Cullinan Diamon Mine Acq

Petra Diamonds Ld
22 November 2007







22 November 2007                     AIM: PDL

                             Petra Diamonds Limited

                      Acquisition of Cullinan Diamond Mine





Petra Diamonds Limited ('Petra' or 'the Company' or 'the Group') announces that
it has, as a member of the Petra Diamonds Cullinan Consortium ('PDCC'), entered
into an agreement ('the Agreement') with De Beers Consolidated Mines Limited ('
De Beers') to acquire the Cullinan diamond mine ('Cullinan') in South Africa ('
the Transaction').





Highlights

•         PDCC to acquire Cullinan from De Beers for a total cash consideration
of R1 billion (US$149.0 million); Petra's share of the consideration is R325
million (US$48.4 million)


•         The Transaction represents a major development towards achieving 
Petra's strategy of value creation for its shareholders by growing its 
production and revenue base alongside its world-class exploration portfolio. 
A major producing diamond asset such as Cullinan very rarely becomes available, 
and PDCC is proud to be acquiring the assets after a long, transparent and 
competitive tender process



•         According to information made available to Petra by De Beers, the
Cullinan kimberlite pipe is the second largest indicated diamond resource in the
world by in-situ value


•         In the year to December 2006, De Beers produced 1.15 million carats at
the mine, with a market value of R504.9 million (US$75.2million); Petra will be
the operator and will (as at Koffiefontein) make production changes at the mine.
Petra expects PDCC's average annual production from Cullinan will meet, and
potentially exceed, the recent production achieved by De Beers adding
substantially to Petra's group revenues (37% interest)

•         Many of the world's most spectacular diamonds have been recovered at
Cullinan, including the 3,106 carat Cullinan Diamond, the largest gem diamond
ever found.  It was cut to form the 530 carat Great Star of Africa and the 317
carat Lesser Star of Africa set in the Crown Jewels of Britain. The mine is
renowned as a source of large diamonds and has produced over 300 stones weighing
more than 100 carats, and around a quarter of all of the world's diamonds
weighing more than 400 carats. Cullinan is also the world's only significant
source of blue diamonds, which are highly desirable in the jewellery market



  • The members of PDCC are Petra Diamonds Limited (37% initial interest), Al
    Rajhi Holdings W.L.L. ('Al Rajhi') (37% initial interest) and PDCC's Black
    Economic Empowerment ('BEE') partners (26% interest). Petra can at its
    option increase its interest in PDCC (from Al Rajhi) based on performance of
    the mine and pre-agreed option payments. PDCC will be funded by Petra US$50
    million and Al Rajhi US$150 million; the total funding of US$200 million
    will be applied to the purchase consideration of Cullinan of R1 billion
    (US$149.0m), with the balance for the mine's working capital and Capex
    requirements. The BEE partners will pay for their interests from their share
    of future cash flows from the mine, after servicing interest at appropriate
    interest rates, or they can arrange independent financing



  • The BEE partners are represented by Thembinkosi Mining Investments (Pty)
    Ltd ('Thembinkosi'), a consortium of BEE mining companies with a 14%
    interest, and a broad based Petra employee share trust with a 12% interest
    that will ensure that all Petra employees can benefit in the mine's success.
    This structure is very important as it includes all HDSA (Historically
    Disadvantaged South Africans) Petra employees in the mine's future, not only
    achieving the objectives of the South African Mining Charter, but
    underscoring Petra's belief in employee participation for the benefit of the
    business and the employees themselves




Adonis Pouroulis, Petra's Chairman, commented, 'A major producing diamond asset
such as Cullinan very rarely becomes available and Petra is, with its consortium
partners, very proud to be acquiring such a prestigious asset following a
competitive tender process. The transaction is a historic development for Petra.
It brings a major resource to the group with the expectation of adding
significantly to annual production, elevating Petra into the league of the
world's major diamond producers.'



David Noko, Managing Director of De Beers said: 'We are particularly pleased to
have been able to conclude this transaction with PDCC. We believe that Petra's
track record as a hardrock underground miner bodes well for the long-term
sustainability of Cullinan Diamond Mine going forward, and are confident that
this will help ensure a long-term opportunity for the Petra-led consortium as
the new owners of the mine, as well as guarantee continued investment in the
town of Cullinan for many years to come.'







