Finsch

completed

The project entails an IFC revolving loan to Finsch diamond mine in South Africa (“Finsch” or the “Project”), which is 74% owned by Petra Diamonds Limited (“Petra” or the “Company”). The financing, that will be provided jointly by IFC and a South African Bank (Rand Merchant Bank), will enable Petra to: (i) finance the Finsch mine expansion program; (ii) strengthen Petra’s overall liquidity position following its move to the London Stock Exchange (“LSE”) main-board; and, (iii) fund other general corporate requirements (through repayment of intercompany loans) (collectively, the “Project”). On January 21, 2011, Petra entered into an agreement to acquire Finsch from De Beers Consolidated Mines Limited for 1.425 billion South African Rand (about $210 million), that was fully financed by a 205 million Great British pounds (about $325 million) equity-raising. The transaction was completed on September 14, 2011, with Petra assuming management (including production, revenues and cash flow) at the mine. Finsch is one of the world’s major diamond mines with a resource base of 43.3 million carats (“Mcts”), of which 25.8 Mcts are in the reserve category. Finsch produced an average of approximately 2 Mcts per annum over the five years to 2010, from a combination of underground mining and tailings retreatment and has produced 126 Mcts in its 40-plus year life to date. The mine has a new order mining right valid until 2038. Finsch is expected to more than double Petra’s annual production, contributing about 1.5 Mcts per annum to Petra’s production, rising to nearly 2 Mcts per annum by 2018. Finsch adds an eighth producing mine to the Petra group, consolidating Petra’s position as London’s largest quoted diamond mining group and provided a strong platform for the company’s move to the LSE main-board in December 2011. Petra will implement a development plan to increase production from 1.5 Mcts per annum to 2 Mcts per annum by 2018, by gradually opening up Block 5 below the current Block 4 operations, supported by a surface tailings treatment program. Production levels from underground will be maintained during the transition from Block 4 to Block 5 by developing smaller sub-level caves within the Precursor ore body (adjacent to the main ore body) at Block 4 and within Block 5 itself. Petra foresees a long life for the operation and has a current mine plan of 18 years, though the ore body remains open-ended at depth. The Finsch capital expenditure over the next six years for the underground and infrastructure development program is estimated to be approximately $330 million and is expected to be financed by a combination of debt and internal cash generation. The proposed revolving loan facility will allow Petra to fully fund the projected capital expenditure programs for the next two years and withstand unfavorable variations in cash flows.