FOR IMMEDIATE RELEASE
13 December 2021 |
LSE: PDL |
Petra Diamonds
Limited
("Petra", the "Company", the
"Group")
Framework
Agreement in principle with the Government of Tanzania
Petra Diamonds Limited announces that it has reached an
agreement in principle with the Government of Tanzania relating to the operations of the
Williamson open pit diamond mine in Tanzania (the “Williamson Mine”), which
recently resumed operations and sales, having been on care and
maintenance since April 2020. The
agreement with the Government of Tanzania has been reached with the view to
establishing a sustainable future for the joint-venture between
Petra and the Government of Tanzania, held through Tanzanian company
Williamson Diamonds Limited ("WDL").
The agreement in principle has been documented in a "Framework
Agreement", which would bind each of Petra, WDL and the Petra Group
entity that currently directly holds shares in the capital of WDL,
Willcroft Company Limited (“WCL”) (together, the "Petra Parties"),
as well as the Government of Tanzania.
The Framework Agreement provides for a capital restructuring of
the WDL entity, including to reflect the 16% free carried interest
that the Government of Tanzania is
entitled to receive in WDL and its shareholder loans under Section
10 of the Tanzanian Mining Act, 2017 and Regulation 10 of the
Tanzanian Mining (State Participation) Regulations, 2020. The
capital restructuring will include:
- a WDL share issue with the effect of reducing Petra's indirect
shareholding from 75% to 63% and consequently increasing the
Government of Tanzania's
shareholding from 25% to 37%;
- a contribution to the Government of Tanzania of 16% of the principal outstanding
value of WCL's shareholder loans payable by WDL, with the remaining
84% of such principal outstanding loans continuing to be owed to
WCL; and
- the transfer of the WDL shares held by WCL to another member of
the Petra Group (either Petra itself or a special purpose
subsidiary).
In connection with the reorganisation of the parties' legal
interests in WDL, the Framework Agreement also provides for an
overall economic benefit sharing ratio between the Government of
Tanzania and Petra in relation to
their future economic benefits from the activities of the
Williamson Mine. The agreed economic benefit sharing ratio is 55:45
as between Government:Petra and is intended to capture the parties'
entitlements as shareholders as well as, with respect to the
Government of Tanzania, the
revenue it collects from WDL arising from taxes, royalties, duties,
fees and other fiscal levies (“Government Imposed Charges”). The
Framework Agreement records that the parties have also agreed that
WDL shall be entitled to off-set its unpaid and overdue VAT
receivables against future Government Imposed Charges payable by it
to the Government of Tanzania,
with such off-set Government Imposed Charges treated as paid for
the purposes of the economic benefit sharing ratio.
The Framework Agreement sets out the terms on which the
shareholder parties of WDL intend to operate the Williamson Mine,
including recording that, as is currently the case and is
consistent with the effective management of the Williamson Mine,
the management of WDL's Tanzanian operations will be carried out in
Tanzania with a continued focus on
engaging local talent to maximise the employment of Tanzanians.
Currently, the mine’s workforce (both employees and contractors)
comprises 98.3% Tanzanian nationals and 1.7% expatriates.
The Framework Agreement provides that Petra and the Government
of Tanzania will provide financial
assistance for the restart of operations at the Williamson Mine,
with Petra having already provided funding and the Government of
Tanzania agreeing to allocate the
proceeds of the sale of the 71,654.45 carat parcel of diamonds from
the Williamson Mine that was previously confiscated and blocked for
export. The original value of this parcel was assessed in
September 2017 at approximately
US$15 million, as previously
disclosed, although Petra has not had the parcel independently
valued.
The Framework Agreement records an important settlement between
the parties of long-standing, historic disputes arising in respect
of WDL and the Williamson Mine. As part of the settlement, WDL
shall be liable to the Government of Tanzania for an amount totalling
US$20 million. This settlement payment shall be made in
instalments, with the first instalment of US$5 million to be paid once PDL and the
Government of Tanzania have fully
met their respective financial contributions to restore operations
at the Williamson Mine. The subsequent instalments of the
settlement amount are to be made annually at amounts between
US$3 million and US$5 million depending on WDL's ability
to pay, as determined by WDL’s board of directors.
