Acquisition & Placing

RNS Number : 8526Z

Petra Diamonds Ld

21 January 2011

 



Immediate Release

21 January 2011

THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR NEW ZEALAND OR ANY JURISDICTION IN WHICH SUCH PUBLICATION RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL.

Petra Diamonds Limited

("Petra Diamonds", "Petra", the "Company" or the "Group")

Acquisition of Finsch Diamond Mine & Placing to Raise £205 Million (US$325 Million)

Petra Diamonds announces that it, together with its empowerment consortium, has entered into an agreement to acquire the Finsch diamond mine in South Africa ("Finsch") from De Beers Consolidated Mines Limited ("DBCM") (the "Acquisition") for R1.425 billion (approximately US$210 million).  In addition, the Company has completed a placing of 136,698,212 new ordinary Petra Diamonds shares of 10 pence each ("Ordinary Shares") in the capital of the Company (the "Placing Shares") at a price of 150 pence per share (the "Placing") with institutional and other investors, raising gross proceeds of £205 million (approximately US$325 million) (the "Placing Proceeds").

Acquisition and Placing Highlights:

·     Finsch is one of the world's major diamond mines and South Africa's second largest diamond mine by production

·     The Acquisition is a continuation of Petra's strategy to build a world-class diamond mining group - Finsch will further diversify Petra's portfolio, adding a second major over 1 million  carats per annum ("Mctpa") mine, and will become the Group's eighth producing diamond mine

·     Finsch is expected to produce over 1.5 Mctpa in its first full year of production, more than doubling the Group's current production of ca. 1.3 Mctpa; it is expected that Group production (including Finsch), will increase to ca. 4 Mctpa by the 2014 financial year ("FY") and to over 5 Mctpa by FY 2019

·     Finsch brings a major diamond resource of 48.1 million carats ("Mcts") to the Group, including 26.6 Mcts of reserves, and will increase Petra's gross resource base to approximately 309 Mcts, with a gross attributable in-situ value of approximately US$38 billion (based on current diamond prices)

·     The Acquisition is expected to be immediately accretive to NAV per share (post Placing) and operating cashflow per share

·     Petra has a proven track record of extracting value from similar acquisitions, with a plan to mirror the successful strategy (including its block caving expertise) applied at Cullinan

·     Finsch is acquired on a 'going concern' basis (assets and assumed liabilities), including the full employee complement and state-of-the-art mining infrastructure

·     The Placing Proceeds will primarily be applied to satisfy the acquisition cost of Finsch, with the balance to fund the South African Department of Mineral Resources ("DMR") environmental guarantee and working capital at Finsch, to settle some or all of the Group's outstanding debt owed to Al Rajhi Holdings W. L. L. ("Al Rajhi"), to accelerate capital expenditure and provide working capital across the Group's other core operations and to cover transaction and fundraising costs

·     The Acquisition and Placing together consolidate Petra's position as London's largest quoted diamond company and provide a strong platform for the Company's intended move to the LSE Main Market

Johan Dippenaar, CEO of Petra, commented:

"This acquisition is a landmark development for Petra and a further progression of our strategy to build one of the world's leading independent diamond producers. Finsch is a major diamond producer and this acquisition will serve to immediately more than double our current production, significantly enhance earnings and cashflow and will increase our resource base to over 300 million carats. We believe that Petra offers an exceptional growth profile at a time when there is a very positive outlook for our industry and a strong rough diamond price environment."

Adonis Pouroulis, Executive Chairman of Petra, commented:

"Petra is delighted to have carried out such a successful fundraising and to have received overwhelming support from existing and new shareholders in our heavily oversubscribed issue. The Placing has served to further diversify the Company's high quality shareholder base and reflects the increasing interest from the investor community in the compelling fundamentals of the diamond market. We believe that the Company offers a unique investment vehicle for those wishing to gain exposure to diamonds, combining as we do a broad portfolio of producing diamond mines, all of which are in expansion mode, with a major resource base that underpins our growth strategy for many years to come."

Analyst presentation and webcast

A presentation for analysts will be held at 10:00 a.m. (London, UK time) on 21 January 2011 at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE.  A live webcast of the analyst presentation will be available on Petra's website at www.petradiamonds.com and on the following link: http://mediaserve.buchanan.uk.com/2011/petra210111/registration.asp

A recording of this will be available from 12:00 p.m. (London, UK time) on 21 January 2011 on the website and on the same link.

