Petra Diamonds Regulatory News (PDL)

1 Aug 2007 07:01

Petra Diamonds Ld01 August 2007 Petra Diamonds Limited Petra Diamonds Signs Luangue Joint Venture Agreement Petra Diamonds Limited ("Petra") announces that it has entered into a jointventure agreement ("Luangue JVA") with BHP Billiton to develop the Luanguediamond project ("Project Luangue") in north eastern Angola. Highlights • On 28 February 2007 Petra acquired the entire issued share capital of Frannor Investments and Finance Limited ("Frannor") from Xceldiam Limited ("Xceldiam") • Frannor holds interests in Project Luangue, the diamond project that borders the northern boundary of Project Alto Cuilo (which is subject to a separate joint venture agreement between Petra and BHP Billiton) in the diamond belt of north eastern Angola • Under the terms of the Luangue JVA: (i) BHP Billiton has acquired 25% of the issued share capital of Frannor from Petra for a cash consideration of US$22.35 million; and (ii) BHP Billiton's shareholding in Frannor will remain at 25% until BHP Billiton's earn-in date ("BHP Billiton Earn-in Date"), defined as the earlier of (i) the formation of a kimberlite mining company or (ii) 180 days following the submission of a Technical and Economic Viability Study ("EVTE") in accordance with the Luangue kimberlite concession contract, provided that in either case a BHP Billiton pre-feasibility study is completed beforehand. Submission of an EVTE to the relevant authorities in Angola provides a basis for the formation of a mining company. At the BHP Billiton Earn-in Date, BHP Billiton's shareholding in Frannor will increase to 75%, with Petra holding the remaining 25% of Frannor; and (iii) BHP Billiton will sole fund the development of Project Luangue up to the BHP Billiton Earn-in Date. Should a minimum expenditure commitment, defined as three times Petra's net investment cost, not have been reached at the BHP Billiton Earn-in Date, BHP Billiton will continue to sole fund until it is achieved. When this BHP Billiton sole funding threshold has been reached, BHP Billiton and Petra will fund the development of the Project Luangue pro rata to their 75% / 25% respective shareholdings in Frannor (with commensurate dilution if either defaults in funding). BHP Billiton will provide debt financing for Petra's share of the funding requirements, if so requested by Petra; and (iv) Petra has been funding the development of Project Luangue since 1 March 2007. This expenditure, of circa US$3.5 million, will effectively be refunded to Petra by BHP Billiton by way of BHP Billiton making contributions to Frannor in respect thereof, as part of BHP Billiton's sole funding commitment, enabling Frannor to make repayment of such expenditure to Petra in accordance with the terms of the Luangue JVA; and (v) BHP Billiton and Petra will work together to further Frannor's objective of fast-tracking the technical development at Project Luangue. Adonis Pouroulis, Chairman of Petra, said "The Luangue joint venture agreementwith BHP Billiton exemplifies the relationship that both Petra and BHP Billitonhave with ENDIAMA and Luangue's local Angolan partners. The Luangue jointventure will provide increased investment and accelerated development forProject Luangue towards proving a sustainable diamond resource, achieving ourgoal with BHP Billiton and our Angolan partners of developing world classexploration projects in Angola." Background On 28 February 2007 Petra acquired the entire issued share capital of Frannorfrom Xceldiam for an all share consideration of US$65.14 million (£31.79million). Frannor's only business is its interest (via its wholly owned subsidiary) inProject Luangue, a highly prospective diamond exploration project innorth-eastern Angola, bordering Petra's more advanced Project Alto Cuilo to thesouth. Petra considers there to be potential for the geology of the northernpart of Alto Cuilo, the area which has so far led to exceptional explorationdevelopments, to continue into the Project Luangue area. Frannor (via its wholly owned subsidiary) holds a 39% interest in the ProjectLuangue exploration licence for kimberlite diamond deposits and a 40% interestin the Project Luangue exploration licence for alluvial diamond deposits. Petra's other main focus in Angola is Project Alto Cuilo, where Petra and BHPBilliton are working together within a separate joint venture agreement. Thedetails of that joint venture agreement were announced on 14 September 2004. Rationale for the Transaction Petra originally acquired Frannor due to its interest in Project Luangue andPetra's objective of increasing its geographical spread of assets across theAfrican continent, focusing on areas that are known to hold major diamonddeposits, such as the diamond belt of north east Angola. The Luangue JVA brings significant advantages to Petra: • Petra does not fund development of Project Luangue before the BHPBilliton Earn-in Date when a significant milestone has been achieved, being thepreparation of a BHP Billiton pre-feasibility study together with either theformation of a kimberlite mining company or the submission of an EVTE; • BHP Billiton