Preliminary announcement

Petra Diamonds Ld
20 December 2002

                             PETRA DIAMONDS LIMITED

            PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 30 JUNE 2002

Highlights of 2002

  • Successful pre-qualification for the Alexkor bid and submission of an
    offer for a majority interest in the Alexkor diamond mine;
  • Signed option agreement whereby Rio Tinto Mining and Exploration Limited
    will fund exploration for diamonds on Petra Group mineral rights properties;
  • Recommenced Angolan operations;
  • Credit Line of £ 4.5 million secured from Cornell Capital Partners
    Offshore L.P.


Chairman's Statement

Dear Shareholder

As Petra ends its fifth year of operation, it can look back with satisfaction on
the foundation stones it has laid and will build on in the coming year.

Achievements since flotation include:

•                            Petra succeeded in discovering the first new
kimberlite orebody during the interregnum in the Angolan civil war. The
discovery of this kimberlite on the Alto Cuilo concession in north-eastern
Angola is recognised as a major find by Endiama, the Angolan diamond authority,
and was heralded as one of the most important exploration projects in Angola.

•                            Namibia offers great opportunities for us and the
company has a corporate platform in that country from which to take advantage of
national mining initiatives that we believe are underway. As shareholders will
be aware, Petra was the first company to establish a truly Namibian owned and
managed mining house, the Namibia Mining House.

•                            Against stiff competition Nabera Mining (Pty) Ltd
(Nabera), in which your company has a 29.5% interest, secured the management
contract for the Alexkor diamond mine for a two year period from May 1999 to May
2001.

•                            Petra acquired Goldfields' South Africa's entire
diamond portfolio in 1999. The package included the Syferfontein kimberlite,
which Petra subsequently proved to be diamondiferous. Petra has a number of
options in respect of the Syferfontein kimberlite which it is currently
reviewing.

•                            During 2002 it entered into an option agreement
with Rio Tinto Mining and Exploration Limited (Rio) to undertake a work
programme on a number of properties in your company's South African portfolio,
for which Petra has the minerals rights.

•                            In the second half of calendar 2002, Petra
interests were short-listed as a bidder for the Government of the Republic of
South Africa's 51% share interest disposal in Alexkor Limited, the sea and land
based diamond mine on the West Coast of South Africa; and at the end of November
2002 a funded offer to purchase the mine was submitted.

This is a solid foundation on which to build rapidly in the year ahead, with a
geographic diversity of projects across southern Africa. Petra is well
positioned for good growth and can look forward to a highly productive year
during which it will build on the vision set out at its founding - the
discovery, mining and development of new orebodies in southern Africa;
particularly with the re-start of operations in Angola.

Strategy

The company is committed to moving away from its pure exploration beginnings to
a broader based group that can focus on the mining of precious metals and
minerals. We are alert to the fact that, should we not be successful in our bid
to acquire a 51% share interest in Alexkor Ltd, our remaining portfolio would be
heavily dependent on exploration success. However, we can point out that:

•                            The recommencement of operations in Angola,
specifically the positive initial results from Alto Cuilo, may well indicate the
potential for a future major diamond mine;

•                            Syferfontein too, although still an exploration
asset for diamonds, has provided us with reasonable early expectations that a
mine, even though a small one, might be established; and

•                            The Option Agreement with Rio, if taken to
finality, could presage diamond mining opportunities;

These exploration targets clearly have different time horizons and none of them
will yield commercial revenue opportunities over the next twenty-four months. At
the same time we are committed to finding other mining opportunities that will
offset the high risk/reward profile of pure exploration. In the event that
Alexkor is not secured, acquisition of a mining business (even though it might
only result in a minority interest initially) within the spectrum of precious
metals and minerals, offering positive, sustainable cash and preferably located
within southern Africa, has to be an ongoing priority for management.