Media website

Photos of the Finsch Diamond mine can be viewed at the following dedicated media website: http://media.buchanan.uk.com/petra2.htm

About Finsch

Finsch is a world-class underground block cave diamond mine with state-of-the-art mining infrastructure, including a modern processing plant which was recently upgraded at a total cost of ca. US$100 million. The mine has a shaft capacity of 4.6 million tonnes per annum ("Mtpa") and the plant a capacity of 7.2 Mtpa.  Finsch produced an average of approximately 2 Mctpa over the five years to 2010, from a combination of underground mining and tailings retreatment and has produced 126 Mcts in its 40 plus year life to date. The mine has a new order mining right valid until 2038.

Finsch is acquired as a fully-staffed, going concern and the associated assets include over 800 housing units in a well-established town. The mine has a first-rate safety record and a well managed environmental programme.

Finsch has produced a number of large, special diamonds in its history and mine records reflect the recovery of an average of 27 stones of more than 50 carats per annum over the last four years.  Recovery of such large, high-value stones can substantially increase the total value of production in any one year.  In addition, the mine has produced a range of coloureddiamonds, including pinks and yellows. The recovery of significant large or coloured, high-value stones would substantially increase the average value per carat of the mine in any given year and, in common with its other operations, this will be a focus of management following completion of the Acquisition.

Rationale for the Acquisition and Mining Plan

Finsch offers a seamless fit with Petra's current operations in South Africa. As the asset is situated approximately 165 kilometres North-West of Kimberley, the location affords regional operational management synergies with Petra's Koffiefontein, Kimberley Underground and Sedibeng (fissure) operations. The addition of another major mine to Petra's portfolio will also serve to increase the Group's critical mass, with numerous benefits across areas such as the sharing of technical expertise, personnel and economies of scale in procurement.  Petra intends to leverage off its experience of extracting optimal value from previous acquisitions.

During the course of its due diligence investigations, Petra's management developed a detailed study for its intended development programme. The results of this study are summarised below.

The Finsch orebody is mined using the high volume, low cost block-cave mining technique, also used at Petra's Cullinan and Kimberley Underground operations. Mining at Finsch is currently taking place in "Block 4" of the orebody at a depth of 630 metres.  Finsch currently mines approximately 3.2 Mtpa from Block 4 at a current grade of over 35 carats per hundred tonnes ("cpht"). The Block 4 cave is towards the end of its life and it is expected to be depleted by FY 2015.  

Subsequent to the depletion of Block 4, underground production will be derived principally from "Block 5", a new block cave beneath the current operations. DBCM has identified resources of 25.2 Mct within Block 5 (including 22.1 Mct of probable reserves) at a grade of 47 cpht. Petra intends to maintain production levels from underground during the transition from the Block 4 cave to the Block 5 cave by developing smaller sub-level caves within the "precursor" ore-body (adjacent to the main orebody) at Block 4 level and within Block 5 itself. By so doing, Petra expects to maintain underground production levels at approximately 3.2 Mtpa, ramping up to around 3.5 Mtpa by FY 2018 once the Block 5 cave is fully operational.

Underground production is supported by tailings retreatment. Finsch is currently treating the "pre-1979 tailings" which have a recovered grade of approximately 19 cpht. Pre-1979 tailings are expected to be treated at a rate of approximately 3.5 Mtpa until depleted in FY 2015. Thereafter, tailings from later mining operations, which carry a lower grade of approximately 10 cpht, remain available for treatment. It is expected that tailings production will cease in FY 2020.

Petra's current mine plan forecasts initial diamond production of approximately 1.5 Mctpa (comprising approximately 900,000 carats from underground and 600,000 carats from tailings) in its first full year of ownership (expected to be FY 2012), increasing with the commencement of the Block 5 cave to a steady state production of nearly 2 Mctpa.  Given the major resource of 48.1 Mcts at Finsch (including 26.6 Mcts in the reserve category and 4.7 Mcts in tailings), Petra foresees a long life for the operation and has a current mine plan of 18 years, though the orebody remains open-ended at depth.

The capital expenditure over the next six years for the underground and infrastructure development programme is estimated to be approximately US$320 million (in 2010 money terms, assuming a constant exchange rate of R7.0/US$). Petra will leverage off existing DBCM studies into the expansion process, as well as the Company's experience at Cullinan, Koffiefontein, Kimberley Underground and other operations, which are expected to enable the Company to immediately commence the expansion programme. The capital expenditure required for this programme is expected to be financed from the Group's operational cashflows.  

