The ball is rolling for Petra Diamonds on the African continent as diamonds from the company's Koffiefontein hard rock mine in South Africa are fetching prices second only to Letseng mine's and it is looking forward to revenue from potential company-maker, the Cullinan mine.
Petra (AIM:PDL) also announced today that it has gained increased stakes in its former joint venture exploration projects with BHP Billiton, Alto Cuilo and Luangue in Angola, as BHP Billiton is transferring its interests to Petra. This implied that the upcoming company would accelerate these projects and apply its own approach to the promising information available on the prospects.
Petra's stake in Alto Cuilo will increase from 31 March from 9% to 41.2% and from 29.25% to 39% in Luangue from 30 April. Initial funding for further exploration from internal cash resources totals $10m for Alto Cuilo to the end of the year and $12m for Luangue until April 2009.
Chief executive officer of Petra, Johan Dippenaar, said the company's South African operations were testament to the fact that the diamond market was strong at both the top and lower end.
Petra achieved record prices with its last two tenders - selling diamonds from its Koffiefontein mine for an exceptional $484/ct over the four months ending April, which represented an 18.6% rise on the average price received over the six months ending December last year.
These attained prices made Koffiefontein one of the top performers among hard rock diamond mines, with probably only the Letseng mine in Lesotho producing stones that fetch higher prices. He added that Petra's last two tenders for diamonds at Koffifontein exceeded the sterling prices of the last four months at $524/ct and $526/ct.
Petra took over Koffiefontein as a loss-making operation from De Beers and anticipated mining grades of 7.25 carats per hundred tonne (cpht), while it is now achieving grades in excess of 8cpht.
Interestingly, Dippenaar said the lower end of the diamond market also appeared strong as its fissure mines achieved an average price of $231/ct for the four months ending April compared to an average price of $182/ct in the six months ending December 2007.
The increase was achieved in what is regarded as run-of-the-mill goods, indicating a strong market towards the lower end of the market as well.
Petra is also anticipating results from the potential company-maker Cullinan mine, which is on track to be owned by the Petra Diamonds Cullinan Consortium (PDCC) by the end of June.
The company is progressing very well with the acquisition that is going to be transitional for Petra, it said.
Petra was able to access the mine on a regular basis as it already had the approval of South Africa's Competition Commission for the acquisition. The company will tell the market how it plans to restore Cullinan to the state of comfortable producer when the acquisition is completed.
Cullinan will be a major producer in Petra's hands, the company is well-placed to benefit as production levels increase.
The company added that forward exchange rate cover it put in place has brought its $50m share of the $149m cost of Cullinan down to $40m to date.