About Cullinan

The Cullinan kimberlite pipe (to the east of Pretoria, South Africa) was
established in 1903 and has been mined for many years as a block cave mine. De
Beers is of the opinion that it is the second largest indicated diamond resource
in the world by in-situ value (estimated by De Beers at 193.1 million carats).



Many of the world's most spectacular diamonds have been recovered at Cullinan,
including the 3,106 carat Cullinan Diamond, the largest gem diamond ever found.
It was cut to form the 530 carat Great Star of Africa and the 317 carat Lesser
Star of Africa, set in the Crown Jewels of Britain. The Cullinan Diamond was
found in the early surface working of the mine and was named after Sir Thomas
Cullinan, who discovered the kimberlite deposit in 1898.



Cullinan is renowned as a source of large diamonds and frequently yields
diamonds larger than ten carats. Furthermore it has produced over 300 stones
weighing more than 100 carats, and around a quarter of all of the world's
diamonds weighing more than 400 carats. During the last 15 years Cullinan has
produced more than 500 stones each weighing more than 60 carats.  More recently,
two stones weighing 363 carats and 285 carats were recovered in successive
production series in 1997 with a combined value in excess of US$23 million. In
the previous series, also in 1997, a 698 carat stone was recovered.



Cullinan is also the world's only significant source of blue diamonds, which are
highly desirable in the jewellery market. Cullinan gave the world the collection
of 11 rare blue diamonds which were displayed in 2000 at London's Millennium
Dome alongside the Millennium Star. This exquisite collection included the 27
carat (polished weight) fancy vivid blue 'Heart of Eternity'.



Other notable diamonds from Cullinan include the Premier Rose (353 carat rough),
the Niarchos (426 carat stone), the 599 carat rough De Beers Centenary, the
famous Taylor-Burton diamond and the Golden Jubilee. This means that Cullinan is
the source of not only the world's largest rough diamond but also the two
largest polished diamonds in the world - the Golden Jubilee (at around 545
carats) and the 530 carat Great Star of Africa.






Rationale for the Transaction

It is Petra's stated objective to continue to build its production base
alongside its world class exploration portfolio, further enhancing the Group's
position in the diamond mining industry.

Cullinan comprises two parts, the first being the current operating mine and the
second being the Centenary-Cut ('the C-Cut'), a world class, unexploited diamond
resource. The operating mine consists of an underground block caving operation,
processing plant and related infrastructure. Over the last ten year period (1997
to 2006), De Beers mined 14.5 million carats at an average recovered grade of
43.6 carats per hundred tonnes ('cpht').



The operating mine has reserves to produce in excess of one million carats per
annum at Petra's planned extraction rates. In addition the operating mine has
additional mineral resources which are expected to add significantly to
Cullinan's life of mine (excluding the C-Cut). Production will be further
enhanced by the processing of the mine's substantial tailing resources.



The C-Cut lies beneath the current mine. De Beers has conducted numerous studies
into development of the C-Cut resource and the documentation put together during
these studies was made available to Petra during due diligence of the mine. The
knowledge gained during Petra's initial production stages with regards to grade,
sales values and operating costs will assist in determining the most efficient
way to develop the C-Cut resource. Petra's management remains confident that the
C-Cut will be included in future mineral reserves and resources statements, and
is looking forward to assessing the potential of this world-class resource.

Petra will be the technical operator of the mine on behalf of PDCC; Petra's team
has proven their depth of expertise at the various underground mines that it
operates, most recently at Koffiefontein. Petra is developing a highly
successful track record in its approach to such assets. Petra expects its
average annual production from Cullinan will meet, and potentially exceed, the
production achieved by De Beers adding substantially to the Petra group
revenues.



Funding and Consortium Structure

PDCC will be funded by Petra US$50 million and Al Rajhi US$150 million; the
total funding of US$200 million will be applied to the Cullinan purchase
consideration with the balance for the mine's working capital and Capex
requirements according to the PDCC business plan for the mine; the PDCC BEE
partners' 26% interest in Cullinan will be funded from the Petra/Al Rajhi SPV,
such funding being repayable from the BEE partners' share of future cash flows
at appropriate interest rates, or by independent financing.



