploration with the identification to date of 62
        kimberlitic occurrences together with diamond indicator mineral results 
        comparable with some of the world's economic diamond deposits .


O       Petra and AIM quoted Xceldiam Limited have entered into a strategic
        cooperation agreement with regards to the neighbouring Luangue and Alto 
        Cuilo diamond projects


O       The South African operations delivered a significant increase in
        production to 175,000 carats for the year to June 2006. Further 
        increases in production are expected for the year to June 2007 and 
        beyond.


O       In Botswana, exploration is currently focused on the Gope area where
        Petra holds diamond prospecting licences covering ground that is known 
        to host several diamondiferous kimberlites.


O       In Sierra Leone, Petra has earned a 51% interest in the Kono Project,
        following the expenditure of US$3million on the project. This JV with 
        AIM and TSX-listed Mano River Resources Inc is progressing well and 
        first production from the Lion fissures was reported for June 2006.


For further information on Petra Diamonds, please visit www.petradiamonds.com



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