Petra Diamonds shareholders back rights issue

LONDON – Shareholders in mining company Petra Diamonds on Wednesday approved a rights issue to raise about $170-million to help cut its debt burden, driving the share price around 5% higher.

The company, which has suffered setbacks in Tanzania as well as production delays and strikes, had said there was a risk it could run low on working capital and breach its debt covenants if shareholders did not back the rights issue.

The shareholders backed it by more than 99% at a special general meeting on Wednesday.

CEO Johan Dippenaar said the focus was on reducing gearing, lowering interest payments and on consolidating progress.

He said in a telephone interview the results of the last three quarters were "very solid", but the company still needs to resolve a dispute with the Tanzanian government.

Petra Diamonds' shares lost around half of their value last year after the company suffered delays in expansion projects and in September the Tanzanian government seized a consignment of diamonds.

So far this year, the share price had lost another 1.5%, but by 1450 GMT it was 4.7% higher versus the previous day's close.

While the seized diamond consignment is still in dispute, five shipments have been exported since and talks are ongoing, the chief executive said.

"We are full of hope we will achieve an amicable settlement," Dippenaar said.

Petra, which was accused of under-declaring the value of the stones, is caught up in a wider crackdown on international miners by the Tanzanian government as it seeks a greater share of mineral revenue. Petra has denied the accusation.