REG-Petra Diamonds Ltd: Entry into agreement with Pink Diamonds for the sale of Petra's entire interest in Williamson Diamonds Limited
22/01/2025 07:15
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
22 January 2025
Petra Diamonds Limited
("Petra" or the "Company")
Entry into agreement with Pink Diamonds for the sale of Petra's entire
interest in Williamson Diamonds Limited
Petra (LSE: PDL) is pleased to announce that it has entered into an agreement
to sell its entire shareholding in the entity that holds Petra's interest in
Williamson Diamonds Limited ("WDL"), together with all the shareholder loans
such entity owes Petra, to Pink Diamonds Investments Limited ("Pink Diamonds")
for a headline consideration of up to US$16 million (the "Transaction").
Transaction Highlights
* Sale of Petra's entire shareholding in the entity that holds its interest in
WDL to Pink Diamonds for a headline consideration of US$16 million
* The US$16 million consideration for the Transaction shall be payable by Pink
Diamonds out of WDL's distributable cash, with 20% of any distributable cash
generated annually payable to Petra until this consideration is fully paid.
There can be no certainty that any or all of this deferred consideration will
be paid to Petra
* Completion of the Transaction ("Completion") is subject to the parties
obtaining all necessary regulatory and lender approvals, including approvals
from the Tanzanian Mining Commission and the Tanzanian Fair Competition
Commission
* Completion is expected to occur during the first quarter of CY 2025, subject
to receipt of customary regulatory and lender approvals
* The Company intends to use any net proceeds from the Transaction for general
corporate purposes
* Petra has concluded that it is preferable for WDL to come under consolidated
ownership and that the Transaction is in the best interests of Petra, as well
as WDL and its stakeholders
This summary should be read in conjunction with the whole of this
announcement, including its Appendices. Certain capitalised terms in this
announcement bear the meanings set out in Appendix 4.
Richard Duffy, Chief Executive of Petra, commented:
"Since we entered into the previous transaction with Pink Diamonds, it has
become increasingly clear to both Petra and Pink Diamonds that it would be
preferable for WDL to come under consolidated ownership. We believe that Pink
Diamonds, who are affiliated to Taifa, the long-term technical services
contractor at the Williamson Mine, will have the technical and financial
capability to conduct operations in a responsible manner for all stakeholders.
We look forward to working closely with the Mining Commission, the Fair
Competition Commission, employees, community representatives and other key
stakeholders in completing the sale as soon as possible."
Rostam Azizi, Chairman of Pink Diamonds, commented:
"Taifa is a wholly Tanzanian owned company. It is also Tanzania's largest
mining contractor with over 30 years mining related experience. We have been
the contractor of choice to most mines in Tanzania and have maintained long
and successful relationships with companies such as Petra, De Beers, Barrick
and AngloGold Ashanti. In addition, we also own the largest fleet of mining
equipment in Tanzania. As a company, we are committed to adopting and adhering
to the latest internationally recognised standards throughout all aspects of
our business.
This is a particularly proud moment for me personally considering my family
hail from the area around Mwadui. Taifa have been contracting at the
Williamson Mine for over 25 years and as such we are particularly pleased to
enter into this next phase of our involvement now also as the mine owners. It
is the end of an era whereby the mine will revert to exclusively Tanzanian
ownership. We have had a very constructive partnership with Petra at
Williamson Mine since it was acquired by them in 2009 and we look forward to
now taking the mine forward on our own. Taifa will place its extensive
experience and resources and it will also exercise best endeavours to
continuously improve the mine. We recognise the mine's viability in providing
sustainable employment and a significant contribution to the greater Tanzanian
economy. The mine has the largest kimberlite deposit in the world by surface
area - with Reserves and Resources of 37.17mcts as at 30 June 2024."
Strategic Rationale
WDL continues to encounter short-term liquidity challenges and going forward,
the Williamson Mine will continue to require further capital investment.
Following Petra's strategic review of its cost structure and the Group's Life
of Mine plans and faced with the prevailing market weakness, Petra determined
that the Disposal Business would be unable to compete with the Continuing
Group for further capital investment, especially given the existing capital
requirements of the Continuing Group. As a result, Petra concluded that it is
preferable for the Disposal Business to come under consolidated ownership and
that the Transaction is in the best interests of Petra, as well as WDL and its
stakeholders.
Use of Proceeds
It is the Board's intention to use any net proceeds from the Transaction for
general corporate purposes.
Next steps and timetable
Completion is, as noted above, conditional on the receipt of customary
regulatory and lender approvals.
Completion is expected to take place in the first quarter of CY 2025.
~ENDS~
Enquiries
Petra Diamonds, London +44 (0)784 192 0021
Patrick Pittaway investorrelations@petradiamonds.com
Kelsey Traynor
About Petra Diamonds Limited:
Petra Diamonds is a leading independent diamond mining group and a consistent
supplier of gem quality rough diamonds to the international market. The
Company's portfolio incorporates interests in two underground mines in South
Africa (Cullinan Mine and Finsch) and one open pit mine in Tanzania
(Williamson).
Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company's loan notes, due in 2026, are
listed on EuroNext Dublin (Irish Stock Exchange). For more information, visit
www.petradiamonds.com.
About Pink Diamonds:
Pink Diamonds is an affiliate of Taifa Mining and Civils Limited ("Taifa"),
the long-term technical services contractor at the Williamson Mine. Taifa is a
wholly Tanzanian owned company and is Tanzania's largest mining contractor
with over 30 years mining related experience, with companies such as Petra, De
Beers, Barrick and AngloGold Ashanti. In addition, Taifa also own the largest
fleet of mining equipment in Tanzania.
FURTHER INFORMATION
Background to and rationale for the Transaction
Pink Diamonds is an affiliate of Taifa, the long-term technical services
contractor at the Williamson Mine.
WDL is the operator of the Williamson Mine and is currently 25% owned by the
Government of Tanzania (the "GoT") and 75% owned by Petra, with Petra having
acquired its majority interest in WDL in 2009. Petra entered into a Framework
Agreement with the GoT in December 2021 in which it was agreed that Petra's
effective interest in WDL will decrease to 63%, with the GoT's interest
increasing to 37%. This Framework Agreement is yet to become effective.
Further details of the Framework Agreement are set out in Appendix 3 of this
announcement.
In May 2023, Petra announced that it had entered into definitive transaction
documents for the sale by Petra to Pink Diamonds of 50% less one share of the
entity which holds Petra's shareholding in WDL and a pro-rated portion of
shareholder loans owed by such entity (the "Initial Transaction"). This
Initial Transaction has been terminated and replaced by the Transaction.
WDL continues to encounter short-term liquidity challenges and going forward,
the Williamson Mine will continue to require further capital investment.
Following Petra's strategic review of its cost structure and the Group's Life
of Mine plans and faced with the prevailing market weakness, Petra determined
that the Disposal Business would be unable to compete with the Continuing
Group for further capital investment, especially given the existing capital
requirements of the Continuing Group. As a result, Petra concluded that it is
preferable for the Disposal Business to come under consolidated ownership and
that the Transaction is in the best interests of Petra, as well as WDL and its
stakeholders.
About the Disposal Business
Petra's shareholding in WDL is held through Mwadui Mine Holdings Limited
("MMHL"), an English incorporated entity. Petra has agreed to sell its entire
shareholding in MMHL, together with all the shareholder loans MMHL owes Petra,
to Pink Diamonds.
WDL is the operator of the Williamson Mine and is currently 25% owned by the
GoT and 75% owned by Petra, with Petra having acquired its majority interest
in WDL in 2009.
The key individuals to the Disposal Business are employed by WDL and will
remain with WDL following Completion.
In the year ended 30 June 2024, the Disposal Business contributed losses of
approximately US$25 million to the Group. The gross assets of the Disposal
Business as at 30 June 2024 were approximately US$87 million. Appendix 2
includes key unaudited historic financial information on the Disposal
Business.
Effect of Transaction on the Group
WDL continues to encounter short-term liquidity challenges and after
Completion, the Williamson Mine will continue to require further capital
investment. Following Petra's strategic review of its cost structure and the
Group's Life of Mine plans and in the current continuing market downturn,
Petra has determined that the Disposal Business would be unable to compete
with the Continuing Group for further capital investment. The Transaction
will enable Petra to focus its capital allocation on the Continuing Group
which provides opportunities for higher returns.
Whilst the Disposal Group's financial results have been consolidated with the
Group's, the Disposal Business has historically made no contribution to the
Continuing Group's cash generation. Completion of the Transaction is not
expected to impact the Continuing Group's cash generation potential.
The Group's going concern assessment is performed excluding the Disposal
Business's operating results, as WDL is considered a ring-fenced operation for
these purposes, as per the definitions and requirements set forth in the
Group's financing agreements. The Disposal Business also does not form part of
the RCF's security package.
Leigh Day settlement
Petra has already made the necessary provisions or provided all the funds
needed to meet its financial obligations under the settlement it reached with
Leigh Day in May 2021. This includes funding of the Independent Grievance
Mechanism ("IGM") and resolving historic complaints, as well as various
restorative justice projects ("RJPs") that provide sustainable benefits to the
communities located close to the mine and Petra will continue to meet its
ongoing commitments in relation to the IGM and such projects following
Completion.
Further details of the Transaction
Further details of the principal terms of the Transaction are set out in
Appendix 1 to this announcement.
The Transaction, because of its size in relation to Petra, constitutes a
'Significant Transaction' for the purposes of the UK Listing Rules made by the
Financial Conduct Authority (the "FCA") for the purposes of Part VI of the
Financial Services and Markets Act 2000 (as amended), which came into effect
on 29 July 2024 (the "UKLRs") and is therefore notifiable in accordance with
UKLR 7.3.1R and 7.3.2R. In accordance with the UKLRs, the Transaction is not
subject to shareholder approval.