Last year we made mention of a platinum deposit and we did indeed take an option
over a minority interest in the course of the year under review. The option was
with a related party and the ultimate financing of the interest was deemed by
management to be too difficult to implement while committed to the ongoing bid
process for Alexkor. Platinum, however, remains a key focus, although the
short-term capacity to finance any new venture will depend, in part, on the
outcome of the Alexkor bid and the financing demands placed on your company as a
result thereof.

Funding requirements

In the meantime, current projects will require financing and our estimate of
cash needs (in the relatively short-term - 12 to 24 months) and the source of
funding is summarised below.

•                            Rio Tinto Option Agreement: no funding required
until such time as a feasibility study is completed and shows positive results.

•                            Angola: a preliminary work budget for the 12 month
period to September 2003 has been established totalling approximately $1.9
million. Currently, the establishment of a site camp and ancillary costs
(including an office in Luanda) is being financed from own resources. The
project is not yet mature enough for project finance and it will require access
to an equity supported financing programme.

•                            Alexkor: the offer to purchase the majority share
in this mine, submitted by a company, Dimeng Diamond Holdings (Pty) Ltd
(Dimeng), in which Petra initially has the controlling interest, is accompanied
by bank guarantees and a stand-by credit facility. If the offer is accepted and
becomes unconditional, then Petra will be required by the bankers to the
transaction to refinance a portion of the loan funding by 31 March 2005.

•                            Syferfontein: the Syferfontein exploration costs
and trial mining will almost certainly be postponed until further exploration
has taken place on other potential targets in the area. There is no immediate
capital requirement and funding may be possible out of own resources.

•                            Own resources include funding that can be secured
through the equity line of credit negotiated with Cornell Capital.

•                            In June 2002 Petra announced that it had concluded
an Equity Line of Credit Agreement with Cornell Capital Partners Offshore LP.
The deal allows Petra to raise a maximum of £4.5 million over a 36-month period
by issuing new shares to Cornell at a 5% discount to the prevailing market
price. There is also a 5% fee on the amount subscribed for on each draw down.
This facility is attractive because it allows the company to access a credit
line without recourse to the markets. To date the company has raised £55 000
(before expenses) and issued 296 977 shares to Cornell on this basis.

•                            Petra also has two conditional share put options
previously announced with Societe Diamantaire Finkelstein Ch. & Cie N.V.
(Finkelstein) for $1 750 000 at 50 pence per share and for $1 750 000 at 75
pence per share.

Operational overview

Nabera

Nabera's management of Alexkor confirmed Petra's capacity as part of a bigger
team to successfully run and administer a large mining operation. Shareholders
have previously been advised that a key remuneration element in Nabera's
management contract was its entitlement to one third of any surplus value (the
difference between the value of the mine at the termination date of the contract
and the value of the mine at the commencement date of the management contract)
that it might have added during its two year tenure. Snowden Mining Industry
Consultants (Pty) Ltd (Snowden) was appointed by the South African Government,
Alexkor and Nabera to ascertain this potential value. Snowden has issued a draft
report on the final value but a final report has not yet been tabled by the
consultants.

Alexkor

The Nabera contract at Alexkor was a prelude to the sale by the South African
Government of a majority interest in the mine.

Petra is participating in the tender process to acquire from government the 51%
share interest disposal that is the subject matter of the transaction. It is
doing so in partnership with Phadima Diamond Works (Pty) Ltd, its black-owned
co-shareholder. Together they own Dimeng, which was one of the five companies
short-listed to make an offer to purchase.

Dimeng marshalled significant technical and financial resources to submit a
world-class bid and has complied with the bid deadline of end-November,
submitting both its bid and the accompanying bank guarantees that were arranged
by Petra and Finkelstein. An official announcement on a preferred bidder is
expected during the first quarter 2003 and the transaction could become
unconditional by as early as end-March 2003.

Should the Dimeng bid be successful, a Finkelstein company would acquire at par
a significant minority interest in Afropean Diamonds (Pty) Ltd, the wholly owned
vehicle through which Petra holds 59% of Dimeng and Petra has made undertakings
to Finkelstein in this regard.

