Petra Diamonds Regulatory News (PDL)

19 Sep 2006 07:01

Petra Diamonds Ld19 September 2006 19 September 2006 Petra Diamonds Limited US$20 million Interest Free Convertible Bond Issue Petra Diamonds Limited ("Petra" or "the Company" or "the Group"), the AIM-quotedand ASX-listed diamond mining group, announces the issue of a US$20 millionunsecured, interest free convertible bond ("the Convertible") as well as thegrant of accompanying warrants over 2 million Petra shares ("the Warrant"), bothconvertible or exercisable at an exercise price of 130 pence per Petra share. The Convertible and Warrant agreements were concluded on 18 September 2006 andhave been issued to Al Rajhi Holdings W.L.L. ("Al Rajhi"), a member of the AlRajhi group, a major Saudi Arabian based investment group. Highlights: • The financing will strengthen Petra's treasury without burdening the Company with further interest bearing debt and without diluting existing shareholders at the current market price • Petra will now have the flexibility to act quickly on potential growth opportunities, such as acquisitions or investments in other diamond mines or related businesses • The Convertible is unsecured and interest free, repayable by Petra 36 months from the date of issue if not converted • The Convertible is convertible by Al Rajhi into Petra shares at a price of 130 pence per share - representing a 24.2% premium to the 30 day average Petra share price • Petra has granted Al Rajhi Warrants over 2 million Petra shares, exercisable at a price of 130p per share Adonis Pouroulis, Petra's Chairman, comments: "This convertible bond financinggives Petra the ability to actively consider revenue and production growthopportunities that have the potential to fast-track Petra's development andfurther entrench the Company as a true mid-tier diamond producer. The financingwill also serve to underpin our treasury should we decide to expand ourexploration interests and exercise our warrants as part of the Xceldiamcooperation agreement. We are confident that the growing relationship with AlRajhi will only assist in Petra achieving its long term objectives." Details of the Convertible and Warrant The Convertible is unsecured, interest free, and is convertible at the electionof Al Rajhi into Petra ordinary shares at a price of 130 pence per share ("theConversion Price"). The number of Petra shares to be issued will be calculatedby reference to the £/US$ exchange rate on the business day immediately prior tothe date of conversion. If not converted, the principal amount of theConvertible (US$20 million) is to be repaid by Petra 36 months from the date ofissue, being 18 September 2009. The Convertible may only be converted in full. The Convertible contains standard events of default and restricts Petra fromincurring additional debt in excess of US$2 million if such debt would rank inpriority to the outstanding amount under the Convertible, or incurringadditional balance sheet debt in excess of US$10 million, save that theserestrictions do not apply to any guarantee provided by the Petra Group to theSouth African Department of Minerals and Energy for the purposes ofenvironmental rehabilitation in relation to any existing and future miningoperations in South Africa or any debt incurred by the Petra Group to fund a newproperty or asset where security for such debt is granted over such property orasset. The Conversion Price represents a premium of 29.3% over the 30 day average Petrashare price up to and including 25 August 2006 of 100.5 pence, when the termsheet between the parties was signed. On 18 September 2006, when the formalbinding legal documentation was signed, the Conversion Price represented apremium 24.2% over the 30 day average Petra share price up to and including 18September 2006. As there is no interest chargeable on the Convertible, Petra has granted AlRajhi the Warrant over 2 million Petra ordinary shares, the Warrant beingexercisable at a price of 130 pence per share at any time from the date ofdrawdown under the Convertible until 18 September 2009, being 36 months from thedate of grant. The Warrant will remain exercisable should Al Rajhi elect toconvert the Convertible. Reasons for issuing the Convertible Petra's stated objective is to become a true mid-tier diamond group, and withthat objective in mind the Company continues to scrutinise acquisitions andbusiness opportunities in the diamond sector. The Company has decided not toissue new Petra shares at this time as consideration for any such acquisitions,or as a method of raising equity finance by the placing of new shares at thecurrent market price. Although the Company has reported solid production growth in the year to June2006 and is aiming to