The Finsch resource has an in-situ value of approximately US$5.7 billion (using a management estimated average value per carat of US$120) and its addition to the Company's portfolio increases the Group gross resource base to some 309 Mcts with an in-situ value of approximately US$38.0 billion (based on current diamond prices).

Black Economic Empowerment ("BEE")

Petra willhold a 74 per cent. interest in Finsch via its subsidiary Afropean Diamonds (Pty) Limited ("Afropean"), with a 26 per cent. interest held by its Finsch BEE partners. Petra's BEE partners at Finsch will include Sedibeng Mining (Pty) Limited and Namoise Mining (Pty) Limited (commercial BEE partners) and the Petra Diamonds Employee Share Trust, a broad-based trust established for all Petra's South African employees, the majority of which are historically disadvantaged South Africans.

Petra will fully fund the BEE partners' 26 per cent. share of the acquisition consideration via loans, which will be repaid by the BEE partners from their share of future Finsch cashflows.

Terms of the Agreement

Petra Diamonds (via Afropean), will acquire Finsch as a going concern (the mining and associated assets and employee related liabilities) from DBCM for a total consideration of R1.425 billion (approximately US$210 million) and in addition will assume the DMR rehabilitation obligations and environmental liabilities.  Closing of the Acquisition is expected to take place in approximately eight weeks' time, although the process may take considerably longer.

Completion of the Acquisition is conditional upon a number of conditions, including:

·     completion of the Placing in accordance with the terms set out in the Appendix;

·     Ministerial consent to the cession of the new order mining right in respect of Finsch;

·     approval by the South African Competition Authority;

·     the DMR consenting to the cession, transfer and delegation of the rehabilitation obligations and liabilities in respect of Finsch;

·     the waiver of certain rights of first refusal over certain land packages used by the Finsch mine held by local parties;

·     the passing of a resolution approving the Acquisition by the boards of De Beers s.a. and DBCM; and

·     the approval of the Acquisition by DBCM's BEE partner.

THE PLACING

Details of the Placing and use of proceeds

A total of 136,698,212 Placing Shares have been placed at a price of 150p pence per share, being a discount of 7.3 per cent. to the Company's closing share price of 161.75 pence on 20 January 2011 (the last day prior to this announcement). The Placing Shares represent an increase of 38.5 per cent. in the Company's current issued share capital of 354,867,464 Ordinary Shares. The Placing is conditional, inter alia, on admission of the Placing Shares to trading on the AIM market of the London Stock Exchange plc ("AIM") ("Admission").

The Placing Proceeds, net of the placing agents, advisory and other fees related to the Acquisition, are expected to be utilised as follows:

·     US$210 million for the acquisition of Finsch;

·     US$40 million for the DMR environmental guarantee and working capital requirements at Finsch; and

·     US$57 million applied to:

o  address opportunities within the Group to accelerate capital expenditure;

o  to settle some or all of the deferred Cullinan consideration owing to Al Rajhi; and 

o  general Group working capital purposes.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the Company's existing Ordinary Shares at the date of their issue.

Application has been made for the Placing Shares to be admitted to trading on AIM.  It is expected that Admission of the Placing Shares to AIM will take place and that trading in the same will commence at 8.00 a.m. on Wednesday 26 January 2011.

Following Admission of the Placing Shares, Petra will have 491,565,676 Ordinary Shares in issue, none of which are held in treasury. 

The completion of the Placing (and the issue and allotment of the Placing Shares) is not conditional upon the Acquisition having completed and, as referred to above, there remain conditions precedent to the completion of the Acquisition to be satisfied following Admission.

RBC Capital Markets acted as financial adviser to Petra in connection with the Acquisition and as sole bookrunner and joint-broker for the Placing. Canaccord Genuity Limited acted as joint-broker for the Placing.

Terms and conditions of the Placing

The Placing was undertaken on the terms and conditions set out in the Appendix to this announcement and settlement details are included therein. 

AIM Disclosures

Given the size of the Acquisition, the Company has provided such disclosure as is required in accordance with Rule 12 of and Schedule 4 to the AIM Rules for Companies as a substantial transaction.  A further announcement will follow in due course, which will include a resource statement for Finsch, in accordance with the AIM Guidance for Mining Companies, when the new order mining right is transferred to Petra.

