Petra Diamonds has entered into a sale of shares and claims agreement on behalf of both its and its black economic empowerment partners’ interest in Helam Mining to Lindleys Mining for a nominal consideration of R200 with immediate effect.
The Helam mine was put on care on maintenance by Petra Diamonds during FY 2015, following previous attempts to source a suitable purchaser, and no mining activities have been conducted by the company since then.
The rationale for the disposal is to support the South African Government’s intention to prolong the lives of mines facing closure by facilitating opportunities for emerging miners to the benefit of entrepreneurs, host communities and local employment.
The disposal is also in line with Petra Diamonds’ strategic priorities, which include that the bboard continues 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.
The board has determined to enter into a sale of shares and claims agreement based on the following benefits to Petra:
- whilst Helam has the potential to be a small-scale 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; and
- it will reduce cash outflow with existing care and maintenance expenditure amounting to about US$2 million per annum.
Lindleys Mining will take on all of the company’s environmental obligations with regards to Helam, currently estimated at about R23 million excluding VAT.
As part of the disposal, agreement has been reached for the joint use of the processing plant at Helam, which has historically been used to conduct resource and production sampling and analyses for the Petra Group. Lindleys Mining have agreed to continue with such sampling and analyses for a period of up to two years. Petra Diamonds intends to establish appropriate sampling facilities elsewhere in the group which, once commissioned, will replace the need to continue with this arrangement.
Due to Helam being the owner of an old-order mining right, the sale is not conditional upon ministerial consent; the transaction will thus become unconditional with immediate effect.
Jim Davidson, former technical director of Petra who retired from the Company on 30 June 2018, was approached by the existing owners of Lindleys Mining to be a co-shareholder in this venture given his extensive experience with Helam and to maximise their chances of success. Davidson has agreed to subscribe to 49% of the shares in Lindleys Mining.