Proposed Merger

Petra Diamonds Ld
08 February 2005

8 February 2005




                             Petra Diamonds Limited


  Proposed merger with Crown Diamonds NL and dual listing on the AIM Market of
  London Stock Exchange plc ('AIM') and the Australian Stock Exchange ('ASX')


Petra Diamonds Limited ('Petra' or 'the Company') (LSE: PDL), the AIM-quoted
diamond mining group, is pleased to announce that it has today entered into a
conditional agreement to merge with ASX-listed Crown Diamonds NL ('Crown') (ASX:
CRD) by acquiring the entire issued share capital of Crown under a Scheme of
Arrangement ('the Proposed Transaction'). On completion of the Proposed
Transaction Petra will be quoted on AIM and the ASX.



Highlights

•         The Proposed Transaction, which is subject to both Petra and Crown
shareholder approval, as well as various regulatory approvals in the relevant
jurisdictions, will be an all share transaction

•         Each Crown shareholder will receive one Petra share for every eight
Crown shares

•         Based on the closing price of Petra and Crown shares on 7 February
2005 (being the last trading day prior to this announcement) of 95 pence and 22
cents respectively, the Proposed Transaction values Crown at £35.3 million or
28.66 cents per share (using a rate of £/AS$ 2.4135), representing a 30.27%
premium to the Crown share price

•         Petra will issue approximately 37.2 million new shares to Crown
shareholders (by reference to Crown's current issued share capital)

•         Crown also has AS$4 million of ASX-listed Convertible Loan Notes ('
Loan Notes') in issue (equivalent to approximately 22.4 million Crown shares if
converted), with the final redemption date being 30 November 2005. The Proposed
Transaction is conditional upon Crown and Petra agreeing on a proposal for the
treatment of the Loan Notes in a manner satisfactory to all parties

•         The Company will also seek to raise funds by way of a placing to
institutional investors on both AIM and the ASX. Further details with respect to
this placing will be announced when appropriate

•         Two members of the current Crown board, Johan Dippenaar and Jim
Davidson, will join the Petra board. Johan Dippenaar will be appointed CEO, Jim
Davidson will be appointed Technical Director and Kevin Dabinett, currently
Petra's CEO, will become COO of the enlarged group.



The Proposed Transaction will constitute a Reverse Takeover in accordance with
the AIM Rules. Accordingly, Petra's ordinary share capital will be suspended
from trading on AIM until such time as an AIM Admission document relating to the
Proposed Transaction is published.



The Proposed Transaction will be effected in Australia by way of a Scheme of
Arrangement requiring the approval of 75% of Crown shareholders. A Scheme
Booklet will be dispatched in due course by Crown to its shareholders. The
directors of Crown have confirmed to the Petra Board that they intend to
unanimously recommend to Crown shareholders that they vote in favour of the
Proposed Transaction.



Rationale for the Proposed Transaction

The Proposed Transaction represents a further step in Petra's long-term growth
strategy of becoming a significant player in the diamond industry. The merged
entity will:



  • create an impressive exploration base coupled with successful
    income-producing and cash flow positive diamond mines. The combined group
    will have a well balanced portfolio of diamond assets in various phases of
    development, ranging from green fields exploration to production;
  • create a geographically diversified diamond group with an enhanced
    geographical spread of diamond assets on the African continent (Angola,
    South Africa and Sierra Leone);
  • create a diamond group with a substantial asset base and pro-forma market
    capitalisation (before exercise of the Loan Notes) of approximately £100
    million (AS$250 million) which will become a niche mid-tier producer of
    rough diamonds;
  • be dual listed on AIM and ASX, enhancing liquidity and aiming to increase
    the scope of institutional investor interest due to the asset base and
    market capitalisation;
  • combine the substantial skills and experience of the two management teams
    and workforces;
  • give rise to costs savings from the rationalisation of the two quoted
    company structures.

The last two years have seen demand for rough diamonds outstrip supply and the
industry has experienced some of the highest rough diamond prices ever. A
further rough diamond supply shortage is predicted in the short to medium term.
Having access to rough diamond supply will allow the merged entity to further
benefit from the current boom in the industry. It can take many years for a new
diamond mine to come into production and the directors believe having current
production in a buoyant diamond market is highly beneficial.



Crown brings with it an experienced management team which is highly skilled in
diamond mining production in Southern Africa. The two management teams together
will have the depth and knowledge to develop diamond opportunities anywhere on
the African continent. Crown also brings with it in-house engineering expertise
where considerable savings can be made in any future diamond projects.



The directors of both Petra and Crown believe that Crown's existing business is
soundly based and capable of further expansion.



Information on Crown

Crown's current producing diamond assets are all situated in South Africa. They
encompass Helam, Star and the Messina/Dancarl joint venture. All three of these
diamond operations are kimberlite fissure mines with life of mine in excess of
15 years each and each produce high quality diamond gem stones. It is estimated
that the Crown operations will produce in excess of 167,000 carats of gem
quality stones in 2005, compared to 85,487 in 2004.



