Saad Group to sell 19% stake in Petra Diamonds

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JEDDAH - Saad GroupSaad Group has agreed to sell a 19 percent stake in Petra Diamonds Limited, a UK-based mining company focusing on diamond resources, for $100 million in a private placement.

Saad GroupSaad Group is a Saudi Arabia-based conglomerate engaged in construction and engineering, real estate development, tourism, medical services, financial services, and education sectors.

Following the transaction, Saad GroupSaad Group's stake in Petra Diamonds will decrease from 44 percent to 25 percent.

Petra Diamonds intends to use the proceeds for acquiring additional stake and development of the Cullinan mine in South Africa, repay debt, and refurbish mines.

The shares will be sold partly to pay for a stake in the Cullinan mine in South Africa, where Petra found a chicken-egg sized gem earlier this year.

Petra Chief Executive Officer Johan Dippenaar said "if we raise $100 million, that will be a good number," he said in London. No one at SaadSaad could immediately be reached for comment.

"That stock is with the administrator and a home has to found for it," Investec Ltd. analyst Jonathan Guy said in London. "That clearly provides an overhang on the share price."

Petra increased 6.25 pence, or 9.5 percent, to 72.25 pence in London trading, the biggest one-day gain since Oct. 20.

The Jersey, Channel Islands-based company agreed an option to buy 37 percent of Cullinan from Al Rajhi HoldingsAl Rajhi Holdings W.L.L., doubling its stake to 74 percent, the company said in a statement.

The fundraising will be used to exercise the option, cut debt and refurbish mines, Dippenaar said.

Shareholders have until Dec. 18 to decide on whether to approve the option. Petra said Sept. 29 it found a 507.6-carat stone at the mine the size of a chicken egg and weighing more than 100 grams (3.53 ounces).

"The Cullinan acquisition gives shareholders access to the future growth of value in the mine," Dippenaar said.

"The rough diamond market has improved significantly in recent months," he said in a statement. "Our recent tenders have been particularly successful and this positive price environment bodes well for the overall earnings of our operations as we continue to increase group production."

Meanwhle, the Cullinan mine in South Africa which recently coughed up a 507-carat diamond of exceptional color and clarity, is to come under control of Petra Diamonds.

Petra and Al RajhiAl Rajhi bought Cullinan from De?Beers two years ago for $125?million (£74.4 million). Petra said it is buying out Al RajhiAl Rajhi's 37 percent stake for $80 million, taking its own holding to 74 percent.

© The Saudi Gazette 2009