When Petra Diamonds and its BEE (Black Economic Empowerment) partners acquired the Finsch and Cullinan mines from De Beers Consolidated Mines, Petra agreed to finance the BEE Partners’ 26% share in each mine.
These loans to the BEE Partners by Petra were subject to normal commercial interest rates and were due to be repaid to the company out of the Finsch and Cullinan mine free cash flows.
The BEE partners in Finsch and Cullinan are Senakha Mining Investments, Thembinkosi Mining Investments and the Petra Diamonds Employee Trust (PDET).
However working with Absa (Corporate and Investment banking) and RMD (a division of First Rand Bank), US$98 million has been raised to pay down the debt. The loans made directly to the BEE partners will be financed from cash flow derived from their share of the mines.
Johan Dippenaar, Petra CEO comments: “The re-financing of the BEE partner loans is a validation by Absa and RMB of the quality of Petra’s asset base, cash flows and management team. The repayment of these loans significantly strengthens the company’s balance sheet, enhances flexibility and places Petra in a strong position financially.”
Petra Diamonds has a resource base of 300 million carats and produced over 3 million carats in 2014.
Petra states that its intention “is to adopt a proactive strategy to foster and encourage BBBEE and transformation at ownership and management level, through skills development training, employment equity, procurement and rural development. The South African operations are fully BBBEE compliant from an equity ownership perspective”.
Petra will apply the funds flowing from the refinancing to its Group treasury, further strengthening the balance sheet and confirming the commencement of dividends for the current financial year.
The refinancing means that:
- the loans due by the BEE partners to Petra are settled some three to four years sooner than previously would have been the case; and
- The employees of Petra’s South African operations (the beneficiaries of the PDET) will receive their first trust distribution in December 2014, some three to four years earlier than was previously expected to be the case.
Petra believes “that employees who are empowered and accountable for their actions work to the best of their ability, and the company has fostered a culture whereby innovation and creativity in the workplace is encouraged and rewarded. We believe that no-one knows our operations better than our own employees and the company looks to leverage its internal skills-base wherever possible”.
Dippenaar has led Petra through a period of significant growth, taking the company’s annual production from circa 175 000 carats in FY 2006 to 3.1 million carats in FY 2014, and establishing the company as a leading independent diamond producer.
Quoted on the London Stock exchange the company has a market cap of GBP 987 million and a current share price of 195p with plans to produce 5.1million carats in 2019.