10 year forecast
                                           *Messina/Dancarl        Star             Helam           Total
Proven, probable reserves & inferred       1,936,000               1,700,000        3,886,000        =SUM(LEFT)
resource ROM tonnes                                                                                 7,522,000
Grade ROM                                  28 cpht                 44 cpht          81 cpht         59 cpht
Total carats                               542,000                 748,000          3,147,000        =SUM(LEFT)
                                                                                                    4,437,000
Price/carat US$                            250                     200              74              117
Value US$                                  135.5m                  149.6m           232.8m          517.9m

*Crown has an effective 74.5% share via a JV with Sedibeng Mining

Source: Crown Diamonds



Helam

Helam is situated in the North-West province of South Africa and has been in
continuous production for over 60 years. Helam was acquired in July 2004 and
production for the 2005 calendar year is expected to be around 96,000 carats at
an average price of US$74 per carat and running at an average grade of 81 carats
per 100 tonnes. The mechanisation program in place at Helam will enhance the
ability of this mine to meet future production targets. In addition, Helam has
several compelling and as yet unexplored brown fields targets that have not yet
been investigated. Without these, the life of mine is in excess of 15 years.



Star

Star is situated in the Free State province of South Africa and produced 16,000
carats over the 2004 calendar year at an average price of US$200 per carat
running at an average grade of 44 carats per 100 tonnes. Production in the 2005
calendar year is expected to increase to approximately 36,000 carats. The life
of mine is in excess of 15 years.



Messina/Dancarl

Messina produced around 25,000 carats (and sold 26,000 carats) in the 2004
calendar year at an average price of US$250 per carat running at an average
grade of 28 carats per 100 tonnes. Dancarl was purchased from De Beers in
September 2004 by way of a JV between Crown and Sedibeng Mining, Crown's Black
Economic Empowerment partner in South Africa. Messina and Dancarl are expected
to produce at least 35,000 carats in the 2005 calendar year as underground
mining gets underway at Dancarl and the ground is mined from Messina
infrastructure. The life of mine is in excess of 15 years.



Sierra Leone

Crown has a Joint Venture with Mano River Resources Inc in Sierra Leone which
will allow Crown to earn a 51% profit interest by spending US$1.5 million and a
51% equity interest by spending a further US$1.5 million in the Kono diamond
project over the next three years. The Kono project is a kimberlite project with
several identified fissures already known from which small scale production is
envisaged during the next twelve months. Prospecting for kimberlite pipes and
blows which are known to exist in the area will be commenced with during the
year. Initial indications show good geochemical results with a fissure strike
length greater than Crown's current producing mines.



Conditions Precedent

Completion of the Proposed Transaction is conditional, inter alia, upon the
following key conditions:



•         there having been, immediately prior to completion of the Proposed
Transaction, no material adverse change in the financial position of Petra or
Crown;



•         obtaining all necessary regulatory approvals and other such approvals
and consents, including;

i)          approval by the shareholders of both Petra and Crown

ii)         readmission of the enlarged share capital of Petra to AIM

iii)        approval by the ASX of the admission of Petra to ASX

iv)         approval by the Australian Foreign Investment Review Board (FIRB)

v)          approval by the South African Competition Board

vi)         approval by the South African Reserve Bank

vii)        approval of the Scheme of Arrangement by the Supreme Court of
            Western Australia;


•         Crown's directors recommending the merger to Crown shareholders;


•         Crown and Petra agreeing on a proposal for the treatment of the Loan
Notes in a manner satisfactory to all parties


•         satisfactory completion of due diligence by both Petra and Crown.


Timetable

Petra is in the process of producing an AIM Admission document which is expected
to be published within six to eight weeks, at which time trading in Petra's
shares will recommence.



Adonis Pouroulis, Chairman of Petra, comments, 'The merger with Crown will
balance Petra's current portfolio to include successful producing diamond
operations, allowing the Company to benefit from a vibrant and buoyant diamond
market. Crown has a tried and tested management team that has delivered profits
from their assets; we can only benefit from this knowledge. We will also with
the merger be exposed to the exciting West African diamond fields, a
geographical region that is currently enjoying much attention from diamond
players across the world. Ultimately we believe this transaction will create
real value for Petra and Crown shareholders.'



Crown's CEO, Johan Dippenaar, said, 'The bringing together of the Crown and
Petra businesses will create an exciting opportunity for investors to have
exposure to both production and exploration assets in a strong diamond industry.
The gap between the major diamond companies and junior explorers is significant.
  We believe that the combined entity will be one of the few opportunities
investors have to invest in an integrated diamond exploration and production
group that has good geographical spread.

Petra has an excellent record in identifying and bringing to account exploration
assets, especially in previously under explored regions. This knowledge and
expertise, combined with Crown's proven track record in managing diamond
production assets, will provide dynamic growth opportunities to the combined
entity and its shareholders.'


