www.miningmx.com | diamonds Petra lining up De Beers mines

Thu, 18 Mar 2010

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Petra lining up De Beers mines
David McKay
Posted: Wed, 07 Sep 2005

[miningmx.com] -- PETRA Diamonds, the UK listed diamond junior company, may establish a partnership with a black-owned South African firm to bid for marginal mines owned by De Beers Consolidated Mines (DBCM).

Johan Dippenaar, CEO of Petra Diamonds, said the company had successfully bid for a De Beers asset in this way before; its Dancari mine south of Klerksdorp. It had also proved itself able to make money out of marginal mines.

These are typical assets we know how to sweat

Following its merger with Crown Diamonds in June, Petra now owns three mature South African mines. The Helam mine, north west of Johannesburg, has been operating for 60 years. Dippenaar said in ResourceStocks recently that it would achieve output of 96,000 carats/year at an average of $74/c. “We can see another 15 years of life left at Helam,” Dippenaar said.

Five of DBCM’s mines are unprofitable at the current exchange rate including Kimberley Mines, the long-standing DBCM operation that shut its underground sections in August. “These are typical assets we know how to sweat,” Dippenaar said.

Apart from scoring empowerment points, which Petra needs because it is hoping to mine 170,000 carats from South Africa, the purchase of De Beers’ mines fits in which the diamond giant’s own empowerment goals. The presence of Kerwin Rana at Petra Diamond’s Johannesburg presentation today, a De Beers executive tasked with new business, is noteworthy.

Dippenaar said additional corporate acquisitions in South Africa would have to be sizeable in order to supplement Petra’s growing diamond output. As result, a deal would also increase the likelihood of a Johannesburg listing, Dippenaar said. “We would only list if we have more output from South Africa, but that is possible.”

Operating income is crucial to Petra Diamonds owing to the weight of exploration within the rest of its portfolio. It owns about a third of Alto Cuilo, a promising but undeveloped diamond mining prospect in north east Angola, and other prospects in Sierra Leone.

Petra also bought Kalahari Diamonds in a paper deal valued at $25m, a company that has exploration licenses in Botswana. “There’s no reason why there isn’t another Orapa mine sitting below Kalahari’s sands,” said David Abery, Petra financial director. Orapa, in which DBCM has a stake, is one of the world’s largest diamond mines with annual output of 20 million carats.

Petra had no interest in the Letseng diamond mine which is 80% owned by JCI. “The problem with the mine is that you find high value stones and then nothing for nine months so the average value is unprofitable,” he said. “At least with De Beers you have an improved idea you know what you’re getting,” he said.

Petra, which is chaired by Adonis Pouroulis, the son of well-known mining entrepreneur, Loucas, is in good shape. The company is generating enough cash flow to fund exploration without having to dip into its R120m cash balance. “Those [cash] funds are not spoken for,” Dippenaar said.