Petra Diamonds sells Botswana assets for R5m

Cash-strapped Petra Diamonds agreed on the first sale of assets, disposing of its exploration tenements in Botswana, one of the world’s leading sources of diamonds, for about R5m.

Petra told the market at the end of last month that it had put its entire business, or parts thereof, up for sale as it struggled to generate revenue from its three mines in SA and one in Tanzania because of the global Covid-19 pandemic.

Yesterday, London-listed Petra said it agreed on a $300,000 (about R5m) cash sale of its entire dormant and loss-making Botswana exploration business to Botswana Diamonds, which is traded on London’s Alternative Investment Market and the Botswana bourse.

The payment is split equally over two tranches due in August next year and August 2022 and Botswana Diamonds said it would issue shares to fund the transaction.

Shore Capital mining analyst Yuen Low described the deal as a “fire sale” by “underpressure Petra”.

In 2010, Petra discovered a kimberlite called KX36, which is an ancient volcanic, carrot-shaped deposit, deep in the Kalahari in northern Botswana.

It is 70km away from the Ghaghoo mine that Londonlisted Gem Diamonds tried unsuccessfully to bring into production and subsequently sold at an enormous loss.

“This disposal forms part of our strategy to focus on driving efficiencies from our high-quality producing mines, but allows us to maintain upside to potential future commercial production from the Botswana assets, particularly from the KX36 deposit,” Petra CEO Richard Duffy said.

The assets were marked for disposal in June 2018 and the cash raised from the sale would go towards general working purposes, he said.

Included in the terms of the deal is a 5% royalty on future revenues from the assets payable to Petra.

Botswana Diamonds can remove this option by paying Petra $2m (R33.35).

Petra has a $650m (R10.83m) note repayment due in May 2022.

It had to ask holders of the notes for a “forbearance” agreement after it failed to make an interest payment in May, preventing those investors from accelerating the terms of the debt and crippling Petra.

Petra’s turnaround strategy in SA, which was focused on generating maximum cash and cutting costs, was disrupted by the strict economic lockdown at the end of March, which was gradually eased, allowing underground mines to return to full staffing levels last month. —