De Beers unloads diamond mine
De Beers sells its oldest asset - Kimberley Mines - to a consortium controlled by Ekapa Mining and Petra Diamonds.
|||Johannesburg - De Beers has sold its oldest asset Kimberley Mines to a consortium controlled by empowerment group Ekapa Mining and Petra Diamonds, for R102 million, signalling the end of an era for De Beers’ mining in Kimberley.
Ekapa Mining, with a 50.1 percent stake in the consortium, and Petra, which owns the difference, said there were no plans to shed the mine’s 353 jobs. Ekapa Mining chief executive John Hohne said “jobs are relatively safe”.
Diamonds were first discovered near Kimberley in 1871, about 1.6km away from the De Beers’ farm that gave its name to the former monopoly.
Life extension
Kimberley Mines, owned by De Beers since 1888, was the company’s second-largest source of South African diamonds, and will be sold as soon as regulatory conditions are met. Anglo American owns 85 percent of De Beers.
Through the sale, Kimberley Mines, which produced 722 000 carats last year, will be given an extension of its life beyond 2018.
Ekapa Mining said it was expecting to produce 700 000 carats a year in the first three years of Kimberley Mines’ operation, with revenue of about R920m annually, based on an assumed diamond price of $95 (R1 368) a carat.
Hohne said the most compelling aspect of the deal was the extension of the mining and processing of Kimberley’s tailings mineral resources (TMRs) far into the future.
Kimberley-based Ekapa was established as a family business that operated contract work for De Beers about 20 years ago and has, over the past 10 years, become an empowerment firm.
The acquisition will be funded by Ekapa Mining and Petra according to their percentage in the consortium, with Petra’s share being R50.9m, the firm said.
De Beers said its decision to sell to Ekapa Mining was based on its experience as a TMR operator with sound technical, financial and economic capability and strong corporate and social responsibility credentials, including an ongoing commitment to the Kimberley region.
“The sale combines experienced operators and enables them to leverage their joint resources, expertise and capabilities to create a compelling future for Kimberley tailing resources,” the company said.
Phillip Barton, the chief executive of De Beers Consolidated Mines, said though the decision to sell the mine had not been easy, it was the right thing to do.
“Previously an employee of Kimberley Mines, and a resident for many years in this famous diamond city, I know I represent all the De Beers leadership, over many generations, when I acknowledge today that passing this mine to new owners is an important commitment by De Beers to the future of Kimberley Mines.”
Johan Dippenaar, Petra’s chief executive, said: “We look forward to working with (Ekapa) to build upon their proven capabilities in tailings retreatment operations in Kimberley, as well as their strong local relationships.”
Petra’s portfolio includes four producing mines in South Africa, one in Tanzania and exploration activities in Botswana. A 122.52-carat blue diamond, recovered from its Cullinan operation, sold for $27.6 million (R398.5m) last year.
De Beers plans to retain a presence in Kimberley through various other businesses, including Sightholder Sales South Africa.
Shares tumble
Petra’s shares tumbled 63 percent this year on lower diamond prices and investor concerns about the company’s debt. The stock jumped the most in more than three years yesterday, partly after Petra said on Monday its banks had agreed to waive some of its debt covenants.
“This is a good transaction for Petra,” SP Angel Corporate Finance said in a note to investors.
* Additional reporting by Bloomberg
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