De Beers Consolidated Mines agreed to sell its Kimberley underground mines for ZAR 78.5 million ($10.9 million), which closed in 2005, to Petra Diamonds.
De Beers Consolidated Mines (DBCM) spokesperson Tom Tweedy said the agreement to sell to Petra follows an intensive selection process by them in consultation with their corporate advisors, Standard Bank.
"Petra will operate the mines with its BEE joint venture partner, Sedibeng Mining, with whom Petra also operates the Dancarl Mine in the Barkley West District, which Petra previously purchased from De Beers."
Petra took 74 percent of Kimberley Underground with its Black Economic Empowerment (BEE) partner Sedibeng Mining (Pty) Ltd holding the remaining 26 percent. Under the agreement, De Beers has guaranteed the full environmental rehabilitation liability of the mine at a cost of ZAR 63.5 million ($8.9 million,) while Petra will pay the remaining amount of ZAR 15 million ($2.1 million) in cash.
Petra said it expects sales from the mines to reach in excess of 100,000 carats a year at an average $160 per carat once full production recommences.
Petra bought the Koffiefontein mine from De Beers in November 2006 and is reported to be bidding for the Cullinan Mine which De Beers has put on tender as part of the strategic review.
Petra, meanwhile, said it expects the Kimberley Underground mine to have a remaining life of “at least 12 years.”
"Petra will also assume responsibility for full care and maintenance of the underground mines from the signature date," he said in a statement.
Petra, Sedibeng and DBCM would now seek the necessary approvals from the Department of Minerals and Energy.
Chief Executive Oficer of Petra Johan Dippenaar said their transactions with DBCM had created about 1000 new jobs to date.
Dippenaar said due to the economic multiplier effect of mining, these mines brought much needed development and economic activity to local communities. We would like to extend our gratitude to both the department and DBCM for their extraordinary efforts in making this transaction possible.
DBCM said the proposed sales form part of efforts to position itself for future growth by focusing resources on those mines that fit the company's strategy to ensure sustainable growth beyond 2014.
Managing-director of DBCM David Noko said the company believed that other players could take advantage of the opportunities of "those assets that may not have a strategic fit" with the company.
"Today's agreement with Petra is a reflection of our commitment to encourage wider industry growth and facilitate broad BEE ownership and competition within the South African diamond sector," he said.
Petra believes that, based on its operating model, the Kimberley underground mines will have an economic life in excess of 10 years.