The Framework Agreement contemplates the amendment to the
constituent documents of WDL in order to implement effectively the
newly-agreed arrangements.
Petra’s Directors consider the Framework Agreement to be of
material importance to the strength and success of WDL and the
sustainability of its business operations, which in turn shall have
positive benefits for the other Petra Parties as shareholders of
WDL.
The Framework Agreement is subject to a number of conditions,
including Tanzanian regulatory approvals and the consent of Petra’s
South African lender group. Petra is entering into the Framework
Agreement with the Government of Tanzania in the latter's capacity principally
as a regulator and collector of taxes in Tanzania. However, the Government of
Tanzania is also a related party
to Petra for the purposes of the UK Listing Rules, due to the
Government of Tanzania's
shareholding in WDL. Accordingly, the Framework Agreement cannot
become legally binding on the parties until approval is obtained
from Petra’s shareholders. Notwithstanding the foregoing, the
Government of Tanzania's right
under the Tanzanian Mining Act, 2017 to a 16% free carried interest
is an entitlement as a matter of Tanzanian law, which is not of
itself ultimately subject to any approval or condition in any
respect. Accordingly, Petra acknowledges that arrangements to
reflect this will need to be implemented regardless of the
Framework Agreement becoming effective. The Directors consider that
the Framework Agreement reflects effective implementation of the
Tanzanian legal requirements, while securing important benefits for
Petra and its stakeholders through the improvement of economic
arrangements and operations in respect of the Williamson Mine.
Petra will be publishing a Circular, once it has received
approval from the UK’s Financial Conduct Authority, seeking Petra
shareholder approval of the Framework Agreement. The Circular will
be posted to shareholders and will contain a notice convening a
General Meeting of the Company at which such approval shall be
sought. The Circular will be published on the Company’s website at:
https://www.petradiamonds.com/investors/shareholders/meetings/
WDL holds a valid and unencumbered special mining licence number
216/2005 dated 25 May 2005 in respect
of the Williamson Mine, which is located in the Mwadui area in the
Shinyanga region of Tanzania. The
special mining licence confers on WDL the exclusive right to mine
for diamonds in relation to the licence areas until 2030. Petra
released its financial results for the year ended 30 June 2021 on 12 October
2021. During this period, WDL produced a net loss of
US$11.2 million and at the end
of the period had gross assets of US$59.6
million.
Richard Duffy, CEO,
commented:
"This Framework Agreement is the
culmination of many months of negotiations, which were at times
impacted and restricted by the COVID-19 pandemic. We are therefore
delighted to have put this agreement in place, which marks a new
era of the joint venture parties' relationship and sets the
foundation for sustainable operations at the Williamson Mine. I
would like to thank the Government of Tanzania for their ongoing partnership and
support."
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is being
released on behalf of Petra by the Company Secretary.
~ Ends ~
For further information, please
contact:
Petra Diamonds,
London
Telephone: +44 20 7494 8203
Cathy
Malins
investorrelations@petradiamonds.com
Des Kilalea
Julia Stone
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
a supplier of gem quality rough diamonds to the international
market. The Company’s portfolio incorporates interests in three
underground producing mines in South
Africa (Finsch, Cullinan and Koffiefontein) and one open pit
mine in Tanzania (Williamson).
Petra's strategy is to focus on value rather than volume
production by optimising recoveries from its high-quality asset
base in order to maximise their efficiency and profitability. The
Group has a significant resource base of ca. 230 million carats,
which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest
ethical standards and only operates in countries which are members
of the Kimberley Process. The Company aims to generate tangible
value for each of its stakeholders, thereby contributing to the
socio-economic development of its host countries and supporting
long-term sustainable operations to the benefit of its employees,
partners and communities.
Petra is quoted with a premium listing on the Main Market of the
London Stock Exchange under the ticker 'PDL'. The Company’s
US$336.7 million notes due in 2026
are listed on the Irish Stock Exchange and admitted to trading on
the Global Exchange Market. For more information, visit
www.petradiamonds.com.