Board's views on the Transaction
As noted above, the Board of Petra has concluded that it is preferable for WDL
to come under consolidated ownership and that the Transaction is in the best
interests of Petra, as well as WDL and its stakeholders. Therefore, the Board
believes that the Transaction is in the best interests of Petra's shareholders
as a whole.
IMPORTANT NOTICES
This announcement has been issued by, and is the sole responsibility of,
Petra.
No offer or solicitation
This announcement is not a prospectus and does not constitute or form part of
any offer or invitation to purchase, acquire, subscribe for, sell, dispose of
or issue, or any solicitation of any offer to purchase, acquire, subscribe
for, sell, dispose of or issue, any security.
Overseas jurisdictions
The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law. Persons who are not resident in the
United Kingdom or who are subject to the laws of other jurisdictions should
inform themselves of, and observe, any applicable restrictions or
requirements. Any failure to comply with these restrictions may constitute a
violation of securities laws of any such jurisdictions. To the fullest extent
permitted by law, Petra disclaims all and any responsibility or liability for
the violation of such restrictions by such person.
Forward-looking statements
This announcement includes statements that are, or may be deemed to be,
'forward-looking statements'. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
'believes', 'estimates', 'plans', 'anticipates', 'targets', 'aims',
'continues', 'expects', 'intends', 'hopes', 'may', 'will', 'would', 'could' or
'should' or, in each case, their negative or other variations or comparable
terminology.
These forward-looking statements include matters that are not facts. They
appear in a number of places throughout this announcement and include
statements regarding the Directors' intentions, beliefs or current
expectations concerning, amongst other things, the Group's and, following
Completion, the Continuing Group's results of operations, financial condition,
prospects, growth, strategies and the industries in which the Group and,
following Completion, the Continuing Group operate. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances.
A number of factors could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking statements,
including, without limitation: conditions in the markets; the market position
of each of the Group and, following Completion, the Continuing Group;
earnings, financial position, cash flows, return on capital and operating
margins of the Group and, following Completion, the Continuing Group;
anticipated investments and capital expenditures of the Group and, following
Completion, the Continuing Group; changing business or other market
conditions; and general economic conditions. These and other factors could
adversely affect the outcome and financial effects of the plans and events
described herein. Forward-looking statements contained in this announcement
based on past trends or activities should not be taken as a representation
that such trends or activities will continue in the future. Subject to any
requirement under the UKLRs, the FCA's Disclosure Guidance and Transparency
Rules or any other applicable law or regulation, neither the Company nor any
other adviser of the Company undertakes any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Investors should not place undue reliance on forward
looking statements, which speak only as of the date of this announcement.
Shareholders should carefully review the risk factors which are set out in
Appendix 3 (Additional Information) of this announcement for a discussion of
factors that could cause the Company's actual results to differ materially
from those expected before making a decision. In light of these risks,
uncertainties and assumptions, the events described in the forward-looking
statements in this announcement may not occur.
No profit forecast
Nothing in this announcement is intended as a profit forecast or estimate for
any period and no statement in this announcement should be interpreted to mean
that earnings or earnings per share or dividend per share for the Company for
the current or future financial years would necessarily match or exceed the
historical published earnings or earnings per share or dividend per share for
the Company.
Rounding
Certain figures included in this announcement have been rounded. Accordingly,
figures shown for the same category may vary slightly and figures shown as
totals may not be an arithmetic aggregation of the figures that precede them.
Appendix 1 - Principal terms of the Transaction
Parties and structure
The Transaction is governed by a sale of shares and claims agreement entered
into between the Company, Pink Diamonds, Taifa and MMHL on 21 January 2025
(the "Share Purchase Agreement"). Pursuant to the Share Purchase Agreement and
subject to the Conditions (as defined below), the Company has agreed to sell
and Pink Diamonds has agreed to purchase the Disposal Business.
Conditions
Completion is subject to the fulfilment of each of the conditions set out in
the Share Purchase Agreement, which includes approvals from the Tanzanian
Mining Commission (if needed), the Tanzanian Fair Competition Commission and
Absa Corporate and Investment Banking ("Absa"), the Company's lender under the
Company's revolving credit facility (the "RCF") (together, the "Conditions").
If all of the Conditions have not been satisfied or (where applicable) waived
within 120 days of the Share Purchase Agreement being signed (or such later
date as the parties may agree), each party will have the right (but not the
obligation) to issue a termination notice which will result in the Share
Purchase Agreement terminating 45 days after the termination notice has been
sent and Completion will not occur.
In the period prior to Completion, Petra is required to procure that the
Disposal Business is carried on in the ordinary course and subject to certain
other customary restrictions, in each case subject to such restrictions
complying with applicable law.
