Adelaide, Sep 20, 2006 AEST (ABN Newswire) - Petra Diamonds Limited (ASX: PDL)("Petra" or "the Company" or "the Group"), the AIM-quoted and ASX-listed diamond mining group, announces the issue of a US$20 million unsecured, interest free convertible bond ("the Convertible") as well as the grant of accompanying warrants over 2 million Petra shares ("the Warrant"), both convertible or exercisable at an exercise price of 130 pence per Petra share.
The Convertible and Warrant agreements were concluded on 18 September 2006 and have been issued to Al Rajhi Holdings W.L.L. ("Al Rajhi"), a member of the Al Rajhi group, a major Saudi Arabian based investment group.
Highlights:
- The financing will strengthen Petra"s treasury without burdening the Company with further interest bearing debt and without diluting existing shareholders at the current market price
- Petra will now have the flexibility to act quickly on potential growth opportunities, such as acquisitions or investments in other diamond mines or related businesses
- The Convertible is unsecured and interest free, repayable by Petra 36 months from the date of issue if not converted
- The Convertible is convertible by Al Rajhi into Petra shares at a price of 130 pence per share - representing a 24.2% premium to the 30 day average Petra share price
- Petra has granted Al Rajhi Warrants over 2 million Petra shares, exercisable at a price of 130p per share
Adonis Pouroulis, Petra's Chairman, comments: "This convertible bond financing gives Petra the ability to actively consider revenue and production growth opportunities that have the potential to fast-track Petra's development and further entrench the Company as a true mid-tier diamond producer. The financing will also serve to underpin our treasury should we decide to expand our exploration interests and exercise our warrants as part of the Xceldiam cooperation agreement. We are confident that the growing relationship with Al Rajhi will only assist in Petra achieving its long term objectives."
Details of the Convertible and Warrant
The Convertible is unsecured, interest free, and is convertible at the election of Al Rajhi into Petra ordinary shares at a price of 130 pence per share ("the Conversion Price"). The number of Petra shares to be issued will be calculated by reference to the Pounds/US$ exchange rate on the business day immediately prior to the date of conversion. If not converted, the principal amount of the Convertible (US$20 million) is to be repaid by Petra 36 months from the date of issue, being 18 September 2009. The Convertible may only be converted in full.
The Convertible contains standard events of default and restricts Petra from incurring additional debt in excess of US$2 million if such debt would rank in priority to the outstanding amount under the Convertible, or incurring additional balance sheet debt in excess of US$10 million, save that these restrictions do not apply to any guarantee provided by the Petra Group to the South African Department of Minerals and Energy for the purposes of environmental rehabilitation in relation to any existing and future mining operations in South Africa or any debt incurred by the Petra Group to fund a new property or asset where security for such debt is granted over such property or asset.
The Conversion Price represents a premium of 29.3% over the 30 day average Petra share price up to and including 25 August 2006 of 100.5 pence, when the term sheet between the parties was signed. On 18 September 2006, when the formal binding legal documentation was signed, the Conversion Price represented a premium 24.2% over the 30 day average Petra share price up to and including 18 September 2006.
As there is no interest chargeable on the Convertible, Petra has granted Al Rajhi the Warrant over 2 million Petra ordinary shares, the Warrant being exercisable at a price of 130 pence per share at any time from the date of drawdown under the Convertible until 18 September 2009, being 36 months from the date of grant. The Warrant will remain exercisable should Al Rajhi elect to convert the Convertible.
Reasons for issuing the Convertible
Petra's stated objective is to become a true mid-tier diamond group, and with that objective in mind the Company continues to scrutinise acquisitions and business opportunities in the diamond sector. The Company has decided not to issue new Petra shares at this time as consideration for any such acquisitions, or as a method of raising equity finance by the placing of new shares at the current market price.
Although the Company has reported solid production growth in the year to June 2006 and is aiming to increase production still further in the 2007 financial year, Petra does not wish to take on significant interest bearing debt burden into the Group. The structure of the Convertible means that Petra will have funds on hand for opportunities that pass the Company's stringent criteria, and that the Company will be able to enter into negotiations knowing that it has the treasury in place to have active discussions.
The Company is currently evaluating opportunities that the board of Petra believe may have the potential to grow revenue and cash flow, and the Company will provide further information should any of these opportunities progress to formal agreements. In the meantime, the proceeds of the Convertible will be held by Petra and accrue bank deposit interest and any acquisitions or other business development will be subject to the Company's demanding review criteria.
Use of proceeds
The proceeds of the Convertible may be applied to the following purposes, depending on developments over the coming months;
(i) the acquisition of, or investment in, further operating diamond mines;
(ii) the acquisition of, or investment in, further diamond or related and complementary businesses;
(iii) the possible exercise by Petra of warrants to subscribe for shares in Frannor Investment and Finance Limited, a subsidiary of Xceldiam Limited (at Petra's discretion) pursuant to the terms of the Strategic Cooperation Agreement announced between Petra and Xceldiam Limited on 30 May 2006; and
(iv) any other purpose that the Petra board considers to be a sound business development for the Petra Group.
Al Rajhi Group
Al Rajhi Holdings W.L.L. and Al Rajhi Partners (together "Al Rajhi") represent the business interests of Sheikh Abdulrahman Saleh Al Rajhi and his immediate family in Saudi Arabia.
Al Rajhi has a substantial portfolio of assets under management, comprising investments in financial services; infrastructure; telecoms and utilities; real estate; oil, gas and petrochemicals. Key investments include Bank Al Bilad, DanaGas; Saudi Telecom; Saudi Cement Company (Khalid al Rajhi, CEO of Al Rajhi, is a director of each of these companies);
Al Rajhi already holds (via Al Salam Opportunities) 6.8 million ordinary Petra shares, representing 4.58% of the Company's ordinary issued share capital. Based on this current holding and current Pounds/US$ exchange rates, on conversion of the Convertible (approximately 8.2 million shares) and Warrant (2 million shares) Al Rajhi would then hold approximately 17 million ordinary Petra shares, representing 10.0% of the Company's fully diluted ordinary share capital.
Contact
Kevin Skinner
Senior Consultant
FIELD PUBLIC RELATIONS
231 South Road
MILE END SA 5031
Tel: (08) 8234 9555
Fax: (08) 8234 9566
Mob: 0414 822 631
kevin@fieldpr.com.au
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