The consideration of R1 billion will be secured by way of a bank guarantee for
R325m (US$48.4million) and shareholder guarantees for the balance. Al Rajhi has
provided both guarantees on behalf of PDCC. In consideration of the issue of the
bank guarantee, Petra has granted Al Rajhi a warrant over 1.5 million Petra
ordinary shares ('the Warrant') , the Warrant being exercisable at a price of
180 pence per share at any time until 22 November 2009, being 24 months from the
date of grant.



The members of PDCC are Petra (37% interest), Al Rajhi (37% interest), and
PDCC's BEE partners (26% interest), namely Sedibeng Mining (Pty) Limited
(6.16%), Umnotho weSizwe Group (Pty) Limited (5.04%) and Namoise Mining (Pty)
Limited (2.8%) (all represented through a BEE holding company, Thembinkosi (14%
total), and an employee share trust that will be established for Petra group
employees holding 12%.





Terms of the Agreement

PDCC is to acquire Cullinan as a going concern (the mining and associated assets
as well as environmental and employee related liabilities) from De Beers for a
total consideration of R1 billion (US$149.0million); the consideration is
payable in cash when the conditions precedent set out below have been met,
expected to be between May and July 2008; Petra's share of the consideration (as
a member of PDCC) is R325 million (US$48.4million)



PDCC will assume all the assets and certain liabilities in respect of Cullinan,
including the DME rehabilitation obligation with regards to Cullinan of R332
million (US$49.5million).



The acquisition is conditional on the conversion and transfer of the required
mining rights and associated approvals from the South African Department of
Minerals and Energy ('DME') as detailed below.



Completion of the Agreement is conditional upon the following conditions:

(i)                   approval by the South African Competition Authority;

(ii)                 the DME converting the old order mining right in respect of
Cullinan held by De Beers into a new order mining right;

(iii)                Ministerial consent to the cession to PDCC of the new order
mining right in respect of Cullinan;

(iv)                the DME consenting to the cession, transfer and delegation
of the rehabilitation obligations and liabilities in respect of Cullinan from De
Beers to PDCC; and

(v)                  all regulatory and other approvals as may be required.





Al Rajhi Group

Al Rajhi Holdings W.L.L. and Al Rajhi Partners (together 'Al Rajhi') already
hold 14.1 million ordinary Petra shares, representing 7.8% of the Company's
ordinary issued share capital. Al Rajhi also holds (as announced 19 September
2006) a US$20 million unsecured, interest free convertible bond and warrants
over 2 million shares, both exercisable into Petra shares at an exercise price
of 130 pence per Petra share. The grant of warrants over 1.5 million Petra
shares, exercisable at a price of 180 pence per Petra share, represents a 24.1
premium to the 30 day average Petra share price.



AIM Disclosures

Given the nature of the proposed transaction, the Company has provided such
disclosure as is required in accordance with Schedule 4 of the AIM Rules as a
Substantial Transaction.  A further announcement will follow in due course,
which will include a resource statement for Cullinan, in accordance with the AIM
Guidance for Mining companies, when the new order mining right is transferred to
Petra.



An exchange rate of US$1:R6.71 has been used for the purposes of this
announcement.







For further information, please contact:
Cathy Malins                                     Telephone: [phone]
Petra Diamonds, London


Louise Goodeve / Justine Howarth                 Telephone: [phone]
Parkgreen Communications, London


Adrian Hadden                                    Telephone: [phone]
Collins Stewart, London





Ends



Notes

1. The information in this update that relates to Exploration Results, 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.





About Cullinan

The Cullinan kimberlite pipe was discovered by Sir Thomas Cullinan, who found
heavy diamondiferous concentrate in one of the tributaries of the Pienaars River
in South Africa. In 1902, he formed the Premier Diamond Mining Company Limited
and purchased Elandsfontein, the farm on which the pipe had been discovered, and
in 1903, open pit mining commenced. At the time of the outbreak of World War I,
14,000 people were employed on the mine.



In 1930, De Beers acquired a controlling interest in Premier Diamond Mining
Company Limited through a scheme of arrangement with Anglo American. The mine
was closed in 1932 as a consequence of an absence of demand for luxury goods
caused by the depression. In 1945, dewatering of the open pit started in
preparation for the development of an underground mine. Subsequently, two
vertical shafts were sunk to access the orebody. In 1977, the Premier
(Transvaal) Diamond Company was amalgamated into De Beers Consolidated, and the
mine was renamed Cullinan in 2003 as part of the mine's centenary celebrations.