Notes

1.   The information in this update that relates to Mineral Resources or Ore Reserves is based on information compiled by Jim Davidson, Pr. Sci Nat (reg No 400031/06), who is a Member of the Geological Society of South Africa, a 'Recognised Overseas Professional Organisation' ('ROPO'). Jim Davidson is the Qualified Person for the purposes of the AIM Guidance Note on Mining, Oil and Gas Companies dated March 2006. Jim Davidson is a full-time employee of the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify. Jim Davidson has given his written consent to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

2.   Exchange rates of R6.8 : US$1 and US$1.58 : £1 have been used for the purposes of this announcement.

For further information, please contact:

Petra Diamonds Ltd, London	Telephone: [phone]
Cathy Roberts	[e-mail]

Buchanan Communications (PR Adviser)	Telephone: [phone]
Bobby Morse James Strong Katharine Sutton	[e-mail] [e-mail] [e-mail]

RBC Capital Markets (Financial Adviser and Joint Broker)	Telephone: [phone]
Joshua Critchley	[e-mail]
Jonathan Stephens	[e-mail]
Martin Eales	[e-mail]

Canaccord Genuity Limited (NOMAD and Joint Broker)	Telephone: [phone]
Robert Finlay	[e-mail]
Andrew Chubb	[e-mail]
Ryan Cohen	[e-mail]

~ Ends ~

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and an increasingly important supplier of rough diamonds to the international market.

The Company believes that it offers an exceptional growth profile within the diamond sector, with a core objective to increase annual production to around 4 million carats by FY 2014 (including Finsch) and further increase output to over 5 million carats by FY 2019 (including Finsch). The Group has a major resource base of 309 million carats (including Finsch).

Petra has a well-diversified portfolio, with interests in seven producing mines: six in South Africa (Cullinan, Koffiefontein, Kimberley Underground, Helam, Sedibeng and Star) and one in Tanzania (Williamson).  Post completion of Finsch, the Company will have eight producing mines in Africa.

Petra conducts all its operations according to the highest ethical standards and will only work in countries which are members of the Kimberley Process. The Company is quoted on the AIM market of the London Stock Exchange (AIM: PDL). For more information, visit www.petradiamonds.com.

Notes:

The Placing Shares will, when issued, be issued credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of Petra, including the right to receive all dividends and other distributions declared after the date of their issue.

Applications will be made for the Placing Shares to be admitted to trading on the AIM market of the London Stock Exchange plc ("Admission"). It is expected that Admission will become effective on or around 26 January 2011 and that dealings in the Placing Shares will commence at that time. As part of the Placing, the Company has agreed that it will not issue or sell ordinary shares for a period ending 90 days after Admission, without the prior consent of Royal Bank of Canada Europe Limited ("RBC") and Canaccord Genuity Limited ("Canaccord"), save in limited circumstances set out under "Details of the Placing" below.

The Appendix to this announcement (which forms part of this announcement) sets out the terms and conditions of the Placing.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of Petra's plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. Petra cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding Petra's future financial position, income growth, impairment charges, business strategy, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditure, and plans, dividend growth and objectives for future operations of Petra and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards ("IFRS") applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation or regulatory investigations, the success of future acquisitions and other strategic transactions and the impact of competition - a number of which factors are beyond Petra's control. As a result, Petra's actual future results may differ materially from the plans, goals, and expectations set forth in Petra's forward-looking statements. Any forward-looking statements made herein by or on behalf of Petra speak only as of the date they are made. Except as required by the FSA, the London Stock Exchange or applicable law, Petra expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in Petra's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

This announcement is for information only and shall not constitute an offer to buy, sell, issue, or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This announcement has been issued by and is the sole responsibility of Petra.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by RBC or Canaccord or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

RBC, which is authorised and regulated in the United Kingdom by the FSA, is acting for Petra and for no-one else in connection with the Placing, and will not be responsible to anyone other than Petra for providing the protections afforded to customers of RBC nor for providing advice to any other person in relation to the Placing or any other matter referred to herein.

Canaccord, which is authorised and regulated in the United Kingdom by the FSA, is acting for Petra and for no-one else in connection with the Placing, and will not be responsible to anyone other than Petra for providing the protections afforded to customers of Canaccord nor for providing advice to any other person in relation to the Placing or any other matter referred to herein.

The distribution of this announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by Petra, RBC or Canaccord that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by Petra, RBC and Canaccord to inform themselves about, and to observe, such restrictions.