will sole fund the development of Project Luangue untilthe later of the BHP Billiton Earn-in Date and BHP Billiton achieving theminimum expenditure commitment described in (iii) above; • it further consolidates Petra's project base in Angola, offeringgeographical synergies and giving Petra access to the technical skills,experience and project management capability of BHP Billiton; • it will enable BHP Billiton and Petra to combine their extensiveexperience in this area of Angola together with their skills in diamondexploration and experience in working together to develop the full potential ofProject Luangue; and • it will broaden and strengthen further the solid working relationshipthat Petra and BHP Billiton have built at Alto Cuilo, benefiting exploration atLuangue and opening up the possibility for similar joint venture arrangementselsewhere in Angola. Exploration work carried out to date at Project Luangue supports the presence ofkimberlitic clusters in the area immediately north of the common boundarybetween the Alto Cuilo and Luangue project areas. At Luangue, over 70prospective magnetic anomalies have been identified to date. As detailedinformation on diamond content emerges on the Project Alto Cuilo kimberliticoccurrences from the bulk sampling campaign underway there, the selection andprioritisation of bulk sample targets at Project Luangue will be enhanced. Thisis expected to fast-track exploration developments at Project Luangue and isalso expected to reduce costs in many areas, accelerating progress towards apre-feasibility study. The Luangue JVA is distinct from the joint venture agreement in place betweenPetra and BHP Billiton at Alto Cuilo ("Alto Cuilo JV"). The Alto Cuilo JV hasdifferent terms, and requires BHP Billiton to spend US$60 million to acquire a75% holding in Project Alto Cuilo, at which stage the parties will fund on a 75%/ 25% basis. Ends Note: For the purposes of Schedule 4 of the AIM Rules, the cash consideration ofUS$22.35 million as well as the development expenditure to be refunded to Petraof circa US$3.5 million will be added to Petra's treasury. Petra has no specificplans for the use of these funds at this time. For further information, please contact:Louise Goodeve / Justine Howarth Telephone: +44 (0) 20 7851 7480Parkgreen Communications, London Adrian Hadden / Chris Rollason Telephone: +44 (0) 20 7523 8000Collins Stewart, London Notes to Editors: About Project Luangue Petra's activities at Project Luangue are focused on the exploration foreconomic diamondiferous kimberlite and alluvial deposits. The Luangue concessionarea, which is approximately 3,000 km(2) in size, is in the diamond bearingkimberlite belt known as the Lucapa Graben. The valuable Catoca mine (productionof circa 7 million carats expected 2007) is situated some 70 km north east ofthe Luangue concession area. Previous exploration in the concession area by Condiama (the previous De Beersrepresentative company in Angola) in the early 1970's identified eightkimberlites in the Luangue concession area, at least four of which arediamondiferous. Petra's subsidiary Frannor has two Angolan partners at Project Luangue; EmpresaNacional De Diamantes De Angola, Endiama, EP ("ENDIAMA"), which represents theAngolan government, and Bapsil Service Limitada ("Bapsil"), an Angolancommercial company. Frannor (via its wholly owned subsidiary) has a 39%interest in the Project Luangue kimberlite exploration agreement and a 40%interest in the Project Luangue alluvial exploration agreement. Kimberlite programme As at Project Alto Cuilo, aerial surveys to date have indicated the presence ofa significant number of anomalies, with over 70 magnetic anomalies identified ininitial ground and aerial surveys undertaken. A core drilling programme hasresulted in the identification of HS-1, beneath 23 metres of overburden, withdiatreme facies kimberlite outcroping at surface in parts of the pipe. Diatreme facies kimberlite was also intersected at a shallow depth (20 metres)in target area HS-16, situated in the Nacavuri valley north of the base camp.The dimensions and character of this pipe are currently being determined byfurther drilling. Alluvials To date, two areas, the Canguvo area in the central north, and theSampoio-Ngombo corridor along the Luangue River in the central area, have beenthe focus of exploration for diamond bearing alluvial gravels. Over 200,000cubic metres of alluvial gravels has been delineated, with initial samplingresults indicating encouraging recoveries of gem quality diamonds, including an18.21 carat gem quality diamond from the Canguvo area. Diamond recoveries from these gravels are yet to be confirmed as beingstatistically representative to define an economic resource, however it isparticularly encouraging at this early stage to see the quality of the diamondsin the Canguvo area and the concentrations of diamonds in the Ngombo area. Bulksampling of the deposits will continue to be processed through the alluvial bulksampling plant in place at the Ngombo tributary of the Luangue River. This information is provided by RNS The company news service from the London Stock Exchange