The pipe occurs within the stable, three billion year old Kaapvaal Craton and
intrudes rocks of the Transvaal Supergroup (Pretoria and Rooiberg Groups),
Bushveld complex and the younger Waterberg Group. Originally 32 hectares at
surface, it is the largest diamondiferous kimberlite ever to be discovered in
South Africa.



The large pipe has allowed a variety of mining methods to be utilised in
exploiting the orebody. Open pit mining was carried out to a depth of 189
metres. Other mining methods used above the gabbro sill included open benching
and block caving. Initially, underground mining used the sub-level open bench
mining method but over time, methods and systems were adapted according to
differing ground conditions. In the early 1970's cave mining using scrapers was
implemented and sub-level open stoping was implemented in the early 1980s. The
ore is currently mined using mechanised trackless block-cave mining.



About Petra Diamonds

Petra Diamonds is a pan-African diamond mining group with operations in South
Africa, Angola, Botswana and Sierra Leone. Petra is the second largest producer
of diamonds in South Africa after De Beers and it remains Petra's objective to
grow its stature as a world class diamond producer in all of the countries in
which it operates.  By offering investors exposure to a mid-tier diamond group
with production cash flows and major exploration projects, the Company believes
it can deliver superior returns to shareholders.  In South Africa, the Company
has four producing mines (excluding Kimberley Underground). Complimenting the
Group's production is a first class exploration portfolio spread across some of
the world's most prospective diamond fields. In Angola, Petra is developing its
flagship project Alto Cuilo and the neighbouring Luangue project in two separate
joint ventures with BHP Billiton.  In Botswana, Petra has established the
largest exploration holding in the country, where it believes that modern
exploration techniques will hold the key to the discovery of new, major
kimberlites. In Sierra Leone, Petra is developing a fissure operation and test
work to date indicates the potential for economic operations. The Group
continues to assess new opportunities on the African continent and is actively
pursuing new prospects to maintain its consistent track record of growth each
year, such as Calibrated Diamonds which gives Petra the ability to cut and
polish its own production, transforming the Company into a vertically integrated
group.  For further information, please review www.petradiamonds.com



About De Beers

De Beers, established in 1888, is the world's leading diamond company with
expertise in the exploration, mining and marketing of diamonds. De Beers and its
joint venture partners operate in more than 20 countries across five continents
employing nearly 22,000 people. From its 15 mines across Botswana, Namibia,
South Africa and Tanzania, De Beers produces approximately 40 percent of the
world's rough diamonds and markets approximately 45%. The company's robust
portfolio of future mining projects includes two mines in Canada, and one in
South Africa set to begin operations in 2007 and 2008. As part of the company's
operating philosophy, the people of De Beers are committed to Living up to
Diamonds by making a lasting contribution to the communities in which they live
and work. De Beers encourages sustainable working to ensure long-term positive
development for Africa and returns approximately US$4.9 billion to the continent
every year.  For further information about De Beers visit www.debeersgroup.com





About Thembinkosi

Thembinkosi brings together a significant pool of empowerment players, its
shareholders being Sedibeng Mining (Pty) Ltd, Namoise Mining (Pty) Ltd, Umnotho
weSizwe Group (Pty) Ltd, and a Petra Employee Share Trust that will ensure that
all Petra employees can benefit in the mine's success.  Sedibeng Mining (Pty)
Ltd is a BEE company focused on the empowerment of small-scale miners and women
in the Northern Cape, and the company is partnered with Petra on other
significant diamond mines in South Africa. Sedibeng Mining (Pty) Ltd is chaired
by Clyde Johnson, who left his Executive Director position at Mvelaphanda
Resources to build the business. Clyde also acts as Chairman of the South
African Mining Development Association ('SAMDA').  Namoise Mining (Pty) Ltd is a
BEE and woman-controlled company focusing on the minerals and energy sector with
key shareholders Nana Ditodi and Sizakele Makhaye bringing a wealth of
experience to the table.  Umnotho weSizwe Group (Pty) Ltd is an investment
company with interests in the mineral and energy sector.  Established in 1996 by
Vusi Nkosi the company's portfolio has developed over the past several years to
include diamonds, platinum, chrome and coal assets thus gaining substantial
experience and exposure to the African resources sector.




                      This information is provided by RNS
            The company news service from the London Stock Exchange