JOHANNESBURG (miningweekly.com) - London-listed Petra Diamonds confirmed on Wednesday that it plans to undertake an equity fundraising and said it had entered into an option agreement that would double its stake in South Africa's Cullinan mine to 74%.

The fundraising, led by Canaccord Adams and RBC Capital Markets, would be undertaken to exercise the option, which would see Petra acquiring Al Rajhi's 37% stake in the iconic mine.

Petra and the Saudi-based investment firm each bought a 37% stake in the mine in 2008, with a black economic-empowerment partner holding the balance.

Increasing its ownership in Cullinan to 74% would double the company's attributable production from the mine to 650 000 ct/y, from 320 000 ct/y, and would boost attributable resources from 75,7-million carats to 151,4-million carats.

Petra produced more than one-million carats in the 2009 financial year, up from the 200 287 ct produced in the 2008 financial year.

The company said that the placing would also strengthen its balance sheet by reducing its debt and would see the implementation of development programmes at Cullinan and the Williamson mine, in Tanzania, which would increase production.

Petra would issue 36-million shares at 80p a share to Al Rajhi if it exercises the option and would pay the Saudi investor a deferred option fee of $35-million.

The miner, which has until December 18 to exercise the option, would repay the $20-million Al Raijhi convertible loan, plus accrued interest of $475 000 from the placement proceeds.

It would also assume responsibility for the $80-million Cullinan loan that is due to Al Raijhi.

The original financing package put in place by Petra and Al Rajhi was $175-million, covering the R1-billion acquisition price of the Cullinan mine and a further R400-million for the mine's working capital.

Al Rajhi provided a $95-million loan, of which $15-million had been repaid to date.

"The consolidation of the Cullinan acquisition and the simplification of the ownership structure will be highly value accretive to us and our shareholders. We are pleased that Al Rajhi has decided to restructure its direct ownership in the Cullinan mine," commented Petra CEO Johan Dippenaar.

Al Rajhi would be entitled to appoint a director to the Petra board, with its shareholding increasing to more than 10%.

WHITE DIAMONDS FETCH $2,8BN

Meanwhile, Dippenaar announced that the company had sold two white diamonds from Cullinan for $2,8-million earlier this month.

Petra sold a 58,49-ct diamond for $1,82-million and a 53,31-ct diamond for $960 000.

The group said that the prices achieved boded well for the values that could be realised from 507 ct and 168 ct white diamonds, which were recovered from the same production series at the Cullinan mine in September.

The 507,55-ct white diamond is considered to be among the top-20 largest high-quality rough diamonds ever found.

"The rough diamond market has improved significantly in recent months, as evidenced by the strengthening of prices we have witnessed since early 2009. Our recent tenders have been particularly successful and this positive price environment bodes well for the sale of the exceptional 168-ct white Cullinan diamond, as well as for the overall earnings of our operations as we continue to increase group production," Dippenaar commented.

The Cullinan mine is renowned for producing many of the world's most spectacular diamonds, including the largest gem diamond ever recovered, the ‘Cullinan', at 3 106 ct. 
This diamond was cut into smaller gems, two of which were retained for the British Crown Jewels.

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