3rd Oct 2005 15:19
Petra Diamonds Ld03 October 2005 3 October 2005 Petra Diamonds Limited Proposed Merger of Petra Diamonds Limited and Mano River Resources Inc. Petra Diamonds Limited ("Petra") (AIM/ASX: PDL) and Mano River Resources Inc. ("Mano") (AIM: MANA; TSX-V: MNO) today signed a preliminary agreement (the "Agreement") whereby the businesses of Petra and Mano will be combined (the "Transaction") to create an enlarged diamond exploration and mining group (the "Enlarged Petra"). The Transaction remains subject to the satisfaction of certain conditions precedent including the completion of mutual technical, financial and legal due diligence, execution of the required legal and regulatory documentation and obtaining all the required regulatory and shareholder approvals. It is anticipated that the Transaction will be effected by an offer of new Petraordinary shares to Mano shareholders in a share for share transaction, on thebasis of one new Petra ordinary share for each 5.5 Mano common shares. Both Petra and Mano agree that it is the intention of the Enlarged Petra toremain primarily a diamond exploration and mining group and therefore the Boardof the Enlarged Petra will endeavour to divest or demerge the existing Mano goldassets in the near term, subject to realising full value and maximisingshareholder value for the assets. Rationale for the Transaction The Transaction represents another major step in Petra's long-term growthstrategy of becoming a significant player in the diamond industry for thefollowing reasons: • Mano has established a solid exploration base in West Africa, containing assets which could be fast tracked to production, including the Kono project in Sierra Leone where it is expected that Petra, through its current joint venture with Mano, will commence production in the first half of next year; • the countries of Guinea, Liberia and Sierra Leone in which Mano operates offer highly prospective opportunities for economic diamond operations; • based on the analysis of the technical data on the discoveries made to date, the start up of several medium sized producing mines may be possible within the Mano portfolio in the near to medium term; • Petra has gained on the ground experience in Sierra Leone due to its Kono joint venture with Mano and experience to date suggests that Sierra Leone offers a commercial environment that is conducive to diamond exploration and mining activities; • Mano has joint venture relationships with other parties that the Petra Board believes will augment the business opportunities for the Enlarged Petra, including BHP Billiton, with which Petra has a JV agreement on Alto Cuilo, Angola and a relationship in Botswana, including the rights to deploy the proprietary Falcon technology; • the Transaction will increase the pro-forma market capitalisation of the Enlarged Petra (based on the closing price of Petra on 30 September 2005) to approximately £145 million; • the Transaction will increase the asset base of Petra, creating a true niche mid-tier explorer and producer of rough gem quality diamonds; • the Transaction will combine the substantial skills and experience of the two Boards and management teams. Mano brings with it an experienced management team, headed by Dr Tom Elder, which is highly skilled in diamond and gold exploration in West Africa. Mano's diamond programme is led by diamond geologist Karl Smithson, who will join the Enlarged Petra. The team, in combination with Petra's proven track record and operational expertise in establishing and successfully mining diamond deposits, creates a group that is well positioned to develop the assets held by Mano; and • the Transaction should give rise to cost savings from the rationalisation of the two quoted company structures. Growth opportunities for the Enlarged Petra Petra has identified the untapped potential for kimberlites in the West AfricanCraton. The joint venture with Mano, which was concluded in late 2004, hasprogressed well with initial production targeted for the first half of 2006. Petra has the proven ability to successfully assess and mine hard-rock(kimberlite) deposits and is establishing a base in the Koidu mining area ofSierra Leone. Key personnel and other categories of staff are drawn as requiredfrom the workforce of approximately 1,700 that operate the South African mineswithout effecting the South African production or operations. The Transaction would place Petra in a position to fast-track the development ofthe Bouro kimberlite dyke deposit in Guinea (discovered by De Beers). This dykeis reported by Mano to have an in-situ grade of 500 carats per hundred tonnesand is in good host rock conditions. Production from this source has thepotential to be ramped up to 250,000 carats per annum within 3 years. Mano has a joint venture agreement with BHP Billiton in Sierra Leone whereindicator mineral discoveries have been announced by Mano far removed from anyknown kimberlites. This has the potential to lead to new kimberlite discoveries. In addition, Mano has announced the discovery of seven kimberlites in the Weasuaarea of Liberia. The property is subject to a 50/50 joint venture with Trans HexGroup and Mano can elect to be the operator. Petra intends to fast track theinvestigation and potential development of these deposits with its in-houseexpertise. Mano has also announced the discovery of a kimberlite in the Camp Alpha areawhere the Liberian government has a 30% contributory joint venture interest. Some of the above mentioned discoveries have displayed excellent kimberliteindicator mineral chemistry and could be potentially diamondiferous. Furthermore, Mano holds exploration rights to wholly-owned gold licences inLiberia, where an indicated and inferred resource of over 800,000 ounces of goldhas been independently estimated. Additional gold licences in Sierra Leone andGuinea are under joint venture agreements. Adonis Pouroulis, Chairman of Petra, commented, "Through our joint venture withMano on the Kono project in Sierra Leone it has become apparent that West Africahas the potential