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Petra to Raise $178M to Repay Debt

Rights issue follows severe operational challenges for the miner.
May 24, 2018 8:33 AM   By Rapaport News
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RAPAPORT... Petra Diamonds plans to sell stock to shareholders in a bid to raise $178 million and pay off its debt, it said Thursday.

The miner will issue 332.8 million new shares for $0.54 (GBP 0.40) each, a steep discount to Wednesday’s closing stock price of $1.02 (GBP 0.76). Shareholders will have the right to buy five shares at the reduced price for every eight shares they already own.

Petra will use up to $120 million of the proceeds from the rights issue to repay debts to its lenders in South Africa, comprising Absa, FirstRand Bank and Nedbank. The remainder will cover operating expenses, which have risen due to the strengthening of the rand against the dollar.

“Whilst Petra has successfully delivered on the majority of milestones associated with our expansion programs, cash-flow generation over the last two years has been impaired by a combination of the operational delays in fiscal 2017, combined with a number of business challenges experienced in the first half of fiscal 2018,” Petra CEO Johan Dippenaar said.

The miner has accumulated high debt levels as a result of those difficulties, it said. Production delays at its Cullinan and Finsch mines in South Africa in the fiscal year ending June 2017 resulted in a cash-flow deficit of about $130 million. The company later suffered from strikes at its South African mines, while the Tanzanian government’s seizure of a parcel of rough diamonds from its Williamson mine has dented revenue, as the company is still unable to sell those stones. That incident, combined with other financial problems related to the Williamson mine, has reduced liquidity by $35 million to $40 million, it added.

The appreciation of the South African rand between November and February has further impacted debt levels, the miner continued. The company has had to seek waivers from its lenders three times to avoid breaches of covenants, it said.

Even so, Petra is on track to meet its production forecast of 4.6 million to 4.7 million carats for the fiscal year ending June 31, after it reduced the outlook in January from an earlier projection of 4.8 million to 5 million carats.

The miner noted a “firm” market at its May tender, with rough-diamond prices in line with guidance at its Finsch and Kimberley mines, and above expectations at Koffiefontein and Williamson. Prices at Cullinan were below the forecast, it added.
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Tags: ABSA, Cullinan, Finsch, FirstRand Bank, Johan Dippenaar, Koffiefontein, Nedbank, petra, Petra Diamonds, Rapaport News, Williamson
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