30th May 2006 08:25
Petra Diamonds Ld30 May 2006 JOINT NEWS RELEASE 30 May 2006 Xceldiam Limited and Petra Diamonds Limited Strategic Cooperation Agreement Xceldiam Limited ("Xceldiam") (AIM: XLD) and Petra Diamonds Limited ("Petra")(AIM / ASX: PDL), the diamond mining and exploration groups, announce that theyhave entered into a strategic cooperation agreement (the "Agreement") withregards to the Luangue and Alto Cuilo diamond exploration projects ("ProjectLuangue" and "Project Alto Cuilo") in north-eastern Angola. Highlights: O Xceldiam and Petra believe that Project Luangue may host kimberlitegeology similar to that of Project Alto Cuilo, where exceptional explorationprogress has been announced. The projects share a common border and it is thearea within 20 kilometres either side of this common border that each projectis, based on geology and diamond prospectivity, focusing its explorationactivities. O Exploration and mineralogy activities carried out at Project Luanguesupport the possible presence of kimberlitic clusters in the area immediatelynorth of the common boundary between the Alto Cuilo and Luangue project areas.At Luangue, over 70 prospective kimberlitic type anomalies have been identifiedso far, with 20 of these kimberlitic anomalies having been prioritised fordrilling. At Alto Cuilo, in the area immediately south of the common border, 38kimberlitic occurrences have been identified and drilled to date with anestimated surface area of approximately 1,437 hectares. O Xceldiam and Petra will share information and cooperate on technical,operational and other related matters with regards to the development of ProjectLuangue and Project Alto Cuilo. Bearing in mind the likely contiguous underlyinggeology of the Projects and consequent kimberlite mineralogical similarities,accelerating the exploration efforts on kimberlite targets at Project Luangue isexpected to result in significant cost and time benefits. O The comparison and profiling of the mineralogy of kimberlitic occurrenceswhich are expected to be identified at Project Luangue against the Project AltoCuilo kimberlitic occurrences that have already been identified is expected toenable Xceldiam to accelerate assessment and development of the Project Luanguetargets. As detailed information on diamond content emerges later this year onthe Project Alto Cuilo kimberlitic occurrences from large diameter drilling ("LDD") and bulk sampling, this will significantly enhance the selection andprioritisation of LDD targets at Project Luangue following the less expensivesmall diameter drilling programme which will commence shortly. O As part of the Agreement, Petra has been granted warrants with a totalexercise price of £14 million (the "Cooperation Warrants") to acquire up to 26%of the issued share capital of Xceldiam's wholly owned subsidiary, FrannorInvestment and Finance Limited ("Frannor"), which holds Xceldiam's interest inProject Luangue. Funds paid to Frannor on exercise of the Cooperation Warrantswill be ring-fenced to further develop Project Luangue. There is no otherfinancial consideration payable by either party with regards to the Agreementand Cooperation Warrants. O As part of the Agreement, Petra has also been granted a right of firstrefusal to participate in any disposal, transaction or joint venture concerningXceldiam's interest in Frannor (subject to the rights of the Angolan state).Theright of first refusal remains in place whilst the Petra and Xceldiam continuetheir strategic cooperation and is independent of the exercise of theCooperation Warrants, unless Petra has not exercised any Cooperation Warrants by31 December 2008, at which time it will lapse. Background and Terms of the Agreement Project Alto Cuilo and Project Luangue are situated in a highly prospectivediamond area of north east Angola. The project areas share a common border, withProject Luangue being directly north of Project Alto Cuilo. Xceldiam and Petraconsider that there is potential for the geology of the northern part of AltoCuilo, the area which has so far led to exceptional exploration developments, tocontinue into the Project Luangue area. Under the terms of the Agreement, Xceldiam and Petra will share information andcooperate with the objective of accelerating the pace of geologicalunderstanding and bringing to account potential diamondiferous ore bodies atProject Luangue. Exploration at Project Alto Cuilo has been fully underway since2003 and given the proximity and the substantial amount of progress that hasbeen made at this project, Xceldiam and Petra anticipate that their strategiccooperation will greatly assist with the assessment and interpretation ofgeological information at Project Luangue. As required under the terms of the Project Luangue and Project Alto Cuiloexploration contracts, Xceldiam and Petra will work closely with