REG-Petra Diamonds: Execution of MOU with Caspian Limited

Petra DiamondsAnnouncement

15/12/2021 10:30

15 December 2021   LSE: PDL 

Petra Diamonds Limited

("Petra" or the "Company" or the “Group”)

Execution of Memorandum of Understanding with Caspian Limited

regarding sale of shares in Williamson Diamonds Limited

Petra Diamonds Limited announces that it has executed a non-binding Memorandum
of Understanding (“MoU”) to sell 50% (less one share) of the entity that
holds Petra’s shareholding in Williamson Diamonds Limited (“WDL”), along
with a pro rata portion of shareholder loans owed by WDL, to Caspian Limited
or its nominee (“Caspian”) for a total consideration of US$15 million.
Caspian is the long-term technical services contractor at the Williamson Mine
in Tanzania.

WDL is the operator of the Williamson Mine.  WDL is currently 25% owned by
the Government of Tanzania and 75% owned by Petra, with Petra having acquired
its majority interest in WDL in 2009. However, further to the Framework
Agreement with the Government of Tanzania announced on 13 December 2021, which
provides for a capital restructuring of the WDL entity, Petra’s effective
interest is due to decrease to 63% and the Government of Tanzania’s to
increase to 37%. Upon completion of the transactions contemplated by the MoU
and upon the capital restructuring in the aforementioned Framework Agreement
becoming effective, Petra and Caspian will each indirectly hold a 31.5% stake
in WDL but with Petra retaining a controlling interest in WDL.

Caspian’s purchase will be funded through the settlement of US$11.1 million
of past technical services payments owed by WDL to Caspian, including services
rendered during the recent restart of operations following the care and
maintenance period, with the remaining amount being funded by Caspian
rendering US$3.9 million of technical services to WDL in order to ramp-up
operations at the Williamson Mine.

The transactions in the MoU are subject to Petra and Caspian agreeing
definitive transaction agreements, including a share purchase agreement and a
shareholders’ agreement, with the parties seeking to agree those transaction
agreements in early CY 2022.  The sale of the 50% stake in the entity that
holds Petra’s shares in WDL is subject to the parties obtaining all
necessary Governmental, regulatory and lender approvals, including approvals
from the Tanzanian Mining Commission, the Tanzanian Fair Competition
Commission and The Bank of Tanzania, and a binding ruling from the Tanzania
Revenue Authority on the tax treatment of the transaction.  The parties are
seeking to obtain such approvals by the end of H1 CY 2022.

As noted in the Company’s FY 2021 Preliminary Results released on 14
September 2021, the Board decided to review its strategic options at
Williamson which resulted in the asset being classified as an asset held for
sale for financial reporting purposes. The transaction announced today will
see Petra consolidating Williamson’s operating and financial results, with
an appropriate recognition of non-controlling interests attributable to both
Caspian and the Government of Tanzania.

As announced in the Company’s Q1 FY 2022 Trading Update dated 26 October
2021, production at Williamson has recommenced post the care and maintenance
period and is expected to ramp-up over the course of FY 2022, with estimated
production at the Williamson Mine in FY 2022 of 0.22 to 0.27 Mcts. 

Petra will continue to meet its obligations under the settlement it reached on
12 May 2021 in relation to claims brought in London by the UK law firm Leigh
Day on behalf of a number of anonymous claimants.  This includes the design
and implementation of a non-judicial Independent Grievance Mechanism to
address allegations of human rights impacts at the Williamson Mine, and the
funding of various restorative and community programmes intended to provide
long-term sustainable support to the communities living around the mine.

Richard Duffy, Chief Executive of Petra, commented:

“We are very pleased to be partnering with Caspian, who bring considerable
local and mining experience. This will assist us in optimising the orebody for
the benefit of all of Williamson’s stakeholders, both in the short term as
we continue to ramp-up operations and in the longer term to fully realise the
mine’s potential in an improved economic environment.

Our new arrangement with Caspian, following the Framework Agreement signed
with the Government of Tanzania on 13 December, puts Williamson on a very
solid basis for the future. The reduction in Petra’s equity interest in to
WDL, from 75% to 31.5% while still retaining control, both reduces Petra’s
exposure in line with our stated objectives outlined in our Preliminary
Results while maintaining a share of the upside that we believe exists
following the signing of the Framework Agreement with the Government who
continue as partners.”

Rostam Azizi, Chairman of Caspian, commented:

“Caspian is a wholly Tanzanian owned company. It is also Tanzania’s
largest mining contractor with over 30 years mining related experience. We
have been the contractor of choice to most mines in Tanzania and have
maintained long and successful relationships with companies such as Petra, De
Beers, Barrick and AngloGold Ashanti. In addition, we also own the largest
fleet of mining equipment in Tanzania. As a company, we are committed to
adopting and adhering to the latest internationally recognised standards
throughout all aspects of our business.

“We have been contracting at the Williamson Mine, the largest kimberlite
diamond mine in the world by surface area for close to 20 years and as such we
are particularly pleased to enter into this next phase of our involvement at
the mine as co-owners. We recognise its viability in providing sustainable
employment and a significant contribution to the Tanzanian economy.”

This announcement includes inside information as defined in Article 7 of the
Market Abuse Regulation No. 596/2014 and is being released on behalf of Petra
by the Company Secretary.

~ Ends ~

For further information, please contact:

Petra Diamonds,
London                                        
           Telephone: +44 20 7494 8203

Cathy Malins                          
investorrelations@petradiamonds.com

Des Kilalea

Julia Stone

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Company’s
portfolio incorporates interests in three underground producing mines in South
Africa (Finsch, Cullinan and Koffiefontein) and one open pit mine in Tanzania
(Williamson).

Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
of ca. 230 million carats, which supports the potential for long-life
operations.

Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.

Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company’s US$336.7 million notes due in
2026 are listed (subject to temporary suspension) on the Irish Stock Exchange
and admitted to trading on the Global Exchange Market. For more information,
visit www.petradiamonds.com.

About the Williamson Mine

The Williamson Mine was discovered in 1940 by Dr John Williamson, a Canadian
Geologist, and is the largest economic primary diamond deposit to have been in
near continuous production for over 70 years.

The Williamson Mine’s Special Licence Area covers an area of 30.6km(2) in
the Shinyanga province in north-western Tanzania. The mine is an open pit
operation based upon the 146 hectare Mwadui kimberlite pipe, which is one of
the world’s largest economic kimberlites.

Despite having been in operation since 1940, the pit is only 120 metres at its
deepest point due to the large size of the deposit. The low grade of the
deposit is countered by the high value of its diamonds and lends itself well
to high volume, bulk mining methods.

Williamson is renowned for ‘bubblegum’ pink diamonds, including the
Williamson Pink, which is considered one of the finest pink diamonds ever
discovered. It was found in October 1947 weighing 54 carats in the rough. The
mine, then owned by the Canadian geologist and royalist Dr John Williamson,
gave the diamond to Princess Elizabeth in 1947 as a wedding present. It was
cut into a 23 carat round brilliant and set as the centre of a brooch in the
form of a jonquil flower, designed and set by Cartier in 1953. The mine also
produces beautifully rounded white diamonds of high quality.

In FY 2019, the Company achieved the highest level of production at the mine
in over forty years, with 399,615 carats produced (FY 2020: 298,130 carats).
The Company’s current mine plan for Williamson has a life to 2030 but given
that the Mwadui kimberlite hosts a major resource of 39.0 Mcts, there is
potential to substantially extend the LOM.



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