increase production still further in the 2007 financialyear, Petra does not wish to take on significant interest bearing debt burdeninto the Group. The structure of the Convertible means that Petra will havefunds on hand for opportunities that pass the Company's stringent criteria, andthat the Company will be able to enter into negotiations knowing that it has thetreasury in place to have active discussions. The Company is currently evaluating opportunities that the board of Petrabelieve may have the potential to grow revenue and cash flow, and the Companywill provide further information should any of these opportunities progress toformal agreements. In the meantime, the proceeds of the Convertible will beheld by Petra and accrue bank deposit interest and any acquisitions or otherbusiness development will be subject to the Company's demanding review criteria. Use of proceeds The proceeds of the Convertible may be applied to the following purposes,depending on developments over the coming months; (i) the acquisition of, or investment in, further operating diamond mines; (ii) the acquisition of, or investment in, further diamond or related and complementary businesses; (iii) the possible exercise by Petra of warrants to subscribe for shares in Frannor Investment and Finance Limited, a subsidiary of Xceldiam Limited (at Petra's discretion) pursuant to the terms of the Strategic Cooperation Agreement announced between Petra and Xceldiam Limited on 30 May 2006; and (iv) any other purpose that the Petra board considers to be a sound business development for the Petra Group. Al Rajhi Group Al Rajhi Holdings W.L.L. and Al Rajhi Partners (together "Al Rajhi") representthe business interests of Sheikh Abdulrahman Saleh Al Rajhi and his immediatefamily in Saudi Arabia. Al Rajhi has a substantial portfolio of assets under management, comprisinginvestments in financial services; infrastructure; telecoms and utilities; realestate; oil, gas and petrochemicals. Key investments include Bank Al Bilad,DanaGas; Saudi Telecom; Saudi Cement Company (Khalid al Rajhi, CEO of Al Rajhi,is a director of each of these companies); Al Rajhi already holds (via Al Salam Opportunities) 6.8 million ordinary Petrashares, representing 4.58% of the Company's ordinary issued share capital. Basedon this current holding and current £/US$ exchange rates, on conversion of theConvertible (approximately 8.2 million shares) and Warrant (2 million shares) AlRajhi would then hold approximately 17 million ordinary Petra shares,representing 10.0% of the Company's fully diluted ordinary share capital. Ends For further information, please contact: Justine Howarth / Cathy Malins Telephone: +44 (0) 20 7493 3713 Parkgreen Communications, London Notes to Editors: Overview of Petra's Operations > Petra is focused on the exploration and mining of diamonds in Africa. Petra's strategy is to continue to build its portfolio of revenue producing and exploration assets, achieving the objective of becoming a 'mid-tier' diamond group. > Petra has operations in Angola, South Africa, Botswana and Sierra Leone. Petra is well placed to achieve high yielding results from the increasingly robust market for diamonds. > Petra's exploration activities at Alto Cuilo in Angola continue to deliver ever more exciting results and the joint venture with BHP Billiton has expedited exploration with the identification to date of over 50 kimberlitic occurrences together with diamond indicator mineral results comparable with some of the world's economic diamond deposits . > In May 2006 Petra announced that it has entered into a strategic cooperation agreement with AIM quoted Xceldiam Limited, with regards to the neighbouring Luangue and Alto Cuilo diamond projects > The South African operations delivered a significant increase in production to 175,000 carats for the year to June 2006. Further increases in production are expected for the year to June 2007 and beyond. Two large stones were reported in the twelve months, one 76 carat stone which sold for US$465,000 and also a 67 carat stone which was sold for US$704,265. > In Botswana, exploration is currently focused on the Gope area where Petra holds diamond prospecting licences covering ground that is known to host several diamondiferous kimberlites. > In Sierra Leone, Petra has earned a 51% interest in the Kono Project, following the expenditure of US$3million on the project. This JV with AIM and TSX-listed Mano River Resources Inc is progressing well and first production from the Lion fissures was reported for June 2006. For further information on Petra Diamonds, please visit www.petradiamonds.com This information is provided by RNS The company news service from the London Stock Exchange