Petra ready to sell its exploration assets in Botswana for $300 000 plus 5% royalty
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London-listed Petra Diamonds is selling its exploration assets in Botswana for $300000 (R5 million) and a 5percent royalty on future revenues should any of the prospects within the exploration licences be brought into production.
The company said yesterday that it had entered into an agreement to dispose of its exploration assets in Botswana via the sale of 100percent of its holding in Sekaka Diamonds Exploration, to AIM-listed exploration company, Botswana Diamonds.
Last month Petra announced that it had decided to seek offers for the company or for parts of the business or group assets to repay its $650m debt as grappled near-term liquidity risks arising from the unprecedented Covid-19 operating environment.
Chief executive Richard Duffy said yesterday that the sale was in line with the company's strategy.
“This disposal forms part of our strategy to focus on driving efficiencies from our high quality producing mines, but allows us to maintain upside to potential future commercial production from the Botswana assets, particularly from the KX36 deposit,” said Duffy.
Sekaka is Petra Diamond’s exploration vehicle in Botswana and holds three prospecting licences in the Central Kalahari Game Reserve, which includes the high-grade KX36 kimberlite pipe that was discovered by Sekaka. Sekaka also holds a recently constructed bulk sampling plant on site.
Commenting on the transaction, Botswana Diamonds managing director James Campbell said that KX36, together with its associated prospecting licences, added scale to the company’s Sunland and Maibwe JV properties in the Kalahari.
“Botswana Diamonds will refine resource estimates of KX36, and development options. The Sekaka exploration database adds to Botswana Diamonds’ extensive database, improving our diamond exploration programme, particularly in the Kalahari, where we are currently focused,” Campbell, adding that Botswana Diamonds planned to conduct a new exploration programme focused on the KX36 pipe and intended to spend around $100000 a year in each of the next three years.
“No exploration activities were currently possible under the current lockdown restrictions in place in Botswana as a result of the Covid-19,” he said.
The financial terms of the transaction comprise a deferred cash payment of $300000, of which $150000 is payable on or before the end of August next year. The company said the balance in cash would be payable on or before August 31, 2022.
Campbell said Botswana Diamonds intended to fund the cash consideration through an issue of new ordinary shares at such time. “In addition, Petra is entitled to a 5 percent royalty on the sale of diamonds that are commercially produced from KX36,” he said. “The royalty is also payable on diamonds from any kimberlite discovered from Sekaka’s data. Botswana Diamonds has the option to buy-out the royalty for a cash payment of $2m.”
Campbell said the transaction was subject to customary regulatory approvals - which would include the Botswana Ministry of Mineral Resources and the local competition authority - as well as Petra lenders and noteholders.