The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS (AS DEFINED IN ARTICLE 2(1)(E) OF EU DIRECTIVE 2003/71/EC (THE "PROSPECTUS DIRECTIVE")); (B) PERSONS IN THE UNITED KINGDOM WHO ARE QUALIFIED INVESTORS AND PERSONS WHO ARE (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); (II) PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS IN (A) AND (B) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN PETRA.

Persons (including individuals, funds or otherwise) by whom or on whose behalf a commitment to acquire Placing Shares has been given ("Placees") will be deemed to have read and understood this announcement, including the Appendix, in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, acknowledgements, and undertakings contained in the Appendix. In particular each such Placee represents, warrants and acknowledges that it is: (i) a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business; and (ii) outside the United States and is subscribing for the Placing Shares in an "offshore transaction" (within the meaning of Regulation S under the United States Securities Act of 1933 (the "Securities Act")).

This announcement, including the Appendix, is not for distribution directly or indirectly in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Canada, Australia or Japan or any jurisdiction into which the same would be unlawful. This announcement does not constitute or form part of an offer or solicitation to purchase or subscribe for shares in the capital of Petra in the United States, Canada, Australia or Japan or any jurisdiction in which such an offer or solicitation is unlawful.  In particular, the Placing Shares referred to in this announcement have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an exemption from the registration requirements under the Securities Act. No public offering of securities of Petra will be made in connection with the Placing in the United Kingdom, the United States or elsewhere.

The relevant clearances have not been, and nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Placing Shares have not been, and nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Canada, Australia or Japan. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into the United States, Canada, Australia or Japan or any other jurisdiction outside the United Kingdom.

Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of the Appendix or this announcement should seek appropriate advice before taking any action.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange. Neither the content of Petra's website nor any website accessible by hyperlinks on Petra's website is incorporated in, or forms part of, this announcement.

APPENDIX

TERMS AND CONDITIONS

IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING

Details of the Placing

RBC and Canaccord (together the "Brokers") have today entered into an agreement with Petra (the "Placing Agreement") under which, subject to the conditions set out therein, the Brokers have agreed to use reasonable endeavours to procure subscribers for the Placing Shares at the Offer Price.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of Petra including the right to receive all dividends and other distributions declared in respect of such ordinary shares after the date of issue of the Placing Shares.

As part of the Placing, the Company has agreed that it will not issue or sell any ordinary shares for a period of 90 days after Admission, without the prior consent of the Brokers. These agreements are subject to certain customary exceptions and do not prevent the Company from granting or exercising options pursuant to the terms of the existing employee share schemes of the Company or other share options or warrants to subscribe for ordinary shares issued by Petra, provided such other options or warrants have been disclosed in publicly available information. 

Application for Admission

Application will be made to London Stock Exchange plc for admission to trading of the Placing Shares on AIM. It is expected that Admission will become effective on or around 26 January 2011 and that dealings in the Placing Shares will commence at that time.

Participation in, and principal terms of, the Placing

1. RBC and Canaccord are acting as brokers and agents of Petra.

2. Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by the Brokers. The Brokers and their affiliates are each entitled to participate in the Placing as principal.

3. The Placing Price and the number of Placing Shares to be issued has been agreed between RBC and Petra following completion of a bookbuilding exercise by RBC (the "Bookbuild").

4. Each prospective Placee's allocation (in each case the "Placing Participation") has been determined by the Brokers in their sole discretion and confirmed orally by one of the Brokers as agent of Petra. That oral confirmation constitutes an irrevocable legally binding commitment upon that person (who will at that point become a Placee) to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix (a copy of the terms and conditions having been provided to the Placee prior to or at the same time as such oral confirmation) and in accordance with Petra's memorandum and articles of association.

5. Each Placee also has an immediate, separate, irrevocable and binding obligation, owed to the relevant Broker as agent of Petra, to pay in cleared funds as soon as reasonably practicable following receipt of the oral confirmation referred to in paragraph 4 above and in accordance with the Registration and Settlement requirements set out below, an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to subscribe and Petra has agreed to allot and issue to that Placee.

6. Except as required by law or regulation, no press release or other announcement will be made by the Brokers or Petra using the name of any Placee (or its agent), in its capacity as Placee (or agent), other than with such Placee's prior written consent.

7. Irrespective of the time at which a Placee's Placing Participation is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

8. All obligations under the Bookbuild and Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Termination of the Placing Agreement".

