Adonis Pouroulis, chairman, Petra Diamonds
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» Petra swoops on Cullinan in R1bn deal


Petra posts a maiden profit
Brendan Ryan
Posted: Tue, 19 Feb 2008

[miningmx.com] -- AIM-listed Petra Diamonds is almost at the point where it will have to fund its pro-rata share of the costs of further exploration at the Alto Cuilo kimberlite deposit in Angola.

Petra holds an effective nine percent stake in Alto Cuilo through a joint venture (JV) with BHP Billiton. The JV holds a total stake of 36% in Alto Cuilo where, so far, some 77 kimberlite pipes have been found.

Terms of the JV are that BHP Billiton will earn its 75% stake in the JV once it has spent US$60m on exploration work. In Petra's interim results for the six months to end-December released on Tuesday, chairman Adonis Pouroulis said BHP Billiton’s exploration spend had reached $57.8m as of December 31.

Petra CEO Johan Dippenaar estimated on-going annual exploration costs at Alto Cuilo at between $12m and $20m putting Petra’s share of those costs at between $3m and $5m.

The company will face a major funding requirement should the go-ahead eventually be given for development of a diamond mine at Alto Cuilo.

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Finance director David Abery commented; “If you take Catoca – the only operating kimberlite diamond mine so far developed in Angola – as an example then what will happen is there will be a re-negotiation of the equity stakes in Alto Cuilo between the JV and Angolan state diamond company Endiama.”

Abery declined to comment on what stake the Petra/BHP Billiton JV would go for saying only: “We will negotiate the best deal we can and Petra will maintain its share.”

Analysts reckon the JV would ideally like to increase its stake in Alto Cuilo to 60% which would give Petra an effective 15% stake in the mine.

Turning to the Cullinan mine in South Africa, which Petra bought from De Beers late last year for R1bn, Dippenaar said the Competition Commission had now approved the deal and Petra hoped to meet the remaining conditions precedent between May and July this year.

Petra’s revenues for the six months to end-December soared 291% to $32.1m thanks to diamond sales from the Koffiefontein mine coming on stream from last July. Petra reported a maiden profit of $8.2m.