Angola

As a result of the peace accord signed between the Angolan government and the
Unita rebel movement early in 2002 and the subsequent disbanding of Unita
forces, Petra has returned to the original foundation stone on which the company
was built: its Alto Cuilo concession in Angola.

In 1997 Petra discovered the first new Angolan kimberlite orebody following two
decades of civil war. The discovery, on the 1,333 square mile Alto Cuilo
concession in the Lunda provinces in north-eastern Angola, was recognised as a
major find and heralded as the most important exploration project in Angola.

Petra was forced to halt operations and declare force majeure on the concession
when renewed fighting broke out in the area in 1998.

The general situation has improved significantly in the wake of the peace accord
and, early in 2002, Petra reconnaissance teams visited Alto Cuilo to establish
the status of ground conditions and the sustainability of renewed operations. It
is anticipated that your company will, in consequence, restart drilling
operations in the first quarter of 2003.

The work programme envisages two drill rigs: one operating on the kimberlite
discovered by Petra and the other traversing the concession to explore six other
known kimberlites and 31 further anomalies.

Petra's approach to the Alto Cuilo project in Angola is cautious. Hard-won
lessons learnt from its previous experience will be used to define a new
strategy, which will essentially be one focused entirely on kimberlite
exploration.

Further on in this report we refer to major changes in accounting policy. Alto
Cuilo's huge potential is not recognised in the balance sheet values that have
been reflected because recognition of an economic benefit from this world-class
exploration target has been sadly delayed by the extended period of force
majeure endured by the company.

The timing and nature of Petra's involvement in Angola coincides with Nepad, the
ambitious continental co-operation programme launched by the newly established
African Union in mid-2002.

The Rio Option

In September 2002 Petra, through its subsidiary Blue Diamond Mines (Pty) Ltd
(BDM), entered into a five year Option Agreement with Rio to exploit seven
properties in South Africa's Limpopo Province and North West Province that were
acquired by BDM from Goldfields in 1999. The agreement entitles Rio to explore
and conduct feasibility studies on the mineral rights properties which are owned
by BDM.

Rio will pay BDM an annual fee related to the area under option subject to its
decision, which is annually renewable to continue with a work programme on the
relevant property. Rio has no obligation to Petra beyond the first year but
should the option run for the full five-year period, Rio will spend US$1 million
on exploration. All costs of the exploration programme will be borne by Rio
throughout the duration of the Option Agreement. During the option period and up
to the stage including feasibility, the agreement gives Rio 51% of the project
and Petra the remaining 49%. If the feasibility study yields a positive outcome
and Rio decides to develop a mining operation, Rio will earn 70% of the project
with the remaining 30% residing with Petra. Both parties will thereafter be
obliged to fund their pro-rata portion of the project development costs in order
to retain their interests at this level with a provision for dilution. Rio has
submitted all required documentation for the issuance of the prospecting permits
to the South African Government and expects a positive response before the
year-end.

Syferfontein

During the period under review, through BDM, your company acquired the surface
rights over the Syferfontein kimberlite in the Klerksdorp area west of
Johannesburg to add to its mineral rights on the relevant farm. Petra has
different exploitation options in respect of the Syferfontein kimberlite and
will first adjudicate on these through further desk-top review in the current
financial year.

Further exploration opportunities

Mike Scott and Associates (MSA)

Petra has entered into an agreement with MSA to acquire intellectual capital
that it has with regard to other prospective targets, specifically relating to a
kimberlite on the Kaapvaal craton in South Africa. Micro-diamonds were recovered
from this kimberlite but further work is required to establish whether
macro-diamonds are present.

Petra will carry out further preliminary exploration to identify new kimberlites
in the same area. The possibility exists of adding more kimberlites to Petra's
portfolio in South Africa.

