Investors welcomed news this morning that AIM listed mining group Petra Diamonds (LON:PDL) was set to buy the Finsch diamond mine in South Africa from De Beers for R1.425 billion (£126.6m). The Petra Diamonds share price surged by 11% to 180p during the morning. Finsch is one of the world's major diamond mines and South Africa's second largest diamond mine by production. The company is funding the deal with a £205m placing of shares priced at 150p each.

Petra said the acquisition was a continuation of its 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 approximately 1.3 Mctpa. It is expected that group production (including Finsch), will increase to around 4 Mctpa by the 2014 financial year and to over 5 Mctpa by 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).

Johan Dippenaar, the chief executive of Petra, said: “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, the executive chairman of Petra, added: “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…

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