8th Feb 2005 08:00
Petra Diamonds Ld08 February 2005 8 February 2005 Petra Diamonds Limited Proposed merger with Crown Diamonds NL and dual listing on the AIM Market of London Stock Exchange plc ('AIM') and the Australian Stock Exchange ('ASX') Petra Diamonds Limited ('Petra' or 'the Company') (LSE: PDL), the AIM-quoteddiamond mining group, is pleased to announce that it has today entered into aconditional agreement to merge with ASX-listed Crown Diamonds NL ('Crown') (ASX:CRD) by acquiring the entire issued share capital of Crown under a Scheme ofArrangement ('the Proposed Transaction'). On completion of the ProposedTransaction Petra will be quoted on AIM and the ASX. Highlights • The Proposed Transaction, which is subject to both Petra and Crownshareholder approval, as well as various regulatory approvals in the relevantjurisdictions, will be an all share transaction • Each Crown shareholder will receive one Petra share for every eightCrown shares • Based on the closing price of Petra and Crown shares on 7 February2005 (being the last trading day prior to this announcement) of 95 pence and 22cents respectively, the Proposed Transaction values Crown at £35.3 million or28.66 cents per share (using a rate of £/AS$ 2.4135), representing a 30.27%premium to the Crown share price • Petra will issue approximately 37.2 million new shares to Crownshareholders (by reference to Crown's current issued share capital) • Crown also has AS$4 million of ASX-listed Convertible Loan Notes ('Loan Notes') in issue (equivalent to approximately 22.4 million Crown shares ifconverted), with the final redemption date being 30 November 2005. The ProposedTransaction is conditional upon Crown and Petra agreeing on a proposal for thetreatment of the Loan Notes in a manner satisfactory to all parties • The Company will also seek to raise funds by way of a placing toinstitutional investors on both AIM and the ASX. Further details with respect tothis placing will be announced when appropriate • Two members of the current Crown board, Johan Dippenaar and JimDavidson, will join the Petra board. Johan Dippenaar will be appointed CEO, JimDavidson will be appointed Technical Director and Kevin Dabinett, currentlyPetra's CEO, will become COO of the enlarged group. The Proposed Transaction will constitute a Reverse Takeover in accordance withthe AIM Rules. Accordingly, Petra's ordinary share capital will be suspendedfrom trading on AIM until such time as an AIM Admission document relating to theProposed Transaction is published. The Proposed Transaction will be effected in Australia by way of a Scheme ofArrangement requiring the approval of 75% of Crown shareholders. A SchemeBooklet will be dispatched in due course by Crown to its shareholders. Thedirectors of Crown have confirmed to the Petra Board that they intend tounanimously recommend to Crown shareholders that they vote in favour of theProposed Transaction. Rationale for the Proposed Transaction The Proposed Transaction represents a further step in Petra's long-term growthstrategy of becoming a significant player in the diamond industry. The mergedentity will: • create an impressive exploration base coupled with successful income-producing and cash flow positive diamond mines. The combined group will have a well balanced portfolio of diamond assets in various phases of development, ranging from green fields exploration to production; • create a geographically diversified diamond group with an enhanced geographical spread of diamond assets on the African continent (Angola, South Africa and Sierra Leone); • create a diamond group with a substantial asset base and pro-forma market capitalisation (before exercise of the Loan Notes) of approximately £100 million (AS$250 million) which will become a niche mid-tier producer of rough diamonds; • be dual listed on AIM and ASX, enhancing liquidity and aiming to increase the scope of institutional investor interest due to the asset base and market capitalisation; • combine the substantial skills and experience of the two management teams and workforces; • give rise to costs savings from the rationalisation of the two quoted company structures. The last two years have seen demand for rough diamonds outstrip supply and theindustry has experienced some of the highest rough diamond prices ever. Afurther rough diamond supply shortage is predicted in the short to medium term.Having access to rough diamond supply will allow the merged entity to furtherbenefit from the current boom in the industry. It can take many years for a newdiamond mine to come into production and the directors believe having currentproduction in a buoyant diamond market is highly beneficial. Crown brings with it an experienced management team which is highly skilled indiamond mining production in Southern Africa. The two management teams togetherwill have the depth and knowledge to develop diamond opportunities anywhere onthe African continent. Crown also brings with it in-house engineering expertisewhere considerable savings can be made in any future diamond projects. The directors of both Petra and Crown believe that Crown's existing business issoundly based and capable of further expansion. Information on Crown Crown's current producing diamond assets are all situated in South Africa. Theyencompass Helam, Star and the Messina/Dancarl joint venture. All three of thesediamond operations are kimberlite fissure mines with life of mine in excess of15 years each and each produce high quality diamond gem stones. It is estimatedthat the Crown operations will produce in excess of 167,000 carats of gemquality stones in 2005, compared to 85,487 in 2004. 