Petra sells down stake in Williamson mine following the punishing agreement with the Tanzanian Government

Richard Duffy, CEO, Petra Diamonds

Petra Diamonds has moved to further chop its equity exposure to the Williamson Mine in Tanzania after the deal struck earlier this week with the Tanzanian government through which Petra agreed to drop its stake in the mine from 75% to 63%,

The Tanzanian government’s equity shareholding was increased to 37% from 25% at no cost and Petra agreed to a series of financial measures which appear heavily in favour of the government.

Petra has now agreed to sell 50% less one share of its remaining stake in Williamson Diamonds Limited (WDL) – the company that controls the Williamson Mine – to Tanzanian mining services contractor Caspian. The deal drops Petra’s indirect stake in the Williamson mine to 31,5% but Petra still retains control.

Caspian is wholly-Tanzanian owned and is the country’s largest mining contractor. It has been mining at Williamson for nearly 20 years and has also done mining contracting on other operations in the country owned by Barrick and AngloGold Ashanti.

Petra CEO Richard Duffy commented, “ the reduction in Petra’s equity interest in WDL from 75% to 31.5% – while still retaining control – both reduces Petra’s exposure in line with our stated objectives outlined in our preliminary results while maintaining a share of the upside that we believe exists following the signing of the Framework Agreement with the Government who continue as partners.”

Williamson was classified as “an asset held for sale” in Petra’s preliminary results for 2021 published on September 14.

Caspian is paying $15m for the stake but, as with the agreements struck with the Tanzanian government over money due to the Williamson mine for VAT refunds and the proceeds from a confiscated diamond parcel, there will be no direct cash inflows to Petra.

Instead, $11.1m will be settled through payment for “past technical services payments owed by WDL to Caspian” and $3.9m for technical services to be provided to WDL from Caspian in order to ramp up operations at the mine.

The deal is subject to a string of conditions including approvals from the Tanzanian Mining Commission, the Tanzanian Fair Competition Commission and the Bank of Tanzania as well as a ruling from the Tanzania Revenue Authority on the tax treatment of the transactions.

Petra hopes to have everything in place by end-June next year.