Petra Diamonds Regulatory News (PDL)

Petra Diamonds Limited

("Petra" or the "Company" or the "Group")

Disposal of Interest in Kimberley Ekapa Mining Joint Venture ("KEM JV")

Petra Diamonds Limited announces that it has entered into a binding Heads of Agreement with regards to the disposal of the Company's and its black economic empowerment ("BEE") partners' 75.9% interest in the KEM JV to the Company's joint venture partner Ekapa Mining (Pty) Ltd ("Ekapa Mining") for a cash consideration of ca. ZAR300 million (the "Disposal").

KEM JV is a joint venture between Petra and its partner Ekapa Mining and incorporates the Kimberley Underground mine, extensive tailings retreatment programmes and the high volume Central Treatment Plant - all located in or around the historic diamond mining centre of Kimberley in South Africa.

The Disposal will be on a going concern basis, with Ekapa Mining taking on all of the Company's financial, employee, environmental, health, safety and social obligations with regards to the KEM JV operation. The ca. ZAR300 million purchase consideration will be payable in 24 monthly instalments starting in January 2019.

The rationale for the Disposal is to ensure a sustainable future for KEM JV by placing the operation under the sole stewardship of an operator best suited to maximise its value. Ekapa Mining's extensive experience of operating specifically within Kimberley and its ability to solely focus on these assets is expected to provide the right fit for the operation, thereby ensuring continuation of diamond mining employment and related economic activity in this renowned diamond centre.

Petra set out the Company's strategic priorities in its Rights Issue announcement dated 24 May 2018, including that the Board would continue on an ongoing basis to review the asset portfolio of the business with a view to maximising return on capital and to ensure that all assets are in a position to contribute positive cash flow to the business.

Following an initial approach by Ekapa Mining in mid-June 2018 with regards to agreeing a potential transaction, the Board has as of today determined to enter into a binding heads of terms based on the following benefits to Petra:

· while KEM JV has the potential to be a sustainable and economic diamond producer, it is better suited to an operator with an owner-manager approach that is able to solely focus on the optimisation of these assets;

· it will subsequently free up considerable Petra management time that can be focused on the key assets of the business, in particular Finsch and Cullinan;

· it will reduce cash outflow, given that it will take time to ensure KEM JV can make a positive cash contribution to the business;

· it will decrease operational risk in the context of the wider Petra Group; and

· the purchase consideration will facilitate the Group's working capital position.

Completion of the Disposal will be subject to a number of conditions, including:

· approval by the South African Competition Commission;

· Section 11 Ministerial consent in terms of the South African Mineral and Petroleum Resources Development Act, 2002 in respect of the underground mining operations;

· the consent of Petra's South African lender group and the release of relevant securities in relation to the KEM JV; and

· the passing of resolutions approving the Disposal by the relevant boards.

The Disposal is expected to effectively complete in Petra's Q1 FY 2019 (the three months to 30 September 2018).

It is expected that a non-cash impairment charge will be recorded in the Company's preliminary results for the year to 30 June 2018 (the "Prelim Results"), calculated to be in the region of US$35 - 45 million; however, this figure will be assessed by the Company and will be subject to finalisation of the Prelim Results.

This Disposal constitutes a Class 2 transaction for the purposes of the UK Listing Rules and further required disclosures are below:

Notes:

1. All numbers stated above are on a 100% basis and therefore do not only represent Petra's existing 75.9% effective interest in the KEM JV.

2. Including the US$68.5 million gross impairment charge.

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

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For further information, please contact:

Petra Diamonds, London Telephone: +44 20 7494 8203

Cathy Malins investorrelations@petradiamonds.com  

Cornelia Grant

Marianna Bowes

Buchanan Telephone: +44 20 7466 5000

(PR Adviser) pdl@buchanan.uk.com 

Bobby Morse

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 has a diversified portfolio incorporating interests in five producing operations: three underground mines in South Africa (Finsch, Cullinan and Koffiefontein), the Kimberley Ekapa Mining joint venture (including the Kimberley Underground mine and extensive tailings retreatment operations) and one open pit mine in Tanzania (Williamson). It also maintains an exploration programme in Botswana and South Africa.

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 the efficiency and profitability of its operations. The Group has a significant resource base in excess of 300 million carats, which supports the potential for long-life operations.

Petra conducts all operations according to the highest ethical standards and will only operate 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' and is a constituent of the FTSE4Good Index. For more information, visit www.petradiamonds.com.