Petra Diamonds (LON: PDL) said on Monday its share in the Williamson diamond operation in Tanzania will decrease from 75% to 63% while the government’s will jump from 25% to 37% as part of a framework agreement between the parties.
The company will also grant Tanzania a 16% free-carried interest in its subsidiary Williamson Diamonds Limited (WDL), which brings the company in line with the country’s mining legislation passed in 2017.
In addition, the two partners have agreed to an economic benefit ratio of 55% for the government and 45% for Petra.
The company recently resumed operations and sales at Williamson, the country’s only major diamond mine. The asset had been on care and maintenance since April 2020 due to a collapse in diamond prices following the global covid-19 outbreak.
Petra has faced allegations of human rights abuses at the mine, resulting from the actions of its security guards.
The miner formed in February an internal committee to oversee the investigation, which concluded that “regrettable” incidents did take place at the mine in the past. Shortly after, it reached a £4.3 million (about $6m) settlement with claimants, even though it did not admit liability at the time.
Monday’s deal also settles other long-standing, historic disputes around the Williamson mine, with WDL assuming liability and agreeing to pay the government $20 million in installments.
The first portion, $5 million, will be paid once both Petra and the government of Tanzania have fully met their respective financial contributions to restore operations at the mine, the company said.
The subsequent installments will be paid annually at amounts between $3 million and $5 million depending on WDL’s financial ability, as determined by the company’s board of directors.
Despite covid-19 and issues at Williamson, Petra staged a sharp turnaround in fortunes over the past financial year. It cut net debt by two-thirds in the year ended June 30 after a capital restructuring completed in March and rising sales drove growth in free cash flow.
Petra ended fiscal 2021 with net debt of $228 million, down from just under $693 million last year. Net profit reached $196.6 million, reflecting a $213.3 million gain after the successful debt restructuring.
For fiscal 2022, Petra expects to produce between 3.3 million and 3.6 million carats, with capital expenditure of $78- $92 million.
Australia’s Strandline Resources, Black Rock Mining and Orecorp also inked framework agreements with the government of Tanzania on Monday to fulfill a rule that sees the government granted a 16% free carried interest in all major mines in the country.