De Beers Sales Finsch Diamond Mine to Petra

(IDEX Online News) - De Beers on Friday announced the sale of yet another diamond mine to Petra Diamonds Limited, this time the Finsch Diamond Mine in South Africa. Petra, which formed an empowerment consortium to acquire the mine, will pay De Beers Consolidated Mines (DBCM) R1.425 billion (~$205 million) in cash for the mine.

According to Petra, Finsch is South Africa’s second largest diamond mine by production and will further diversify Petra’s portfolio by adding a second mine producing more than 1 million carats per annum (Mctpa), becoming 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 and to over 5 Mctpa by 2019.

Petra will hold a 74 percent interest in Finsch via its subsidiary Afropean Diamonds (Pty) Limited. The remaining 26 percent interest will be held by its Finsch BEE partners 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 these employees are historically disadvantaged South Africans.

Petra will fully fund the BEE partners’ 26 percent share of the acquisition consideration via loans, which will be repaid by the BEE partners from their share of future Finsch cash flows.

“The agreement to sell the mine to a Petra company follows an open and rigorous selection process that evaluated prospective bidders on a number of criteria determined by DBCM as critical to ensuring the long-term sustainability of Finsch,” De Beers said Friday about the transaction.

“[Petra’s] track record as a hardrock underground diamond miner bodes well for the long-term sustainability of Finsch going forward, and we are confident that this will help ensure continued investment in the town of Lime Acres and the Northern Cape for many years to come,” said DBCM Chairman Barend Petersen.

According to Petra CEO Johan Dippenaar, “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.”

DBCM will continue to manage Finsch until the sale, which is subject to a number of conditions precedent, has been finalized. Conditions include obtaining the necessary approvals from the Competition Tribunal, as well as the successful transfer of DBCM’s new order mining right to Petra.