BOTSWANA – Petra Diamonds Limited, owner of the South African mine, has announced that it has entered into an agreement to dispose of its exploration assets in Botswana due to debt increment.

Petra is set to dispose 100% of its holding in Sekaka Diamonds Exploration Limited to Botswana Diamonds PLC for a total consideration of US$300,000 and a 5% royalty on future diamond revenues should any of the prospects within the exploration licenses be brought into production.

The assets of Sekaka Diamonds include the Company’s three existing Prospecting Licenses in Botswana, which includes the KX36 project, a 3.5-hectare kimberlite that was a new discovery by Petra in 2010, as well as a bulk sampling plant. 

These assets have been put on sale since 30 June 2018 following a decision by the Board to dispose of its Botswana exploration assets; the transaction is not a result of the recent sales process announced on 26 June 2020.

The purchase price will be payable in two equal instalments at the end of August 2021 and August 2022.

As it stands now, and the sale is approved by competition and other authorities, Petra is entitled to a 5% royalty on the sale of diamonds commercially produced from any kimberlite which falls within the license areas covered in the sale.

Should Botswana Diamonds want to exclude the royalty clause, Petra is asking for N$33 million (US$2.22m), more than six times the N$5 million (US$300,000) asking price.

Richard Duffy, chief executive officer of Petra, said the disposal is part of Petra’s strategy to focus on driving efficiencies from their high-quality producing mines.

“This is a very challenging market to seek offers for the mines, when the diamond miners are struggling even to sell the diamonds themselves due to both travel restrictions in getting to sites, lockdown of cutting and polishing centres in India and collapse in jewellery sales,” said Ben Davis, an analyst at Liberum.

The US$80 billion diamond industry has been devastated by the pandemic, as a global supply chain spanning mines in South Africa, polishers in India, and retailers in London’s Hatton Garden, has ground to a near halt because of lockdowns imposed to contain the virus.

Even before the pandemic, Petra was struggling. Weak diamond prices and difficulties in Tanzania, where it operates the Williamson mine, weighed on profits and share price. 

At the same time, its debts have increased following investment in a new processing plant at Cullinan and the expansion of underground operations at other mines. These include Finsch, South African’s second-largest diamond mine by production.

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