LSE-listed Petra Diamonds and its black economic empowerment partners plan to sell their 75.9% interest in the Kimberley Epaka Mining (KEM) joint venture (JV) to JV partner Ekapa Mining for about R300-million.
The KEM JV incorporates the Kimberley Underground mine, extensive tailings retreatment programmes and the high-volume Central Treatment Plant, near Kimberley, South Africa.
Petra on Thursday said it has entered into a heads of agreement with Ekapa and that the transaction will ensure a sustainable future for the KEM JV by placing the operation “under the sole stewardship of an operator best suited to maximise its value.
“Ekapa Mining’s extensive experience of operating specifically within Kimberley and its ability to solely focus on these assets is expected to provide the right fit for the operation, thereby ensuring continuation of diamond mining employment and related economic activity in this renowned diamond centre,” the company stated.
It added that while the KEM JV has the potential to be a 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.
Further, the disposal will free up Petra management’s time to focus on its key assets – the Finsch and Cullinan mines.
In addition, Petra expects the disposal to reduce its cash outflow, while decreasing operational risk for the Petra group.
The disposal will be on a going concern basis, with Ekapa Mining taking on all of Petra’s financial, employee, environmental, health, safety and social obligations with regard to the KEM JV operation.
The purchase price will be payable in 24 monthly instalments starting in January 2019.
The transaction is subject to various conditions but is expected to be completed in the quarter ending September 30.
Petra’s share price on the LSE rose by 3.64% on Thursday.