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South Africa: BHP Billiton Ends Petra Partnership
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Business Day (Johannesburg)
14 May 2008
Posted to the web 14 May 2008
Charlotte Mathews
Johannesburg
GLOBAL resources group BHP Billiton has pulled out of its two diamond exploration joint ventures with Petra Diamonds in Angola, Petra said yesterday.
"Our joint venture with BHP Billiton has been rewarding, but we now have the opportunity to progress exploration at Alto Cuilo and Luangue in a way that is more oriented to Petra's approach to mining," Petra chairman Adonis Pouroulis said. Petra's "enthusiasm and belief in Alto Cuilo and Luangue is as strong as ever".
London-based investment house Fairfax said Petra was large and strong enough to push projects ahead on its own.
"Petra may now accelerate progress at the giant Alto Cuilo and Luangue projects unfettered by their former partner's more conservative working practices," it said.
Asked whether Billiton's withdrawal indicated the deposits were commercially unattractive, Fairfax analyst John Meyer said it was more likely that Billiton was looking at bigger projects, such as the Olympic Dam in Australia, and so far had found nothing of sufficient scale in the diamond sector to interest them.
Meyer said diamond prices had not moved up in the same way as that of copper, aluminium or iron ore. He said he would not be surprised if Billiton planned to exit the diamond business altogether, including its projects in Canada.
But a Billiton spokesman said that diamonds remained a key part of the group's portfolio. The decision to withdraw from the two Angolan joint ventures with Petra was made for "commercial reasons" and the group was proceeding with a number of other joint venture diamond exploration projects in Angola.
By the end of March Billiton had earned 75% of the Alto Cuilo project and 25% of Luangue and the two parties were determining the final terms of the hand-over, Petra said.
Petra now owns an effective 41,2% of Alto Cuilo, with Angolan state diamond company Endiama holding 51%. In Luangue Petra's interest is 39%.
Petra said at Alto Cuilo, $10m would be spent from internal cash resources to advance work on the project to the end of this year, while at Luangue, $12m would be spent up to the end of next April.
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It planned to revise its exploration strategy at Alto Cuilo, moving away from searching for kimberlite pipes and instead exploring the shallower deposits around the crater rim, where it believed there was potential for a world-class diamond deposit, similar to De Beers' Williamson mine in Tanzania.
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