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Petra Diamonds sells stake in Kimberley Ekapa JV for $22 million

Petra Diamonds has sold its stake in the Kimberley Ekapa Mining JV (pictured) for about $22 million. (Image courtesy of Petra Diamonds.)

Petra Diamonds (LON:PDL) climbed on Thursday after the miner said it had sold its stake in the Kimberley Ekapa Mining joint venture to its namesake partner, Ekapa Mining, for about 300 million rand ($22 million).

London-listed shares in the South African diamond producer, which have more than halved in the last two years, jumped 3.64% to 55.45 pence by 1:42 PM local time.

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

The sale of its 75.9% stake in the operation, which focuses on mining in South Africa’s Kimberley town, will allow Petra to pay particular attention to its Finsch and Cullinan diamond mines, sources of major recent findings.

The transaction, which would also help the miner reduce operational risk and shore up its finances, is 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.

Petra has accumulated a hefty debt in the last 18 months as it borrowed heavily to expand its mines, particularly the iconic Cullinan, where the world’s biggest-ever diamond was found in 1905 and which has also produced the gems included in the British crown jewels.

The company has also faced illegal mining at its operations, weak prices, a surging South African rand and setbacks in Tanzania, where the government seized last year a diamond parcel from it Williamson mine of about 71,000 carats. The move, part of the country’s ongoing probe into alleged wrongdoing in the diamond and tanzanite sectors, has been costly for Petra, as it shares lost around half of their value last year after the incident.

The company, which operates five mines in Tanzania and South Africa, said the transaction should be completed in the first quarter of its financial year 2019, and is subject to regulatory and lender approvals.