Consideration
The US$16 million consideration for the Transaction shall be payable by Pink
Diamonds out of WDL's distributable cash, with 20% of any distributable cash
generated annually payable to Petra until this consideration is fully paid.
There can be no certainty that any or all of this deferred consideration will
be paid to Petra.
Warranties and indemnities
The Company has given certain customary warranties to Pink Diamonds pursuant
to the Share Purchase Agreement relating to matters such as its title to the
share capital in MMHL and MMHL's title to its shares in WDL, WDL's assets and
liabilities, legal proceedings relating to WDL, WDL's mining licence, WDL's
insurance, WDL's recent accounts and certain WDL tax matters.
The Company has also given an indemnity in respect of matters relating to
security operations at the Williamson Mine for the period prior to Completion.
Pink Diamonds has given a reciprocal indemnity in respect of matters relating
to security operations at the Williamson Mine for the period after Completion.
Other matters
If a 'Material Adverse Change' occurs prior to Completion, Pink Diamonds is
entitled to terminate the Share Purchase Agreement with immediate effect. A
Material Adverse Change is limited to the termination of the Williamson Mine's
mining licence (or the threat to do so where such threat is reasonably likely
to result in such termination), an insolvency event affecting MMHL or the
suspension or termination of a material portion of the operations at the
Williamson Mine for a period exceeding twelve months (where such suspension or
termination is not caused by Taifa breaching its mining services agreement
with WDL).
Pink Diamonds has provided various warranties and undertakings that support
Petra meeting its ongoing commitments in relation to the IGM and RJPs.
An affiliate of Petra currently provides technical, diamond marketing and
sales services to WDL in respect of the diamonds sold by WDL from time to
time. This agreement will remain in effect after Completion and, if it is
terminated, Pink Diamonds and WDL may seek to negotiate the terms of a new
agreement for Petra to provide such services to WDL on a 'cost plus' basis.
Taifa has provided a guarantee to the Seller in relation to the performance by
Pink Diamonds and WDL of their obligations under the Share Purchase Agreement
and ancillary Transaction documents.
Governing law and jurisdiction
The Share Purchase Agreement is governed by English law and the parties have
agreed that any dispute in connection with the Share Purchase Agreement shall
be determined by arbitration in accordance with the London Court of
International Arbitration Rules.
Cession Agreement
In connection with the Transaction, the Company and Pink Diamonds have entered
into a cession agreement dated 21 January 2025, pursuant to which Pink
Diamonds has agreed to pledge to the Company the MMHL shares and shareholder
loans it acquires from the Company in the Transaction as security for the
performance by Pink Diamonds of its obligations under the Share Purchase
Agreement, in particular the obligation to pay the Company the deferred
consideration. In the event that an enforcement event under such cession
agreement is triggered, the Company has the right (but not the obligation) to
exercise such security.
Appendix 2 - Historical financial information relating to the Disposal
Business
CONSOLIDATED INCOME STATEMENT FOR THE DISPOSAL BUSINESS FOR THE YEARS ENDED 30
JUNE 2023 AND 30 JUNE 2024
US$m 30-Jun-24 30-Jun-23
Turnover - diamond sales 56.8 49.1
Other allocated income / expenses 0.5 (0.6)
Total Income 57.3 48.4
Net Mining Expenditure (82.3) (78.3)
Cost of Sales (Mining and processing costs) (61.4) (65.1)
Depreciation (13.9) (8.2)
Amortisation of Right-of-use-asset (4.5) (2.6)
Corporate Expenditure (2.5) (2.4)
Operating profit / (loss) for the period (24.9) (29.8)
Impairment of intercompany loans and PPE 6.5 (35.1)
Profit / (loss) for the period before finance costs (18.4) (64.9)
Profit/(Loss) on realignment of currencies (1.9) 3.1
Finance Expense (3.8) (0.6)
Operating profit / (loss) before tax (24.1) (62.5)
Tax (0.5) -
Net profit/(loss) for the period (24.6) (62.5)
CONSOLIDATED BALANCE SHEET FOR THE DISPOSAL BUSINESS AT 30 JUNE 2024
US$m 30-Jun-24
Assets
Non-current assets 52.8
Property, plant and equipment 28.0
Long term receivables 5.1
Right-of-use asset 19.7
Current assets 33.9
Trade and other receivables 22.8
Inventories 9.3
Cash and cash equivalents 1.8
Disposal Business Total Assets 86.7
Non-current liabilities 50.4
Interest-bearing loans and borrowings 18.9
Provisions 31.1
Deferred Tax liabilities 0.4
Current liabilities 65.6
Interest-bearing loans and borrowings 11.9
Trade and other payables 45.7
Accruals (l/pay, tax etc) 7.6
Short term provisions 0.4
Disposal Business Total Liabilities 116.0
Disposal Business Net Asset (29.3)
Note: Basis of preparation
The unaudited historical financial information relating to the Disposal
Business has been extracted without material adjustment from the schedules
that support the audited consolidated financial information of Petra Diamonds
Limited as at and for the two financial years ended 30 June 2024. The segment
results for the Disposal Business are shown prior to the elimination of intra
group assets, liabilities and transactions. Net profit from the Disposal
Business includes allocated corporate expenses.