Endiama, theAngolan government diamond body, with regards to the sharing of information andother matters relating to both projects. The strategic cooperation is expected to fast-track exploration developments atProject Luangue and is also expected to reduce costs in many areas, thusaccelerating the progress towards feasibility studies. As part of the Agreement: (i) Petra has the right to invest, by way of theCooperation Warrants, up to £14 million into Frannor; (ii) Petra has a right of first refusal to participate inany disposal or joint venture that Frannor may wish to undertake with regards toits interest in Project Luangue, and a 'tag-along' right should the XceldiamGroup wish to dispose of its interest in Frannor and Petra declines its right offirst refusal to participate. Xceldiam has a right of first refusal to purchaseany shares in Frannor held by Petra should Petra wish to dispose of such shares;and (iii) Petra has the right to appoint a director to theboard of Frannor. Frannor's interests in the Project Luangue contracts are 39% (kimberlite) and40% (alluvial) respectively. The Cooperation Warrants give Petra the rights toacquire up to 26% of Frannor. The Cooperation Warrants are exercisable by Petra at any time up until variousdates as shown below: Warrant tranche Percentage of Warrant exercise Warrant expiry price Shares in Frannor (cumulative) 1 2.4 £1,000,000 31 December 2006 2 4.8 £1,000,000 30 June 2007 3 11.2 £3,000,000 31 December 2007 4 18.4 £4,000,000 30 June 2008 5 26.0 £5,000,000 31 December 2008 Petra subscribed for 1,555,555 shares in Xceldiam (representing 2.9% ofXceldiam's issued share capital) at the placing price of 45 pence per share whenXceldiam was admitted to AIM in November 2005. Petra still holds this investmentwhich is separate to the Agreement and Cooperation Warrants. Should future exploration developments at Project Luangue be in line withPetra's expectations, Petra would expect to exercise some, or all, of theCooperation Warrants. However, it is not bound to do so and should it choose notto exercise one or more warrants by the specific expiry date, the remainderremain in place. Petra has sufficient cash resources to exercise the first twowarrants; further warrants may be financed from expected operating cash flows,however by that stage both Alto Cuilo and Luangue will have been advancedconsiderably and, if they host economic kimberlites, other appropriate financingopportunities will be considered. Petra can, at its sole election, introduce athird party into the Petra subsidiary that will hold the Frannor shares onexercise of the Cooperation Warrants but Petra will control a minimum of 50% ofthe shares and retain control of the board of that Petra subsidiary. Tim George, Chairman and CEO of Xceldiam, commented "Given Petra's experience atProject Alto Cuilo and the close proximity of the areas where exploration isfocused at each project, the strategic and technical cooperation will assist usenormously in further defining and progressing our work programmes, leading tothe accelerated development of Project Luangue. I believe this agreement has thepotential to be of substantial benefit to all stakeholders and will ultimatelyensure a greater understanding of the significant potential of this highlyprospective diamond province" Adonis Pouroulis, Chairman of Petra, said "We look forward to working closelywith Xceldiam. Major exploration developments have taken place at Project AltoCuilo and we look forward to the possibilities of similar discoveries at ProjectLuangue. Petra is confident that this area of Angola will prove, in time, to beof major significance with regards to the production of diamonds, hence ourdecision to also invest in Xceldiam when it was admitted to AIM. This agreementwith Xceldiam gives Petra the opportunity to consolidate its position in one ofthe world's most prospective areas for diamond exploration." Ends Notes 1. The information in this update with regards to Petra Diamonds that relates toExploration Results, Mineral Resources or Ore Reserves is based on informationcompiled by Jim Davidson, Pr. Sci Nat (reg No 400031/06), who is a Member of theGeological Society of South Africa, a 'Recognised Overseas ProfessionalOrganisation' ('ROPO'), included in a list promulgated by the ASX from time totime. Jim Davidson is a full-time employee of the Company and has sufficientexperience which is relevant to the style of mineralisation and type of depositunder consideration and to the activity which he is undertaking to qualify as aCompetent Person as defined in the 2004 Edition of the 'Australasian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves'. JimDavidson has given his written consent to the inclusion in this announcement ofthe matters based on his information in the form and context in which itappears. 