10 year forecast *Messina/Dancarl Star Helam TotalProven, probable reserves & inferred 1,936,000 1,700,000 3,886,000 =SUM(LEFT)resource ROM tonnes 7,522,000Grade ROM 28 cpht 44 cpht 81 cpht 59 cphtTotal carats 542,000 748,000 3,147,000 =SUM(LEFT) 4,437,000Price/carat US$ 250 200 74 117Value US$ 135.5m 149.6m 232.8m 517.9m *Crown has an effective 74.5% share via a JV with Sedibeng Mining Source: Crown Diamonds Helam Helam is situated in the North-West province of South Africa and has been incontinuous production for over 60 years. Helam was acquired in July 2004 andproduction for the 2005 calendar year is expected to be around 96,000 carats atan average price of US$74 per carat and running at an average grade of 81 caratsper 100 tonnes. The mechanisation program in place at Helam will enhance theability of this mine to meet future production targets. In addition, Helam hasseveral compelling and as yet unexplored brown fields targets that have not yetbeen investigated. Without these, the life of mine is in excess of 15 years. Star Star is situated in the Free State province of South Africa and produced 16,000carats over the 2004 calendar year at an average price of US$200 per caratrunning at an average grade of 44 carats per 100 tonnes. Production in the 2005calendar year is expected to increase to approximately 36,000 carats. The lifeof mine is in excess of 15 years. Messina/Dancarl Messina produced around 25,000 carats (and sold 26,000 carats) in the 2004calendar year at an average price of US$250 per carat running at an averagegrade of 28 carats per 100 tonnes. Dancarl was purchased from De Beers inSeptember 2004 by way of a JV between Crown and Sedibeng Mining, Crown's BlackEconomic Empowerment partner in South Africa. Messina and Dancarl are expectedto produce at least 35,000 carats in the 2005 calendar year as undergroundmining gets underway at Dancarl and the ground is mined from Messinainfrastructure. The life of mine is in excess of 15 years. Sierra Leone Crown has a Joint Venture with Mano River Resources Inc in Sierra Leone whichwill allow Crown to earn a 51% profit interest by spending US$1.5 million and a51% equity interest by spending a further US$1.5 million in the Kono diamondproject over the next three years. The Kono project is a kimberlite project withseveral identified fissures already known from which small scale production isenvisaged during the next twelve months. Prospecting for kimberlite pipes andblows which are known to exist in the area will be commenced with during theyear. Initial indications show good geochemical results with a fissure strikelength greater than Crown's current producing mines. Conditions Precedent Completion of the Proposed Transaction is conditional, inter alia, upon thefollowing key conditions: • there having been, immediately prior to completion of the ProposedTransaction, no material adverse change in the financial position of Petra orCrown; • obtaining all necessary regulatory approvals and other such approvalsand consents, including; i) approval by the shareholders of both Petra and Crown ii) readmission of the enlarged share capital of Petra to AIM iii) approval by the ASX of the admission of Petra to ASX iv) approval by the Australian Foreign Investment Review Board (FIRB) v) approval by the South African Competition Board vi) approval by the South African Reserve Bank vii) approval of the Scheme of Arrangement by the Supreme Court of Western Australia; • Crown's directors recommending the merger to Crown shareholders; • Crown and Petra agreeing on a proposal for the treatment of the LoanNotes in a manner satisfactory to all parties • satisfactory completion of due diligence by both Petra and Crown. Timetable Petra is in the process of producing an AIM Admission document which is expectedto be published within six to eight weeks, at which time trading in Petra'sshares will recommence. Adonis Pouroulis, Chairman of Petra, comments, "The merger with Crown willbalance Petra's current portfolio to include successful producing diamondoperations, allowing the Company to benefit from a vibrant and buoyant diamondmarket. Crown has a tried and tested management team that has delivered profitsfrom their assets; we can only benefit from this knowledge. We will also withthe merger be exposed to the exciting West African diamond fields, ageographical region that is currently enjoying much attention from diamondplayers across the world. Ultimately we believe this transaction will createreal value for Petra and Crown shareholders." Crown's CEO, Johan Dippenaar, said, "The bringing together of the Crown andPetra businesses will create an exciting opportunity for investors to haveexposure to both production and exploration assets in a strong diamond industry.The gap between the major diamond companies and junior explorers is significant. We believe that the combined entity will be one of the few opportunitiesinvestors have to invest in an integrated diamond exploration and productiongroup that has good geographical spread. Petra has an excellent record in identifying and bringing to account explorationassets, especially in previously under explored regions. This