The unaudited historical financial information as presented has been prepared
using the accounting policies of Petra Diamonds Limited, as adopted in the
published consolidated financial statements for each of the financial years
presented. These accounting policies comply with International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) that are endorsed for use in the UK. The Directors consider that
this approach provides a reasonable basis for the presentation of the
unaudited historical financial information for the Disposal Business.
Appendix 3 - Additional Information
1. Risk Factors
The risks disclosed below are those which the Company considers are material
to the proposed Transaction, will be material to the Continuing Group as a
result of the proposed Transaction, or are existing material risk factors to
the Group which will be impacted by the proposed Transaction.
1. RISKS RELATING TO THE TRANSACTION
a) The Transaction may be delayed or fail to proceed to Completion
Completion is subject to and can only occur upon the satisfaction of the
Conditions, including approvals from the Tanzanian Mining Commission (if
needed), the Tanzanian Fair Competition Commission and Absa, the Company's
lender under the Company's RCF.
There can be no assurance that each of the Conditions described above will be
satisfied (or waived, if applicable) and therefore, the Transaction may not
proceed to Completion.
Completion is also subject to the Company and Pink Diamonds having delivered
certain deliverables prior to or on the date of Completion. Any failure on the
part of the Company and/or Pink Diamonds to comply with any of the
aforementioned obligations could result in the Transaction being delayed or
not completing at all.
If a Material Adverse Change (as defined in Appendix 1 above) occurs prior to
Completion, Pink Diamonds is entitled to terminate the Share Purchase
Agreement with immediate effect.
If the Transaction does not proceed to Completion, the Group will not receive
the consideration from, and may not receive any other potential benefits of,
the Transaction. This may erode confidence among shareholders and other
relevant stakeholders which could, in turn, have a material adverse effect on
the business, financial condition, operating results or prospects of the
Group.
In addition, there can be no guarantee that the Company will be able to agree
another transaction involving the Disposal Business on terms which are
equivalent to, or more favourable than, the terms of the Transaction.
b) If the Transaction does not complete, the Group would lose the
benefits of the sale proceeds and incur transaction costs
If the Transaction does not complete, the Group will not receive the cash
proceeds from, nor realise any of the potential benefits of, the Transaction.
In such circumstances, the Transaction and other costs incurred by the Group
in connection with the Transaction (including the costs of negotiating the
Share Purchase Agreement) would not be offset by such cash proceeds.
Furthermore, the Company's ability to deliver shareholder value may be
prejudiced such that the Company will not be able to deploy the proceeds from
the Transaction and it may impact the perceived value of the Disposal Business
to investors. Either or both of these could have a material adverse effect on
the business, financial condition, operating results or prospects of the
Group.
c) The Company may incur liability under the Share Purchase
Agreement
The Share Purchase Agreement contains customary warranties, indemnities,
covenants and other contractual protections given by the Company in favour of
Pink Diamonds. Pink Diamonds has undertaken a customary due diligence exercise
to minimise the risk of liability under these provisions.
Although the Share Purchase Agreement contains customary limitations relating
to the liability of the Company, any liability to make a payment arising from
a successful claim by Pink Diamonds under any of the relevant provisions of
the Share Purchase Agreement would reduce the consideration and could have an
adverse effect on the business, financial condition, cash flow or prospects of
the Group.
d) Pre-closing changes in the Disposal Business
During the period from the signing of the Share Purchase Agreement to
Completion, unforeseen events or developments may occur, including trading,
operations or outlook of the Continuing Group or the Disposal Business, or
external market factors, which could make the terms of the Share Purchase
Agreement less attractive for the Group. Subject to the terms of the Share
Purchase Agreement, the Company may be required to complete the Transaction,
notwithstanding such events or developments. This may have an adverse effect
on the business, financial condition, operating results or prospects of the
Group.
1. NEW MATERIAL RISKS RELATING TO THE CONTINUING GROUP
a) The Company will be less diversified and its revenue stream will
be reduced, which may be less attractive to investors following Completion
The Transaction involves a change to the Group's business and the Continuing
Group will be smaller as a result. Following Completion, the Continuing Group
will be less diversified and will be more susceptible to adverse developments
in the businesses the Group continues to operate. A material change in the
trading, operations or outlook of these continuing businesses may have an
adverse effect on the business, financial condition, operating results or
prospects of the Continuing Group.