Other matters

The South African Mining Charter

The Alexkor tender process is taking place against a background of major changes
in South African mining legislation, initiated by the South African Government
to increase black involvement in ownership and operation in the industry. In
October 2002, after several months of negotiation with representatives of the
industry, the South African Government published a 'Broad-based Socio-Economic
Empowerment Charter for the South African Mining Industry'. This is known
locally as the Mining Charter and sets out targets for black involvement in
ownership and operation of South African mining ventures.

As your company operates in the South African environment it is appropriate that
we offer some comment on its application.

Firstly, it proposes that target ownership of mining assets in South Africa by
Historically Disadvantaged South Africans (HDSAs) reach 26% within 10 years;

Secondly, it addresses five key areas: human resource development, employment
equity, procurement, ownership and joint ventures, and beneficiation; and

Thirdly, it sets a number of human resource development criteria among which,
crucially, is a goal of HDSA participation in mining management structures of
40% within five years.

Given South Africa's outstanding record since the democratic elections in 1994
of fiscal prudence, constitutional protection, and defence of property rights,
we do not believe that the Mining Charter should warrant the investor concern
that has been apparent in some quarters and we are committed to its reasonable
goals.

Corporate governance

Issues around corporate governance need constant review and have been an
increasing area of shareholder focus following the accounting scandals in the
United States and disclosure problems that have attracted the attention of
investors and the media alike in other countries.

The subject matter of corporate governance is quite clearly constantly evolving
as business becomes more complex and global. Directors' behaviour and the
regulatory code for it does not necessarily subscribe to set normative
conditions because there are obviously societal and cultural interpretations
that apply different standards in different places. Nevertheless, it is a given
that companies need to address their behaviour and set their standards in line
with the requirements of the providers of capital which, in the case of Petra,
is the United Kingdom where the company is listed.

We are therefore cognisant of the code of conduct prescribed by Turnbull and
Cadbury (among others) and we will, in all future annual financial statements,
include a narrative statement of how we have applied the principles set out in
Section 7 of the Combined Code.

•                            Among the issues to be addressed is the separation
of the roles of Chairman and Chief Executive. In the past, the two positions
have been occupied by the same person; the justification being that in a small
company with limited resources and an extremely flat decision structure, the
separation was unwarranted. However, in the light of the opportunities that are
now becoming available to the company, it is important that decisions and issues
of judgement are filtered by a greater degree of experience. Consequently it is
important that we follow current practise in larger companies and separate the
roles. At this point, the distinction between an executive and non-executive
chairman has not been determined, nor has a timeframe for the appointment.
However, the company and its executives have already conducted some interviews
and an appointment will be made during the current financial year.

•                            It is proposed to strengthen the board by the
appointment of independent directors with suitable commercial and mining
backgrounds. Currently there are three non-executives on the board whose
integrity is without question but whose independence will not necessarily
conform to the guidelines set down by the Voting Issues Service (VIS) which
produces a template for institutional investors following recommendations in the
1999 Report of the Committee of Inquiry into UK Vote Execution. In strengthening
the board the company will follow the independence criteria recommended by VIS
which include inter alia

•       No payment to the director other than for duties as a non-executive
        director;
•       No award of share options or performance-related pay;
•       No appointment of anyone who represents a controlling or significant
        corporate shareholder.

•                            The appointment of KPMG Audit plc as auditors to
your company separates the position of Nominated Advisor and Auditor. Previously
these two positions were combined in the appointment of Grant Thornton (UK). The
new arrangement will conform to better external perceptions of our corporate
governance.

•                            Risk management will be an increasing focus in the
current year as the company returns to operational activities in Angola. Regular
review by the board and conformity to the Combined Code will be part of the
process.

•                            Functioning audit and remuneration committees have
to be established with a regular timetable for meeting and reviewing performance
and this will be implemented in the current financial year.