to become a large producer of diamonds. It is a part of theworld that has stabilized over the last few years and has become investorfriendly. Many of the assets in the Mano portfolio, we believe, can be fasttracked to production. Initial geological interpretation and studies of theseprospects are very promising. Mano also brings with it a highly experiencedexploration and management team well versed with the West African environment.This, combined with Petra's ability to bring assets to fruition, will benefitboth shareholder bases as real value has the potential to be realised in themedium term." Mano's Chairman, Guy Pas, commented, "The business combination with Petra makeseminent sense. Our high regard for Petra's technical, operating and marketingexpertise was already reflected in the Kono joint venture. As stated whenannouncing Mano's reorganisation, Mano has for almost ten years focused entirely on the three countries of the Mano River Union ("MRU"), namely Guinea, Liberiaand Sierra Leone. In the process Mano has now built up an attractive portfolioof both gold and diamond properties and, more recently, iron ore. While substantial internal growth is expected from the exploration anddevelopment potential of its existing assets, expansion outside of the MRU willbest be accomplished through external growth. While Mano was well advanced inits internal separation into distinct diamond and gold divisions, the businesscombination with the fast expanding Petra will ultimately provide greater valuefor our shareholders than dedicating additional resources to reorganising via asplit into two separately listed though initially small diamond and goldcompanies." Details of the Transaction Based on Mano's current issued share capital of approximately 253.4 millionshares, Petra will issue up to approximately 46.1 million shares (the "Consideration Shares") to Mano shareholders on completion of the Transaction.Based on the current issued share capital of both Petra and Mano, existingshareholders of Petra and Mano will own approximately 76% and 24% respectively(excluding the effect of options and warrants) of the Enlarged Petra. The terms of the Transaction imply a price of 13.7 pence per Mano share (basedon the closing price of Petra on 30 September 2005 on AIM of 75.5 pence) whichrepresents a premium of 5% to Mano's closing price on 30 September 2005 on AIMof 13.0 pence and a 22% premium to the 30 day average closing price of 11.2pence. The Agreement is subject to Mano paying to Petra a break fee in certaincircumstances. The Transaction is expected to complete by 28 February 2006. Board On completion of the Transaction, Guy Pas, currently Chairman of Mano, will jointhe Enlarged Petra Board as a non executive Director, and Dr. Tom Elder, Mano'sPresident and CEO, will join the Enlarged Petra Board as an executive Director,responsible for the operations of the Enlarged Petra in Sierra Leone, Liberiaand Guinea. Adonis Pouroulis will remain Chairman of the Enlarged Petra, Johan Dippenaarwill remain Chief Executive Officer and there will no other changes to theExecutive Directors of the Enlarged Petra as a result of the Transaction. Information on Petra Petra is an AIM and ASX listed mining group focused on the exploration andmining of diamonds in Africa. Petra's strategy is to build a portfolio ofexploration and producing assets, with the objective of becoming a mid-tierdiamond explorer and producer. Petra has operations in Angola, Botswana andSouth Africa. Following the recent acquisition of Kalahari Diamonds Limited,Petra has a large area of exploration ground in Botswana and the use of cuttingedge Falcon technology. For the year to 30 June 2005, Petra's loss before tax was £11.3 million whichincluded a goodwill write off of £4.8m and exploration expenditure of £3.5m onthe Alto Cuilo concession before BHP Billiton elected to sole fund. During thefirst month post the Crown merger, the South African operations reported aprofit for June 2005 of £413,732 before depreciation,and, as at 30 June 2005,Petra had net assets of £37.3 million. Information on Mano Mano is an AIM and TSX listed exploration group focused on the discovery anddevelopment of diamond, gold and iron ore deposits in the Archaean terrain ofthe highly prospective, under-explored, West African countries of Sierra Leone,Liberia and Guinea. Mano considers the region to have the potential to develop into a world-classdiamond, gold and iron ore mining province. The company has over 25,000km2 underlicence, close to one million ounces of gold in resource, a cluster ofdiamondiferous kimberlite pipes and the Kono dykes. Joint ventures are in placewith Petra Diamonds, Trans Hex Group, BHP Billiton, Golden Star Resources (gold)and Navasota Resources (gold) and which, if they are all fully exercised, willinvolve a total of over US$16m in third party expenditure. With increasing market recognition of the recent positive evolution in theregional politics, Mano is starting to capitalise on its position as a leadingdiamond and gold explorer in the sub-region. For the year to 31 January 2005, Mano's loss before tax was US$0.9 million andas at 31 January 2005 had net assets of US$15.9 million. For the 6 months to 31July 2005, Mano's loss before tax was US$0.7 million and net assets as at 31July 2005 stood at US$22.7 million including US$5.5 million in cash. Ends For further information, please visit on Petra Diamonds or Mano River Resourcesplease visit www.petradiamonds.com or www.manoriver.com or contact; Petra Diamonds, South Africa David Abery Tel +27 11 467 6710 Petra Diamonds, Australia John Baillie, Perth Tel +61 8 9381 8888 Parkgreen Communications, London Justine Howarth / Annabel Leather Tel +44 20 7493 3713 Field PR, Adelaide Kevin Skinner Tel +61 8 8234 9555, Mobile +61 414 822 631 Mano River, London Tom ElderPresident and CEOUK +44 (0) 1235 810 740 Bell Lawrie Jamie CummingUK +44 141 221 7733 Controller, Canada Raz Hussein+1 (604) 689 1700 St Swithins PR Ltd Gary MiddletonUK +44 (0)207 929 4391 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Petra Diamonds