This could have a significant impact on the Company's share price and may mean
that the Company is less attractive to investors. This could also result in
the Company being more susceptible to adverse economic changes than would have
been the case prior to the Transaction and the Company could be more
vulnerable to a takeover approach, which may have adverse consequences for
shareholders (whether by reason of resulting share price fluctuation or a
change in ownership of the Company on terms unfavourable or potentially
unfavourable to existing shareholders).
b) The Transaction may have a disruptive effect on the Group
The Transaction has required, and will continue to require, substantial
amounts of time and focus from the management team and employees of the
Company and the central functions of the Group which could otherwise be spent
operating the Group's business in the ordinary course. Key managers and
employees may become distracted by the Transaction and, accordingly,
decision-making by the Company may be delayed, deferred or otherwise impacted.
This disruption could be prolonged if the Transaction does not proceed to
Completion. The circumstances described above may have an adverse effect on
the business, financial condition, operating results or prospects of the
Group.
c) There may be an adverse impact on the Group's reputation
If the Transaction does not proceed, there may be an adverse impact on the
reputation of the Group due to amplified investor, customer, supplier,
employee and media scrutiny arising in connection with the proposed
Transaction. Any such reputational risk could adversely affect the business,
financial condition, operating results or prospects of the Group.
1. EXISTING MATERIAL RISKS TO THE GROUP THAT WILL BE IMPACTED BY THE
TRANSACTION
a) The Continuing Group may not be able to realise its strategy
There is no certainty and no representation or warranty is given by any person
that the Continuing Group will be able to achieve any of its strategic aims or
returns referred to in this announcement. The financial operations of the
Continuing Group may be adversely affected by general economic conditions, by
conditions within the global financial and diamond markets generally or by the
particular financial condition of other parties doing business with the
Continuing Group.
b) The market price of Ordinary Shares may fluctuate on the basis of
market sentiment surrounding the Transaction
The value of an investment in the Ordinary Shares may go down as well as up
and can be highly volatile. The price at which the Ordinary Shares may be
quoted, the price which investors may realise for their Ordinary Shares and
general liquidity in the market for the Ordinary Shares will be influenced by
a large number of factors, some specific to the Continuing Group and its
operations and some which may affect the industry, markets and segments in
which the Group operates as a whole, other comparable companies or publicly
traded companies as a whole. The sentiment of the stock market (both over the
long and short-term) regarding the Transaction is one such factor which could
lead to the market price of the Ordinary Shares going up or down as well as
impacting liquidity in the Ordinary Shares. The other factors that may affect
the Company's share price include, but are not limited to, (a) actual or
anticipated fluctuations in the financial performance of the Continuing Group
or its competitors, (b) market fluctuations, (c) legislative or regulatory
changes in the markets and segments in which the Continuing Group operates,
and (d) the fluctuation in national and global political, economic and
financial conditions.
1. Material Contracts
1. Continuing Group
The following is a summary of each contract (not being a contract entered into
in the ordinary course of business) to which the Company or any other member
of the Continuing Group is or has been a party: (i) within the two years
immediately preceding the date of this announcement which is, or may be,
material to the Continuing Group; or (ii) at any time, which contains
provisions under which the Company or any other member of the Continuing Group
has any obligation or entitlement which is, or may be, material to the
Continuing Group:
a) Share Purchase Agreement
A summary of the Share Purchase Agreement is set out in Appendix 1 of this
announcement.
b) Cession Agreement
A summary of the Cession Agreement is set out in Appendix 1 of this
announcement.
c) Framework Agreement
The Company, along with its subsidiary undertakings Willcroft Company Limited
("WCL") and WDL, entered into a framework agreement in December 2021 with the
GoT relating to the operations of the Williamson Mine (the "Framework
Agreement").
The Framework Agreement provides for a capital restructuring of WDL, which has
the effect of reducing the Company's indirect shareholding from 75% to 63% and
consequently increasing the GoT's shareholding from 25% to 37%. In connection
with the reorganisation of the parties' legal interests in WDL, the Framework
Agreement also provides for an overall 55:45 economic benefit-sharing ratio
between the GoT and the Company in relation to future economic benefits from
WDL.
The Framework Agreement is governed by Tanzanian law and the parties have
agreed that any dispute in connection with the Framework Agreement shall be
determined by arbitration in accordance with the UNCITRAL Arbitration Rules.
The Framework Agreement is subject to a number of conditions, including
Tanzanian regulatory approvals and is therefore not yet effective. Certain
conditions precedent remain outstanding, awaiting resolution from the GoT. The
Framework Agreement constituted a related party transaction for purposes of
the UK Listing Rules and in order for it to become unconditionally effective
and legally binding on Petra, Petra was required, amongst other things, to
obtain the approval of its shareholders at a Special General Meeting. Such
shareholder approval was obtained by Petra in February 2022.
d) Notes and Notes Indenture
On 9 March 2021, the Company's wholly owned subsidiary (Petra Diamonds US$
Treasury Plc) amended and restated its Notes Indenture governing its senior
secured second lien loan notes due 2026 (the "Notes").
The final maturity date of the Notes is 8 March 2026 and the current aggregate
principal amount of Notes Debt owing to the Noteholders is US$186 million plus
US$42 million of accrued interest.