9. By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

10. To the fullest extent permissible by law, neither of the Brokers nor any of their affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither of the Brokers nor any of their affiliates shall have any liability (including to the extent permissible by law, any fiduciary duties) in respect of the Brokers' conduct of the Bookbuild or of such alternative method of effecting the Placing as the Brokers and Petra may agree.

Conditions of the Placing

The obligations of the Brokers under the Placing Agreement entered into in respect of the Placing Shares are conditional on, inter alia:

(a) the sale of business agreement between Afropean Diamonds (Pty) Ltd, De Beers Consolidated Mines Limited, the Company and De Beers Group Services (Pty) Ltd ("Acquisition Agreement" ) having been entered into and not having lapsed or terminated or any condition thereto having become incapable of satisfaction pursuant to its terms. For the avoidance of doubt, the completion of the Placing (and the issue and allotment of the Placing Shares) is not conditional upon the Acquisition Agreement having completed and there will, or may, be conditions precedent to the completion of the Acquisition Agreement which remain to be satisfied after Admission;

(b) the warranties and representations contained in the Placing Agreement being true and accurate and not misleading at all times before Admission by reference to the facts and circumstances then subsisting;

(c) Petra complying with its obligations under the Placing Agreement to the extent the same fall to be performed or satisfied prior to Admission;

(d) Petra allotting, subject only to Admission, the Placing Shares in accordance with the Placing Agreement; and

(e) Admission taking place not later than 8.00 a.m. (London time) on 26 January 2011 or such later date as Petra and the Brokers may otherwise agree (not being later than 8.00 a.m. on 9 February 2011).

If (i) any of the conditions contained in the Placing Agreement in relation to the Placing Shares are not fulfilled or waived by the Brokers, by the respective time or date where specified (or such later time or date as Petra and the Brokers may agree), (ii) any of such conditions becomes incapable of being fulfilled or (iii) the Placing Agreement is terminated in the circumstances specified below, the Placing in relation to the Placing Shares will lapse and the Placee's rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.

The Brokers may, at their discretion and upon such terms as they think fit, waive compliance by Petra with the whole or any part of any of Petra's obligations in relation to the conditions in the Placing Agreement. Any such extension or waiver will not affect Placees' commitments as set out in this announcement.

None of the Brokers, Petra or any other person shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and /or the date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Brokers.

Termination of the Placing

The Brokers are entitled, at any time before Admission, to terminate the Placing Agreement by giving notice to Petra if, inter alia:

(a) any of the warranties or representations are not true and accurate or have become  misleading in any material respect in the opinion of the Brokers (acting in good faith); or

(b)  the Company, in any respect which is material in the opinion of the Brokers (acting in good faith), fails to comply with any of its obligations under the Placing Agreement; or

(c) in the opinion of the Brokers, there has been, or the Brokers have become aware of, or there has been made public, a material adverse change in, or affecting, or a material adverse effect on, or any development involving a material prospective adverse change in or affecting the condition, financial, operational, legal or otherwise, or in the earnings, management, business affairs or business prospects of Petra or its growth taken as a whole, whether or not arising in the ordinary course of business since the date of the Placing Agreement; or

(d)  in the opinion of the Brokers (acting in good faith), there has been (i) a change in national or international financial, political, economic or stock market conditions, (ii) an incident of terrorism, outbreak or escalation of hostilities, war or any other calamity or crisis, (iii) suspension or material limitation in trading of securities, or (iv) any change in currency exchange rates or exchange controls or a disruption of settlement systems or a material disruption or general moratorium in commercial banking, in each case as would, in the opinion of the Brokers (acting in good faith) be likely to prejudice the success of the Placing.

Upon such termination, the parties to the Placing Agreement shall be released and discharged (except for any liability arising before or in relation to such termination) from their respective obligations under or pursuant to the Placing Agreement subject to certain exceptions.

By participating in the Placing, Placees agree that the exercise by the Brokers of any right of termination or by the Brokers of any other discretion under the Placing Agreement shall be within the absolute discretion of RBC or the Brokers, as the case may be, and that they need not make any reference to Placees and that they shall have no liability to Placees whatsoever in connection with any such exercise or failure so to exercise.

No Prospectus

No offering document or prospectus has been or will be submitted to be approved by the FSA in relation to the Placing and Placees' commitments will be made solely on the basis of the information contained in this announcement (including the Appendix) released by Petra today [and subject to the further terms set forth in the contract note to be provided to individual prospective Placees].

Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement (including the Appendix) is exclusively the responsibility of Petra and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of Petra or the Brokers or any other person and none of Petra or the Brokers nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of Petra in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Registration and Settlement

Settlement of transactions in the Placing Shares following Admission will take place within the system administered by CRESTCo Limited ("CREST"), subject to certain exceptions. Petra reserves the right to require settlement for and delivery of the Placing Shares (or a portion thereof) to Placees in certificated form if in the Brokers' reasonable opinion delivery or settlement is not possible or practicable within the CREST system or would not be consistent with the regulatory requirements in the Placee's jurisdiction.

Each Placee allocated Placing Shares in the Placing will be sent a contract note stating the number of Placing Shares to be allocated to it. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions that it has in place with the Brokers.

CREST participant ID of RBC:	388
CREST participant ID of Canaccord:	805
Trade date:	21 January 2011
Settlement date:	26 January 2011
ISIN code for the Placing Shares:	BMG 702781094
Deadline for input instructions into CREST:	3.00pm (UK time) on 25 January 2011

Petra will deliver the Placing Shares to a CREST account operated by RBC as agent for Petra and RBC will enter its delivery (DEL) instruction into the CREST system. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.

It is expected that settlement will be on 26 January 2011 on a T + 3 basis in accordance with the instructions given to the Brokers.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by the Brokers.

Each Placee is deemed to agree that, if it does not comply with these obligations, Petra may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for Petra's account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Representations and Warranties

By participating in the Placing each Placee (and any person acting on such Placee's behalf):

1. Represents and warrants that it has read this announcement, including the Appendix, in its entirety;

2. Acknowledges that no offering document or prospectus has been, or will be, prepared in connection with the placing of the Placing Shares and represents and warrants that it has not received a prospectus or other offering document in connection therewith;

3. Acknowledges that the ordinary shares are (and the Placing Shares will be) listed on AIM, and Petra is therefore required to publish certain business and financial information in accordance with the rules and practices of AIM and that it is able to obtain or access such information without undue difficulty, and is able to obtain access to such information or comparable information concerning any other AIM Listed company, without undue difficulty;

4. Acknowledges that none of the Brokers or Petra nor any of their affiliates nor any person acting on behalf of any of them has provided, and will not provide it, with any material regarding the Placing Shares or Petra or any other person other than this announcement; nor has it requested any of the Brokers or Petra nor any of their affiliates or any person acting on behalf of any of them to provide it with any such information;

5. Acknowledges that (i) it is not and, if different, the beneficial owner of the Placing Shares at the time the Placing Shares are acquired will not be a resident of Australia, Canada, Japan or the United States, and (ii) that the Placing Shares have not been and will not be registered under the securities legislation of the United States, Australia, Canada or Japan and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, in or into those jurisdictions;

6. Acknowledges that the content of this announcement is exclusively the responsibility of Petra and that none of the Brokers nor any person acting on their behalf has or shall have any liability for any information, representation or statement contained in this announcement or any information previously published by or on behalf of Petra and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this announcement or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to subscribe for the Placing Shares is contained in this announcement and any information previously published by Petra by notification to a Regulatory Information Service, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given or representations, warranties or statements made by any of the Brokers or Petra and none of the Brokers or Petra will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of Petra in deciding to participate in the Placing;

7. Represents and warrants that neither it, nor the person specified by it for registration as a holder of Placing Shares is, or is acting as nominee or agent for, and that the Placing Shares will not be allotted to, a person who is or may be liable to stamp duty or stamp duty reserve tax under any of sections 67, 70, 93 and 96 of the Finance Act 1986 (depositary receipts and clearance services);

8. Represents and warrants that it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2003 and the Money Laundering Regulations 2007 (the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations. If within a reasonable time after a request for verification of identity the Brokers have not received such satisfactory evidence, the Brokers may, in their absolute discretion, terminate your Placing Participation in which event all funds delivered by you to the Brokers pursuant to this letter (if any) will be returned without interest to the account of the drawee bank or CREST account from which they were originally debited.