Overview of Petra

Petra Diamonds Limited is an AIM-quoted mining group focused on the exploration
and mining of diamonds in Southern Africa. Petra's strategy is to build a
portfolio of cash flow positive, producing mines combined with the 'blue sky' of
high quality exploration assets, thereby creating sustainable value for the
Company and its shareholders.  Petra currently has projects in the Lunda
provinces of North Eastern Angola and the Limpopo and North West provinces of
South Africa.



It is widely accepted that Angola may hold some of the world's best kimberlite
and alluvial diamond deposits. Petra's primary focus in Angola is on the Alto
Cuilo project area in the north east of the country, about 700km east of the
capital, Luanda. The area is rich in kimberlites, with one of the world's
biggest, Camafuca, north east of the Alto Cuilo project area.



Drilling of the Mussunuige Luangue ('ML') Complex, an area of approximately 200
km(2) within the Alto Cuilo concession where activities have been focused to
date, has been underway since early 2004 and a Dense Media Separation diamond
recovery plant was commissioned in September 2004. Twelve kimberlites have now
been identified and a kimberlitic deposit of 115 million tonnes proven up by the
Company, with a further potential to double this number.



In November 2004 a Joint Venture agreement was signed with BHP Billiton, which
may see them spending up to US$60 million on Alto Cuilo. BHP Billiton will
undertake regional exploration on the 2,700 km(2) concession where there is the
potential for other significant kimberlitic deposits and also work with Petra to
further develop the ML Complex.



Petra also has interests in two additional projects in Angola; Medio Kwanza,
west of Alto Cuilo, and Muriege, further east.  Media Kwanza has six known
kimberlites discovered in the early 1970s by the previous project operators.
Petra has downgraded its involvement in Muriege to concentrate on Alto Cuilo and
is now a passive investor with a 5% free carry and is not obliged to contribute
funding to exploration or mining costs.



In South Africa, one of the world's major sources of quality diamonds, Petra
currently has two diamond exploration projects; Limpopo Farms and Syferfontein.
The Limpopo Farms project holds seven of the former Gold Fields' diamond
portfolio properties acquired by Petra in 1999, on three of which indicator
minerals have been discovered since exploration began in early 2003.  Petra is
currently conducting a bulk sampling programme on Syferfontein which was also
acquired from Gold Fields.



Overview of Crown

Crown Diamonds was formed in July 2003 and is a public listed company on the
ASX. It has a market capitalisation of approximately AS$65.4 million and in the
year to 31 December 2004 it made a gross profit of AS$0.45m and a loss before
tax of AS$2.2 million (unaudited).



Crown is engaged in the mining and exploration of diamonds in South Africa and
Sierra Leone.  It initially acquired the Star and Messina diamond mines in 2003,
the Helam diamond mine in July 2004 and tendered successfully for the Dancarl
diamond mine in September 2004.  Its latest transaction is the right to earn an
interest in the Kono diamond project in Sierra Leone.



The Star and Helam mines are 100% owned by Crown while the company has a 74.5%
interest in the Messina/Dancarl complex.  The balance is owned by Crown's JV
Partner, Sedibeng Mining (Pty) Limited.  In Sierra Leone, Crown will earn a 51%
profit share interest in the Kono diamond project by spending US$1.5 million and
a 51% equity interest by spending an additional US$1.5 million over the next 3
years.  Its joint venture partner in Sierra Leone is AIM and TSX quoted Mano
River Resources Inc.



The Star, Messina, Helam and Dancarl mines are underground operations exploiting
kimberlite fissure systems.  Production for the 2005 and 2006 calendar years is
forecasted at 167,000 and 207,000 carats respectively.  Total employees of Crown
amount to some 1,700 people.



The management and board of Crown are well qualified and experienced in the
technical aspects of diamond mining and company corporate affairs.

The first 18 months' of Crown's existence has been characterised by solid growth
with the further acquisition of Helam and the Dancarl joint venture in South
Africa. It also acquired its first offshore exploration project in Sierra Leone.
Given the company's forecast of increasing diamond production over the next two
years, Crown is well placed to benefit from the predicted increase in the
shortfall between demand and supply of rough diamonds in the short to medium
term.





 Ends





For further information, please contact:


Adonis Pouroulis/Kevin Dabinett/     Cathy Malins

David Abery                          Parkgreen Communications, London

Petra Diamonds                       Tel: [phone]

Tel: [phone]
Frank H. Moxon                       Karl Paganin

Williams de Broe Plc, London         Euroz Securities, Perth

Tel: [phone]                Tel: [phone]


In South Africa:



Johan Dippenaar

CEO and Director

Crown Diamonds NL

Tele: [phone]

Fax: [phone]


In Australia:



Charles Mostert

Director

Crown Diamonds NL

Tele: [phone]

Fax: [phone]



Kevin Skinner

Field Public Relations

Tele: [phone]

Mobile: [phone]




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