The Notes currently bear interest at a rate of 9.75 per cent. and are payable
semi-annually in arrears on 30 June and 31 December of each year prior to
their maturity. The Notes Indenture provides for a 30-day grace period
following an interest payment date before the failure to pay becomes an event
of default thereunder.
The Notes are guaranteed by the Guarantors, who are all members of the Group
and which include the members of the Group which own and have the entitlements
to the material assets and revenue streams of the Group.
The Notes are secured on a second-priority basis to the first lien debt
liabilities of the Company.
The second priority security granted in favour of the Notes includes, but is
not limited to:
1. cession, pledges and charges of all claims and shareholdings by the
Company, the Notes Issuer and certain of the Guarantors against debtors and
other third parties;
2. cession of all bank accounts, insurances and intercompany receivables of
the Company and certain of the Guarantors;
3. liens over the moveable assets of the Company and certain of the
Guarantors; and
4. liens over the mining rights and immovable assets held and owned by certain
of the Guarantors,
(together, the "Transaction Security").
The Notes Indenture is governed by the laws of the state of New York and all
parties thereto (including the Company, Petra Diamonds US$ Treasury Plc and
the Guarantors) have submitted to the non-exclusive jurisdictions of the
courts of the state of New York.
The Notes are listed on EuroNext Dublin (Irish Stock Exchange).
Pursuant to the terms of the Notes Indenture, Petra previously implemented the
'Williamson Reorganization' (as such term is defined in the Notes Indenture).
As a result, the sale of WDL pursuant to the Transaction is not an 'Asset
Sale' (as such term is defined in the Notes Indenture) nor is WDL a Guarantor
or pledged.
e) Leigh Day Settlement Agreement
On 12 May 2021, the Company announced that it reached a settlement, on a no
admission of liability basis, in relation to claims brought in London by Leigh
Day, a UK based law firm, on behalf of 71 anonymous claimants, in relation to
alleged breaches of human rights, associated with third-party security
operations, at the Williamson Mine in Tanzania.
The agreed total settlement figure was £4.3 million, which included the sum
to be distributed to the claimants by Leigh Day, a contribution to the
claimants' legal expenses, and significant funds that Petra committed to
invest in programmes dedicated to providing long-term sustainable support to
the communities living around the Williamson Mine.
The agreement also included a framework pursuant to which an additional
payment was made by Petra in respect of 25 additional claimants who came
forward during the final stages of the settlement negotiations.
The agreement also required Petra to establish a new Independent Grievance
Mechanism to investigate and resolve historic complaints alleging severe human
rights impacts in connection with security operations at the Williamson Mine.
The agreement also required several Restorative Justice Projects to be put in
place to provide long-term sustainable benefits to local communities through
income generating projects, including: a feasibility study into a formalised
artisanal mining project at the Williamson Mine; an agri-business project; a
programme which provides medical support to the community; and arrangements
pursuant to which local residents will be permitted to access certain parts of
the mine to collect firewood and/or graze animals. Many of these projects have
been completed or are near completion.
As stated above, Petra has already made the necessary provisions or provided
all the funds needed to meet its financial obligations under the settlement it
reached with Leigh Day in May 2021. This includes funding of the Independent
Grievance Mechanism and resolving historic complaints, as well as the various
Restorative Justice Projects and Petra will continue to meet its ongoing
commitments in relation to the IGM and such projects following Completion.
Further details on the IGM and RJPs can be found on Petra's website here:
https://www.petradiamonds.com/our-business/our-operations/williamson/.
f) RCF
In June 2022, the Group restructured its existing RCF providing more
favourable terms and resulting in a new ZAR1 billion senior RCF with Absa.
This new facility expires on 7 January 2026.
In February 2024 and following the execution of an amendment agreement, Absa
approved an increase in the commitments under the RCF from ZAR1 billion (c.
US$54 million) to ZAR1.75 billion (c. US$96 million), providing an additional
c. US$41 million of liquidity headroom. Such additional commitments are
currently available to the Group.
Interest on the outstanding capital accrues at an interest rate equal to SA
JIBAR + 4.15% per annum, payable monthly (with the margin to be reassessed
annually based on Petra's credit metrics)..
The Group (excluding the Disposal Business) may use the RCF for general
working capital purposes.
The RCF is governed by the laws of South Africa.
1. Disposal Business
No contracts have been entered into (other than contracts entered into in the
ordinary course of business) to which the Disposal Business is or has been a
party: (i) within the period of two years immediately preceding the date of
this announcement, which is or may be material to the Disposal Business; or
(ii) at any time, which contains provisions under which the Disposal Business
has any obligation or entitlement which is, or may be, material to the
Disposal Business.
1. Legal or Arbitration Proceedings
1. Continuing Group
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Company is
aware) during a period covering at least the previous 12 months preceding the
date of this announcement which may have, or have had in the recent past, a
significant effect on the Company's and/or the Continuing Group's financial
position or profitability.
