Petra buys De Beers' Kimberley mine for R78.5m
Posted: Fri, 14 Sep 2007
[miningmx.com] -- AIM-traded Petra Diamonds and its empowerment partner Sedibeng Mining have for R78.5m bought the Kimberley underground mines shut by De Beers because it found them to be unprofitable.De Beers was operating the mine with too large a cost structure, something Petra doesn't have, said De Beers chairman Nicky Oppenheimer. Petra CEO Johan Dippenaar said Petra would only run the mine at a maximum cost of $100 per tonne and target output of 120,000 carats/year that De Beers managed when it owned the mine. The average value per carat is $160 per carat, he told Miningmx.
Petra and its partner could spend another R70m to R80m on the Kimberley acquisition to bring the mine back into full production. It will spend R25m in the first year, Dippenaar told a media conference. The Kimberley mine as well as the Koffiefontein mine Petra also bought from De Beers would lift the group's South African output to 300,000 carats in 2009 from 175,000 carats in 2006, he said. De Beers, 45% owned by Anglo American, has embarked on a strategy of selling its unprofitable mines, particularly in South Africa where just two of its mines are profitable, as it moves away from dominating market share to focus on return on capital. "Being the dominant industry player, we are clear in sending a message that says we are on a path of transformation which allows other players, especially empowered companies, get into the diamond industry," said David Noko, chairman of De Beers' South African arm DBCM. De Beers would remain competitive despite its involvement in empowerment, he said. "This is not going to be a simple handover of the game. We are determined to remain leaders in the diamond industry... our intent is not to give up our leadership position," he said. The 104-year-old Cullinan and the 123-year-old Kimberley underground operations are two of the mines De beers is exiting. Kimberley was closed in late 2005. The other unprofitable mine is the tiny Oaks. Oaks will reach the end of its life in the first quarter of 2009, Oppenheimer said, adding it was too small and depleted to be of any use for another company and would be closed down. It is evaluating tenders from those bidding for its underground Cullinan mine in South Africa. Petra bought the mothballed Koffiefontein diamond mine in the Free State province for R82m in December 2006. The price tag included R80m for the rehabilitation obligations at the mine, and R1.9m in cash for De Beers. Petra will bring the Koffiefontein mine into full production of 100,000 carats/year early in 2008, Dippenaar said. Petra has four producing mines in South Africa, producting 175,000 carats in the year to June 2006. It has partnered with BHP Billiton in an Angolan exploration project. It is also exploring Botswana and Sierra Leone. De Beers in February outlined an exit strategy from its unprofitable one million-carats/year Namaqua operations, which it will merge with state-owned Alexkor. The transaction will be concluded in 2008. De Beers will not be the operator of the company and could dilute its stake in the new company. De Beers is spending R2.2bn to develop its Voorspoed mine, which will begin operations in 2008. It has a sea mining programme off the South African west coast. Its profitable mines are Finsch and Venetia.
not to give up our leadership position