9. If a financial intermediary, as that term is used in Article 3(2) of the Directive of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading (No 2003/71/EC) (as amended) (the "Prospectus Directive") (including any relevant implementing measure in any member state), represents and warrants that the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the European Economic Area which has implemented the Prospectus Directive other than to qualified investors, or in circumstances in which the prior consent of the Brokers has been given to the proposed offer or resale;

10. Represents and warrants that it has not offered or sold and, prior to the expiry of a period of six months from Admission, will not offer or sell any Placing Shares to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of the Financial Services and Markets Act 2000 ("FSMA");

11. Represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons in the European Economic Area prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted in and which will not result in an offer to the public in any member state of the European Economic Area within the meaning of the Prospectus Directive (including any relevant implementing measure in any member state);

12. Represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;

13. Represents and warrants that it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;

14. Represents and warrants that it is a "qualified investor" within the meaning of the Prospectus Directive (including any relevant implementing measure in any member state);

15. Represents and warrants that it and any person acting on its behalf is entitled to subscribe for and purchase the Placing Shares under the laws of all relevant jurisdictions which would apply to it, and that it and any person acting on its behalf is in compliance with applicable laws in the jurisdiction of its residence, the residence of the Company, or otherwise;

16. Acknowledges that the Placing Shares are being offered and sold pursuant to Regulation S under the Securities Act in an "offshore transaction" (as such term is defined in Regulation S under the Securities Act) and the Placing Shares have not been and will not be registered under the Securities Act;

17. Undertakes that it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with this announcement on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other subscribers or sold as the Brokers may in their discretion determine and without liability to such Placee;

18. Acknowledges that its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to subscribe for, and that Petra may call upon it to subscribe for a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

19. Acknowledges that neither of the Brokers, nor any of their respective affiliates, nor any person acting on behalf of either of them, is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of either Broker and that the Brokers have no duties or responsibilities to it for providing the protections afforded to their clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

20. Undertakes that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. Neither of the Brokers nor Petra will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify Petra and the Brokers in respect of the same on the basis that the Placing Shares will be allotted to the CREST stock account of the Brokers who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;

21. Acknowledges that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions and any non-contractual obligations arising out of or in connection with such agreements shall be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by Petra or the Brokers in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;

22. Agrees that Petra and the Brokers and their respective affiliates and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings which are given to the Brokers on its own behalf and on behalf of Petra and are irrevocable;

23. Agrees to indemnify and hold Petra and the Brokers and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Appendix and further agrees that the provisions of this Appendix shall survive after completion of the Placing;

24. Acknowledges that its commitment to subscribe Placing Shares on the terms set out herein [and in the contract note] will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to Petra's conduct of the Placing. The foregoing representations, warranties and confirmations are given for the benefit of Petra and the Brokers. The agreement to settle a Placee's subscription (and/or the subscription of a person for whom such Placee is contracting as agent) free of stamp duty and stamp duty reserve tax depends on the settlement relating only to the subscription by it and/or such person direct from Petra for the Placing Shares in question. Such agreement assumes, and is based on a warranty from each Placee, that neither it, nor the person specified by it for registration as holder, of Placing Shares is, or is acting as nominee or agent for, and that the Placing Shares will not be allotted to, a person who is or may be liable to stamp duty or stamp duty reserve tax under any of sections 67, 70, 93 and 96 of the Finance Act 1986 (depositary receipts and clearance services). If there are any such arrangements, or the settlement relates to any other dealing in the Placing Shares, stamp duty or stamp duty reserve tax may be payable. In that event the Placee agrees that it shall be responsible for such stamp duty or stamp duty reserve tax, and neither Petra nor the Brokers shall be responsible for such stamp duty or stamp duty reserve tax. If this is the case, each Placee should seek its own advice and notify the Brokers accordingly;

25. Acknowledges that no action has been or will be taken by any of Petra, the Brokers or any person acting on behalf of Petra or the Brokers that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required; and

26. Acknowledges that it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the Placing Shares. It further acknowledges that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and are able to sustain a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of Petra and its associates taken as a whole, and the terms of the Placing, including the merits and risks involved.

In addition, Placees should note that they will be liable for any stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the subscription by them of any Placing Shares or the agreement by them to subscribe for any Placing Shares.

Each Placee and any person acting on behalf of each Placee acknowledges and agrees that the Brokers or any of their affiliates may, at their absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.

When a Placee or person acting on behalf of the Placee is dealing with the Brokers, any money held in an account with any of the Brokers on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FSA made under FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from the relevant Brokers' money in accordance with the client money rules and will be used by the relevant Broker in the course of its own business; and the Placee will rank only as a general creditor of the Brokers. All times and dates in this announcement may be subject to amendment. The Brokers shall notify the Placees and any person acting on behalf of the Placees of any changes.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

 

END

 

 

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