1. Disposal Business
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Company is
aware) during a period covering at least the previous 12 months preceding the
date of this announcement which may have, or have had in the recent past, a
significant effect on the Disposal Business' financial position or
profitability.
1. Significant Change
1. Continuing Group
There has been no significant change in the financial position or financial
performance of the Continuing Group since 30 June 2024, being the end of the
last financial period for which audited financial statements have been
published.
1. Disposal Business
There has been no significant change in the financial position or financial
performance of the Disposal Business since 30 June 2024, being the end of the
last financial period for which the historical financial information relating
to the Disposal Business in Appendix 2 of this announcement was prepared.
1. Related Party Transactions
Save as disclosed in the Company's previously published annual reports and
financial statements, the Company has not, during the period since 1 July
2024, entered into any related party transactions which are relevant to the
Transaction.
Appendix 4 - Definitions
The following definitions apply in this document unless the context otherwise
requires:
"Absa" Absa Corporate and Investment Banking
"Board" the board of directors of the Company
"Cession Agreement" the cession agreement between the Company and Pink Diamonds dated 21 January 2025
"Completion" the completion of the Transaction in accordance with the terms of the Share Purchase Agreement
"Conditions" the conditions precedent as set out in the Share Purchase Agreement and as further described in Appendix 1 of this announcement
"Continuing Group" the Group excluding the Disposal Business
"CREST" the UK-based system for the paperless settlement of trades in listed securities, of which Euroclear UK & International is the operator
"Depositary Interests" independent securities constituted under English law and issued, or to be issued, by Link Market Services Trustees Limited (as depositary) in respect of, and representing on a one-for-one basis, underlying Ordinary Shares which may be held or transferred
through the CREST system
"Directors" the directors of the Company and "Director" means any one of them
"Disposal Business" MMHL and WDL
"FCA" the Financial Conduct Authority
"Framework Agreement" the framework agreement between the Company, WCL, WDL and the GoT as more fully described in paragraph 2 of Appendix 3 of this announcement
"GoT" the Government of Tanzania
"Government Imposed Charges" has the meaning given to such term in paragraph 2 of Appendix 3 of this announcement
"Group" the Company and its subsidiary undertakings from time to time
"Guarantors" Petra Diamonds Limited; Willcroft Company Limited; Petra Diamonds UK Treasury Limited; Petra Diamonds Jersey Treasury Limited; Petra Diamonds US$ Treasury Limited; Petra Diamonds Netherlands Treasury B.V.; Ealing Management Services (Pty) Ltd; Petra
Diamonds Holdings SA (Pty) Ltd; Petra Diamonds Southern Africa (Pty) Ltd; Tarorite (Pty) Ltd; Cullinan Diamond Mine (Pty) Ltd; Finsch Diamond Mine (Pty) Ltd; Blue Diamond Mines (Pty) Ltd; Premier (Transvaal) Diamond Mining Company (Pty) Ltd; and Petra
Diamonds Belgium B.V.
"IGM" Independent Grievance Mechanism
"Initial Transaction" the proposed sale by Petra to Pink Diamonds in May 2023 of 50% less one share of the Disposal Business and a pro-rated portion of shareholder loans owed by MMHL to Petra
"Material Adverse Change" has the meaning given to such term in Appendix 1 of this announcement
"MMHL" Mwadui Mine Holdings Limited
"Notes" the senior secured second lien loan notes due 9 March 2026
"Notes Debt" in relation to the Notes, all present and future monies debts and liabilities owed or incurred from time to time, including the outstanding principal amount of such Notes and any accrued but unpaid interest, by Petra Diamonds US$ Treasury Plc or any
Guarantor
"Notes Indenture" the amended and restated indenture dated 9 March 2021 between, inter alios , the Company, Petra Diamonds US$ Treasury Plc and the Guarantors governing the terms of the issue of the Notes, as further amended
"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company, including the Depositary Interests in respect of such shares
"Petra" or "Company" Petra Diamonds Limited
"Pink Diamonds" Pink Diamonds Investments Limited
"RCF" the Company's revolving credit facility as more fully described in paragraph 2 of Appendix 3 of this announcement
"RJPs" or "Restorative Justice Projects" restorative justice projects as more fully described in the 'Further Information' section of this announcement
"Share Purchase Agreement" the share purchase agreement between the Company and Pink Diamonds dated 21 January 2025
"Taifa" Taifa Mining and Civils Limited
"Transaction" the proposed disposal of the Disposal Business to Pink Diamonds
"Transaction Security" has the meaning given to that term in paragraph 2 of Appendix 3 of this announcement
"UKLRs" the UK Listing Rules made by the FCA for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended), which came into effect on 29 July 2024
"WCL" Willcroft Company Limited
"WDL" Williamson Diamonds Limited
"Williamson Mine" the Williamson Diamond Mine, situated at Mwadui, in Tanzania
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