The East African (Nairobi)

14 September 2008

Tanzania: Petra Buys De Beers 75 Percent Stake in Dar Mining Firm for $10 Million

Nairobi — British mining firm with operations in Africa Petra Diamonds Ltd has acquired 75 per cent shares of Willcroft Company Ltd -- part of Tanzania's Williamson Diamond Ltd -- for $10 million.

Petra said the acquisition will be completed by mid November. Williamson Diamond is under Cheviot Holdings Ltd, a wholly-owned subsidiary of De Beers Societe Anonyme.

De Beers Group managing director Gareth Penny said the sale of shareholding in Williamson Diamonds is part of an ongoing drive to position De Beers for long-term growth by reviewing its portfolio of mining assets.

Mr Penny said De Beers is creating new opportunities for other players in an increasingly diversified and competitive global diamond industry.

"It is strategic to maintain mining operations at the current volumes but during the first year of operation, the company will focus on establishing the new economics of the mine, including grade, value per carat, cost per tonne and overall production capacity of the infrastructure," he said.

The acquisition, to be funded wholly from Petra's internal cash resources, marks Petra's entry into Tanzania further diversifying the group's geographical spread.

The acquisition is also in line with the group's aim of creating a diamond production portfolio of global significance, complemented by a substantial and valuable resource base.

Petra's chief executive Johan Dippenaar said the firm already owns three major diamond mines, Cullinan, Koffiefontein and on completion, Kimberley Underground.

"Williamson will add a further major mine to our portfolio, with the potential to deliver considerable value to our shareholders," he said.

Energy and Minerals Minister William Ngeleja said Petra's entry is an opportunity to breathe new life into Williamson Mine and Tanzania's diamond mining sector.

Williamson currently has a resource of some 40 million carats (995 million tonnes of kimberlite), further enhancing Petra's profile as one of the world's largest independent diamond groups.

Williamson is renowned for the production of large, high value diamonds, with special stones (classified as larger than 10.8 carats) produced on a regular basis. Records also show that gem-quality diamonds in excess of 200 carats have been recovered.

The Williamson mine is a large open-pit operation, with a maximum mining depth of 90 metres and a very low stripping ratio.

The current operation comprises the open-pit mine feeding the main plant with 3.7 million tonnes per annum. There is also a dense media separation multi-purpose plant and a pan plant on site.

In 2007, the mine processed approximately 3.2 million tonnes of ore, recovering 220,000 carats at a grade of 6.9 carats per 100 tonnes.

Total waste mined during 2007 was approximately 0.8 metric tonnes, yielding a stripping ratio of approximately 0.24 tonnes of waste per tonne of ore.

Once new operating parameters have been established, Petra will consider an appropriate expansion programme to capitalise on the economies of scale offered by the Mwadui deposit.

Indications are that the introduction of new technology could increase throughput to around, or even above, 7.5 metric tonnes per annum, reducing unit operating costs and resulting in an estimated annual production of some 500,000 carats and a mine life of around 20 years.

Williamson is an example of a major diamond mine where operations are focused on the higher grade resedimented volcaniclastic kimberlite (RVK) material along the rim of the kimberlite crater.

Petra's exploration model at its Alto Cuilo and Luangue projects in Angola is similarly based on delineating one or more RVK deposits of significant size.

In the past two years, Petra has acquired the Cullinan and Koffiefontein mines from De Beers, and has also entered into an agreement to acquire the Kimberley Underground mines.

Petra boasts that given that there are only approximately 30 major diamond mines in operation worldwide, it has achieved its aim of creating a production portfolio of global significance, in a market of ever shrinking supply set against rising demand.

Petra's rapidly rising production has been as a result of carefully identifying acquisitions that can be turned to account and deliver value to both shareholders and other stakeholders.

The Tanzania mining site stretched over 146 hectares, is the largest kimberlite pipe ever to be mined, having been operated continuously as an open pit mine for almost 70 years, during which time it has produced over 20 million carats, and there remains a substantial resource of some 40 million carats.

Critics say although the mine regularly produces large, high quality stones and is a source of rare and extremely valuable fancy pink diamonds, such wealth has failed to portray its translate into lives of millions of Tanzanians living close to the minefield.

Although Petra does not consider a disclosure made by Williamson to be a reasonable basis for future results, for the year ending December 31, 2007, Williamson's loss before tax was $29.46 million and as at 31 December 2007 it had net assets (excluding the diamond resources set out below and Intergroup balances) of US$8.14 million.

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