2. It should be noted that the potential quantity in this report is conceptualin nature, there has been insufficient exploration to define a Mineral Resourceand it is uncertain if further exploration will result in the determination of aMineral Resource. For further information with regards to Xceldiam, please contact: WH Ireland David Youngman Tel: +44 (0) 161 832 2174 Conduit PR Angus Prentice Tel: +44 (0) 207 429 6603 Mob: +44 (0)7974 982 512 Leesa Peters Tel: +44 (0) 207 429 6600 For further information with regards to Petra Diamonds, please contact: Collins Stewart, LondonAndrew Smith / Martin Eales Telephone: +44 (0) 20 7523 8350 Parkgreen Communications, LondonJustine Howarth / Cathy Malins Telephone: +44 (0) 20 7493 3713 Notes to Editors: About Xceldiam O Xceldiam's activities are focused on the exploration for economicdiamondiferous kimberlites and alluvial deposits in Project Luangue of northeast Angola, in association with Endiama and Bapsil, its partners in theProject. The concession, which is approximately 3,000 km(2) in size, is locatedwithin the diamond bearing kimberlite belt known as the Lucapa Graben. Thevaluable Catoca mine is situated some 70 km north east of the LuangueConcession. O Previous exploration in the concession area now covered by ProjectLuangue by Condiama (the De Beers joint venture company in Angola) in the early1970s identified eight kimberlites, at least four of which are diamondiferous.These were under evaluation at the time Angola's civil war commenced whichcurtailed further activities. O In May 2005 Xceldiam completed low level 22,000 line kilometre airbornemagnetic, radiometric and topographic surveys over Project Luangue, whichidentified over 70 kimberlitic type anomalies, adding to the eight kimberlitespreviously identified by Condiama. O Commissioning of the alluvial bulk sampling plant is currently underwayat the Ngombo tributary of the Luangue River. Alluvial sampling of the Luanguecorridor, which has been the focus of exploration activities to date, along 5kmof river terraces between the Sampoio and Ngombo River tributaries will befollowed by sampling of a further extensive deposit on the Canguvo river some 25km to the north west. O Formal approval of the kimberlite programme has been received fromEndiama. Drilling of 20 of the anomalies prioritised from the 70 identified inthe aerial survey, to ascertain whether they are kimberlitic in nature, willcommence shortly. O Xceldiam has a management team with practical diamond mining industryexperience, the depth of which will allow growth potential in a variety ofprojects over the long term. The team also has recently enhanced its team onthe ground to expedite the exploration programmes with management appointeeswith extensive logistical, mining development and operating experience inAngola. O Xceldiam aims to entrench and progress the opportunities available to itwithin Project Luangue to create significant value for all shareholders whilstcontributing to the communities within which it operates. For further information on Xceldiam, please visit www.xceldiamgroup.com About Petra O Petra is focused on the exploration and mining of diamonds in Africa.Petra's strategy is to continue to build its portfolio of revenue producing andexploration assets, achieving the objective of becoming a 'mid-tier' diamondgroup. O Petra has operations in Angola, South Africa, Botswana and Sierra Leone.Petra is well placed to achieve high yielding results from the increasinglyrobust market for diamonds. O Petra's exploration activities at Alto Cuilo in Angola continue todeliver ever more exciting results and the joint venture with BHP Billiton hasexpedited exploration with the identification to date of 38 kimberliticoccurrences over an estimated surface area of approximately 1,437 hectares. O The South African operations are expected to deliver a significantincrease in production for the year to June 2006, giving the group healthyproduction revenues. Two large stones have been reported in the last six months,one 76 carat stone which sold for US$465,000 and also a 67 carat stone which wassold for US$704,265. O In Botswana, exploration is currently focused on the Gope area wherePetra holds diamond prospecting licences covering ground that is known to hostseveral diamondiferous kimberlites. A 700km(2) low-level Xcalibur horizontalgradient magnetic survey has been completed in the immediate vicinity of theGope kimberlites. O In Sierra Leone, Petra has earned a 51% interest in the Kono Project,following the expenditure of $3million on the project. This JV with AIM andTSX-listed Mano River Resources Inc is progressing well and first productionfrom the Lion fissures is on schedule for June 2006. For further information on Petra Diamonds, please visit www.petradiamonds.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Petra Diamonds