Petra Diamonds Limited announces that it has executed a non-binding Memorandum of Understanding (“MoU”) to sell 50% (less one share) of the entity that holds Petra’s shareholding in Williamson Diamonds Limited (“WDL”), along with a pro rata portion of shareholder loans owed by WDL, to Caspian Limited or its nominee (“Caspian”) for a total consideration of US$15 million. Caspian is the long-term technical services contractor at the Williamson Mine in Tanzania.
WDL is the operator of the Williamson Mine. WDL is currently 25% owned by the Government of Tanzania and 75% owned by Petra, with Petra having acquired its majority interest in WDL in 2009. However, further to the Framework Agreement with the Government of Tanzania announced on 13 December 2021, which provides for a capital restructuring of the WDL entity, Petra’s effective interest is due to decrease to 63% and the Government of Tanzania’s to increase to 37%. Upon completion of the transactions contemplated by the MoU and upon the capital restructuring in the aforementioned Framework Agreement becoming effective, Petra and Caspian will each indirectly hold a 31.5% stake in WDL but with Petra retaining a controlling interest in WDL.
Caspian’s purchase will be funded through the settlement of US$11.1 million of past technical services payments owed by WDL to Caspian, including services rendered during the recent restart of operations following the care and maintenance period, with the remaining amount being funded by Caspian rendering US$3.9 million of technical services to WDL in order to ramp-up operations at the Williamson Mine.
The transactions in the MoU are subject to Petra and Caspian agreeing definitive transaction agreements, including a share purchase agreement and a shareholders’ agreement, with the parties seeking to agree those transaction agreements in early CY 2022. The sale of the 50% stake in the entity that holds Petra’s shares in WDL is subject to the parties obtaining all necessary Governmental, regulatory and lender approvals, including approvals from the Tanzanian Mining Commission, the Tanzanian Fair Competition Commission and The Bank of Tanzania, and a binding ruling from the Tanzania Revenue Authority on the tax treatment of the transaction. The parties are seeking to obtain such approvals by the end of H1 CY 2022.
As noted in the Company’s FY 2021 Preliminary Results released on 14 September 2021, the Board decided to review its strategic options at Williamson which resulted in the asset being classified as an asset held for sale for financial reporting purposes. The transaction announced today will see Petra consolidating Williamson’s operating and financial results, with an appropriate recognition of non-controlling interests attributable to both Caspian and the Government of Tanzania.
As announced in the Company’s Q1 FY 2022 Trading Update dated 26 October 2021, production at Williamson has recommenced post the care and maintenance period and is expected to ramp-up over the course of FY 2022, with estimated production at the Williamson Mine in FY 2022 of 0.22 to 0.27 Mcts.
Petra will continue to meet its obligations under the settlement it reached on 12 May 2021 in relation to claims brought in London by the UK law firm Leigh Day on behalf of a number of anonymous claimants. This includes the design and implementation of a non-judicial Independent Grievance Mechanism to address allegations of human rights impacts at the Williamson Mine, and the funding of various restorative and community programmes intended to provide long-term sustainable support to the communities living around the mine.
Richard Duffy, Chief Executive of Petra, commented:
“We are very pleased to be partnering with Caspian, who bring considerable local and mining experience. This will assist us in optimising the orebody for the benefit of all of Williamson’s stakeholders, both in the short term as we continue to ramp-up operations and in the longer term to fully realise the mine’s potential in an improved economic environment.
Our new arrangement with Caspian, following the Framework Agreement signed with the Government of Tanzania on 13 December, puts Williamson on a very solid basis for the future. The reduction in Petra’s equity interest in to WDL, from 75% to 31.5% while still retaining control, both reduces Petra’s exposure in line with our stated objectives outlined in our Preliminary Results while maintaining a share of the upside that we believe exists following the signing of the Framework Agreement with the Government who continue as partners.”
Rostam Azizi, Chairman of Caspian, commented:
“Caspian is a wholly Tanzanian owned company. It is also Tanzania’s largest mining contractor with over 30 years mining related experience. We have been the contractor of choice to most mines in Tanzania and have maintained long and successful relationships with companies such as Petra, De Beers, Barrick and AngloGold Ashanti. In addition, we also own the largest fleet of mining equipment in Tanzania. As a company, we are committed to adopting and adhering to the latest internationally recognised standards throughout all aspects of our business.
“We have been contracting at the Williamson Mine, the largest kimberlite diamond mine in the world by surface area for close to 20 years and as such we are particularly pleased to enter into this next phase of our involvement at the mine as co-owners. We recognise its viability in providing sustainable employment and a significant contribution to the Tanzanian economy.”