knowledge andexpertise, combined with Crown's proven track record in managing diamondproduction assets, will provide dynamic growth opportunities to the combinedentity and its shareholders." Overview of Petra Petra Diamonds Limited is an AIM-quoted mining group focused on the explorationand mining of diamonds in Southern Africa. Petra's strategy is to build aportfolio of cash flow positive, producing mines combined with the 'blue sky' ofhigh quality exploration assets, thereby creating sustainable value for theCompany and its shareholders. Petra currently has projects in the Lundaprovinces of North Eastern Angola and the Limpopo and North West provinces ofSouth Africa. It is widely accepted that Angola may hold some of the world's best kimberliteand alluvial diamond deposits. Petra's primary focus in Angola is on the AltoCuilo project area in the north east of the country, about 700km east of thecapital, Luanda. The area is rich in kimberlites, with one of the world'sbiggest, Camafuca, north east of the Alto Cuilo project area. Drilling of the Mussunuige Luangue ('ML') Complex, an area of approximately 200km(2) within the Alto Cuilo concession where activities have been focused todate, has been underway since early 2004 and a Dense Media Separation diamondrecovery plant was commissioned in September 2004. Twelve kimberlites have nowbeen identified and a kimberlitic deposit of 115 million tonnes proven up by theCompany, with a further potential to double this number. In November 2004 a Joint Venture agreement was signed with BHP Billiton, whichmay see them spending up to US$60 million on Alto Cuilo. BHP Billiton willundertake regional exploration on the 2,700 km(2) concession where there is thepotential for other significant kimberlitic deposits and also work with Petra tofurther develop the ML Complex. Petra also has interests in two additional projects in Angola; Medio Kwanza,west of Alto Cuilo, and Muriege, further east. Media Kwanza has six knownkimberlites discovered in the early 1970s by the previous project operators.Petra has downgraded its involvement in Muriege to concentrate on Alto Cuilo andis now a passive investor with a 5% free carry and is not obliged to contributefunding to exploration or mining costs. In South Africa, one of the world's major sources of quality diamonds, Petracurrently has two diamond exploration projects; Limpopo Farms and Syferfontein.The Limpopo Farms project holds seven of the former Gold Fields' diamondportfolio properties acquired by Petra in 1999, on three of which indicatorminerals have been discovered since exploration began in early 2003. Petra iscurrently conducting a bulk sampling programme on Syferfontein which was alsoacquired from Gold Fields. Overview of Crown Crown Diamonds was formed in July 2003 and is a public listed company on theASX. It has a market capitalisation of approximately AS$65.4 million and in theyear to 31 December 2004 it made a gross profit of AS$0.45m and a loss beforetax of AS$2.2 million (unaudited). Crown is engaged in the mining and exploration of diamonds in South Africa andSierra Leone. It initially acquired the Star and Messina diamond mines in 2003,the Helam diamond mine in July 2004 and tendered successfully for the Dancarldiamond mine in September 2004. Its latest transaction is the right to earn aninterest in the Kono diamond project in Sierra Leone. The Star and Helam mines are 100% owned by Crown while the company has a 74.5%interest in the Messina/Dancarl complex. The balance is owned by Crown's JVPartner, Sedibeng Mining (Pty) Limited. In Sierra Leone, Crown will earn a 51%profit share interest in the Kono diamond project by spending US$1.5 million anda 51% equity interest by spending an additional US$1.5 million over the next 3years. Its joint venture partner in Sierra Leone is AIM and TSX quoted ManoRiver Resources Inc. The Star, Messina, Helam and Dancarl mines are underground operations exploitingkimberlite fissure systems. Production for the 2005 and 2006 calendar years isforecasted at 167,000 and 207,000 carats respectively. Total employees of Crownamount to some 1,700 people. The management and board of Crown are well qualified and experienced in thetechnical aspects of diamond mining and company corporate affairs. The first 18 months' of Crown's existence has been characterised by solid growthwith the further acquisition of Helam and the Dancarl joint venture in SouthAfrica. It also acquired its first offshore exploration project in Sierra Leone.Given the company's forecast of increasing diamond production over the next twoyears, Crown is well placed to benefit from the predicted increase in theshortfall between demand and supply of rough diamonds in the short to mediumterm. Ends For further information, please contact: Adonis Pouroulis/Kevin Dabinett/ Cathy Malins David Abery Parkgreen Communications, London Petra Diamonds Tel: +44 20 7493 3713 Tel: +44 1534 700 111Frank H. Moxon Karl Paganin Williams de Broe Plc, London Euroz Securities, Perth Tel: +44 20 7588 7511 Tel: +61 8 9488 1433 In South Africa: Johan Dippenaar CEO and Director Crown Diamonds NL Tele: +2714544 6116 Fax: +27 14 544 6124 In Australia: Charles Mostert Director Crown Diamonds NL Tele: +61 8 9381 8888 Fax: +61 8 9381 8333 Kevin Skinner Field Public Relations Tele: +61 8 8234 9555 Mobile: 0414 822 631 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Petra Diamonds