Petra Diamonds will offload its majority stake in the Kimberley mine, claiming the deal will ensure a sustainable future for the project and help the company focus on its core assets.
Ekapa Mining has agreed to buy Petra’s 76% interest in the South Africa deposit for $22 million (ZAR 300 million), Petra said Thursday. The companies are currently in a joint venture incorporating the Kimberley underground mine and its associated tailings operations, with Ekapa holding 24%.
Local businesses known as Petra’s Black Economic Empowerment partners also own a portion of the miner’s share, and will be selling their interest.
“The rationale for the disposal is to ensure a sustainable future for [the Kimberley joint venture] by placing the operation under the sole stewardship of an operator best suited to maximize its value,” Petra said.
Ekapa’s experience of operating in Kimberley and its ability to focus solely on those assets will help maintain employment and economic activity in the historic diamond center, the miner added.
The deal will also free up Petra executives’ time to concentrate on key mines such as Finsch and Cullinan, and reduce operating costs and risks, the company said. The Kimberley project still needs time before its income exceeds spending, Petra cautioned. In addition, the sale value will help Petra’s cash availability, it noted.
Petra expects to complete the sale in the first fiscal quarter ending September 30, with Ekapa paying the purchase amount in 24 monthly installments beginning January 2019.
The London-listed miner said it would review its portfolio of assets on an ongoing basis when it announced a stock sale in May. That process, known as a rights issue, saw Petra grant its investors rights to buy additional shares in the company, thereby raising $178 million to repay bank debt.
The miner has accumulated significant debts due to several difficulties at its mines, including production delays at Cullinan and Finsch, strikes at its South African operations and the seizure of a diamond parcel by the Tanzanian government.