•                            Nowhere in the world are issues of social
responsibility more to the fore than in South Africa where your company runs its
office for its Southern African activities. We believe that the working
agreements we have undertaken with Black Economic Empowerment companies to
include them in acquisition and management of mining assets is part of that
responsibility and, should we be the successful bidder for Alexkor, a full
social responsibility programme for economic upliftment is ready to be unrolled.
Furthermore, as our activities in Angola extend and develop routine, we will
engage affected communities in similar programmes.

•                            Although not applicable to your company, the
Political Parties, Elections and Referendums Act 2000 (United Kingdom) now
provides that neither a company nor any of its subsidiaries may make political
donations or incur political expenditure totalling more than £5 000 in any
twelve month period without shareholders' approval by ordinary resolution. In
the interests of transparency we will table for approval all political donations
/ contributions.

•                            Your company, by its nature, is subject to
different environmental codes and statutory requirements in different
jurisdictions. Adherence to responsible environmental awareness and compliance
with environmental legislation is an integral part of Petra's governance
framework.

Accounting policy

Shareholders' attention is drawn to major changes in accounting policy and a
consequent restatement of the company's balance sheet and the effects flowing
from prior year changes to the income statement

•                           In essence, the company has determined that the
previous practice of capitalising exploration costs is no longer in keeping with
best practice and it is a better reflection of shareholder equity if exploration
costs are written off in the year in which they are incurred.

•                           Previously, the board had taken the view that
exploration costs should be capitalised in line with the company's rationale
that it was almost solely an exploration company and these expenditures formed
the predictive basis for shareholder value. This policy was in line with best
practice among other mining exploration juniors.

•                           Shareholders should also be aware that the revision
in accounting policy reflects a change in business philosophy in terms of which
the company will undertake mining as an activity rather than engage only in
exploration with all its attendant risk profile. It therefore is additionally
important that the exploration costs are not seen to accrue benefit before there
is a realistic expectation of such benefit adhering to shareholder value.

•                           Shareholders should note that the decision to
expense exploration expenditure in the year in which it is incurred aligns Petra
with best practice among the large mining groups and the annual financial
statements have accordingly been restated to reflect the prior year adjustment.
So far as we know, we are among the first mining exploration juniors to adopt
this approach. We believe that it is in the best interests of shareholders and
our future investors.

CREST

Until recently it has not been easy for the shares of a Bermudan registered
company to be traded in dematerialised form. Your company has now initiated a
process that should enable Petra's securities to be traded in CREST, the
electronic settlement system used for UK traded shares. This process continues
at the time of writing and we expect to be in a position to make a formal
announcement about this in the near future.

Staff

The solid foundations laid in the past 12 months are due to the dedication and
dynamism of the people who drive Petra. I am proud to have worked with such a
committed and creative team and thank both directors and employees for their
dedication and commitment.

I also thank all shareholders who believe in and continue to support Petra.

I am confident your trust is well founded and, together with the Board, I am
committed to Petra's continual development and achievements of its stated aim of
becoming a major diamond producer and expanding its operational base to other
precious metals and minerals.

The Annual General Meeting of the company will be held on Tuesday, 11 February
2003 at 11:00 at Addleshaw Booth & Co, 25 Cannon Street, London, EC4M 5TB

A Pouroulis
Chairman


Consolidated Profit and Loss Account
for the year ended 30 June 2002


                                                                                 2002                  2001
                                                                                    £                     £
                                                                                                   Restated
Turnover from mining operations                                                     -                 4,728
Cost of mining operations                                                           -              (12,103)
Gross loss from mining operations                                                   -               (7,375)
Other operating income                                                        127,395                     -
Other operating charges                                                     (856,897)           (1,289,383)
Foreign exchange (loss)/gain                                              (1,553,195)                58,953
Operating loss                                                            (2,282,697)           (1,237,805)
Share of operating profit of associate                                              -                14,107
Interest received                                                               9,479                11,380
Interest paid                                                                 (9,478)              (29,789)
Loss after taxation for the financial year                                (2,282,696)           (1,242,107)
Basic loss per share - pence                                                   (5.21)                (3.21)



