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De Beers Sells Cullinan Mine to Petra
Consortium for $149M

24/11/07. De Beers Consolidated Mines has agreed to sell its famous
Cullinan Diamond Mine to a consortium led by Petra Diamonds for ZAR 1
billion ($149 million,) the companies announced Thursday (November 22,

Petra Diamonds owns a 37 percent stake in the consortium, known as
Petra Diamonds Cullinan Consortium, while the company's black
empowerment partner, Thembinkosi Mining Investments, has 26 percent,
and Saudi Arabia-based investment company, Al Rajhi Holdings, holds the
remaining 37 percent.

Petra said it will operate the mine on behalf of the consortium and will
make production changes to enable it to produce in excess of one million
carats a year. Production at Cullinan fell 13 percent to 1.15 million carats in
2006, according to the De Beers production report for that year, but Petra
believes it can maintain levels above the million-carat per annum mark for
at least the next 20-years left in the mine .

“A major producing diamond asset such as Cullinan very rarely becomes
available and Petra is, with its consortium partners, very proud to be
acquiring such a prestigious asset following a competitive tender
process,” said Adonis Pouroulis, Petra’s chairman. “The transaction is a
historic development for Petra. It brings a major resource to the group with
the expectation of adding significantly to annual production, elevating
Petra into the league of the world’s major diamond producers.”

Petra expects the deal to close by June 2008, and Pouroulis told reporters
in a teleconference the mine would contribute to Petra's revenues from the
2009-10 fiscal year.  

In addition to the operating mine, Cullinan also contains the unexplored
'Centenary-Cut' (C-Cut,) which the companies said contains about 133
million carats of resources, as well as a tailings resource, which will further
enhance production.

Pouroulis said however, that Petra would initially concentrate on the
operating mine, and that tapping the C-Cut resources would come at a
later stage of its ownership.

Collins Stewart, a stockbroking firm which trades in Petra shares,
reiterated a ‘buy’ recommendation on the stock saying the acquisition
would elevate the company to the top end of mid-tier producers, making it
a top 10 diamond miner.

The broker added that the C-Cut resource was a significant part of the deal
as was positive cash flow and earnings accretive from the operation which
had "minimal dilution to shareholders.”

Located near Pretoria, South Africa, the 104-year old mine gained fame in
1905 when the Cullinan Diamond was recovered, which at 3,106 carats is
still the largest diamond ever mined. The stone was cut to form the 530-
carat Great Star of Africa and the 317-carat Lesser Star of Africa, which are
set in Britain’s Crown Jewels.

The deal is the third asset that Petra has bought from De Beers in the past
year, following its acquisition of the Koffiefontein mine in November 2006
and the Kimberley Underground Mines in September 2007. Due to a boost
in revenues from Koffiefontein, the company is expecting to record its first
annual profit in fiscal 2008.

The sale also marks the pinnacle of the De Beers restructure announced in
February 2007, which has seen it divest from non-core assets in order to
focus on profitability.

De Beers managing director, Gareth Penny, said the deal will allow the
company to invest in growth opportunities in South Africa. These would
include the launch of new mines in its portfolio such as the Voorspoed
mine, and the marine mining operation off the West Coast of South Africa,
which are scheduled to be fully operational in 2008 and 2009 respectfully.

"This will enable De Beers to best use capital to invest in exciting growth
opportunities and to sustain a strong diamond mining business in South
Africafor the future," Penny said.