July 5, 2018 / 11:28 AM / 3 months ago

Petra Diamonds sells stake in Kimberley JV for $22 million

(Reuters) - Petra Diamonds has sold its stake in the Kimberley Ekapa Mining joint venture for about 300 million South African rand ($22 million), the miner said on Thursday.

London-listed shares in the miner, which have more than halved in the last two years, rose 2.8 percent to 55 pence by 1135 GMT.

Petra Diamonds (PDL.L) said it would sell its 75.9 percent stake in the business, which focuses on mining in the South African town of Kimberley, to its joint venture partner Ekapa Mining.

The sale would allow Petra to focus on its Finsch and Cullinan diamond mines, reduce operational risk for the group and shore up its finances.

The company, which operates five mines in Tanzania and South Africa, said it expected the stake sale to be recorded as a non-cash impairment charge in the region of $35 to $45 million in its 2018 results.

About 600 workers downed tools in September last year in a protest over pay at the Kimberley Ekapa Mining joint venture and Finsch mine.

The labor strike contributed to Petra’s stretched financial position, forcing it to renegotiate its loan agreements as debt soared.

Petra has also been hit by production delays, a confiscated consignment of diamonds in Tanzania and a strong South African rand and has sought waivers from its lenders three times.

The miner raised $178 million in a rights issue in June to help cut its mounting debt.

“With the strategic priority to ensure all assets in Petra’s portfolio generate returns and contribute positive cash flow to the business, we view the disposal as a positive development,” RBC analysts said in a note, while reiterating its “outperform” rating on the miner.

The transaction should be completed the first quarter of Petra’s financial year 2019 and is subject to regulatory and lender approvals.

Reporting by Justin George Varghese in Bengaluru and Zandi Shabalala in London; editing by Jason Neely and Kirsten Donovan

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