Statement of Total Recognised Gains and Losses
for the year ended 30 June 2002
                                                                                 2002                  2001
                                                                                    £                     £
                                                                                                   Restated
Loss for the financial year                                               (2,282,696)           (1,242,107)
Exchange adjustments on translation of subsidiary undertakings              1,527,619               912,065
                On translation of non monetary assets/liabilities            (25,576)               971,018
                Transfer from profit and loss - foreign exchange            1,553,195              (58,953)
              monetary loss/(gain)

Total recognised gains and (losses)                                         (755,077)             (330,042)
Effect of changes in accounting policy
                Amortisation of mineral rights                                  3,733                 4,801
                Reversal of intangible assets written off during                    -           (1,679,415)
              2001
Reduction/(increase) in profit and loss account                                 3,733           (1,674,614)
Total recognised gains and (losses) as previously reported                                      (2,004,656)


Consolidated Balance Sheet
at 30 June 2002
                                                                                 2002                  2001
                                                                                    £                     £
                                                                                                   Restated
Assets
Non-current assets
Intangible assets                                                              55,479                59,212
Tangible assets                                                                12,972                99,126
Investments                                                                    27,542                27,541
Debtors due after more than one year                                           15,431                12,047
                                                                              111,424               197,926
Current assets
Debtors due within one year                                                   457,815                77,446
Cash and cash equivalents                                                     139,615               116,462
                                                                              597,430               193,908
Total assets                                                                  708,854               391,834
Equity and liabilities
Capital and reserves
Share capital                                                               4,623,561             3,972,355
Share premium account                                                      12,347,332            11,270,340
Foreign currency translation reserves                                       2,027,279               499,660
Profit and loss account                                                  (18,482,892)          (16,200,196)
Equity shareholders' funds                                                    515,280             (457,841)
Minority interest                                                                   -                 2,211

Current liabilities
Creditors due within one year                                                 193,574               833,876
Bank overdraft                                                                      -                13,588
                                                                              193,574               847,464
Total equity and liabilities                                                  708,854               391,834


Consolidated Cash Flow Statement
for the year ended 30 June 2002
                                                                                 2002                  2001
                                                                                    £                     £
                                                                                                   Restated
Net loss before taxation                                                  (2,282,696)           (1,242,107)
Adjustments for:
Depreciation and amortisation on tangible assets                                9,323                85,955
Depreciation and amortisation on intangible assets                              3,733                 4,801
Outside shareholders interests                                                (2,211)                     -
Foreign exchange loss/(gain)                                                1,553,195              (58,953)
Loss on sale of tangible assets                                                70,428                 5,694
Interest received                                                             (9,479)              (11,380)
Interest paid                                                                   9,478                29,789
Other non cash flow adjustments                                              (11,501)                     -
Operating loss before working capital changes                               (659,730)           (1,186,201)
(Increase)/decrease in trade debtors and other receivables                  (383,753)               873,094
Decrease in inventories                                                             -                 3,912
Decrease in payables                                                        (640,302)             (393,891)
Cash utilised in operations                                               (1,683,785)             (703,086)
Interest paid                                                                 (9,478)              (29,789)
Net cash utilised by operating activities                                 (1,693,263)             (732,875)
Cash flows from investing activities
Purchase of tangible assets                                                   (7,672)                 (500)
Purchase of intangible assets                                                       -              (76,938)
Additions to investments                                                          (1)                   (3)
Proceeds from sale of tangible assets                                               -                79,944
Associate company share of profits                                                  -              (14,107)
Interest received                                                               9,479                11,380
Net cash generated from/(utilised by) investing activities                      1,806                 (224)
Cash flows from financing activities
Net proceeds from the issuance of share capital                             1,728,198               832,624
Net cash generated from financing activities                                1,728,198               832,624
Net increase in cash and cash equivalents                                      36,741                99,525
Cash and cash equivalents at beginning of period                              102,874                 3,349
Cash and cash equivalents at end of period                                    139,615               102,874




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