Petra to Raise $178M to Repay Debt

RAPAPORT... Petra Diamonds plans to sell stock to shareholders in a bidto raise $178 million and pay off its debt, it said Thursday. The miner will issue 332.8 million new shares for $0.54 (GBP0.40) each, a steep discount to Wednesday's closing stock price of $1.02 (GBP0.76). Shareholders will have the right to buy five shares at the reduced pricefor every eight shares they already own. Petra will use up to $120 million of the proceeds from the rightsissue to repay debts to its lenders in South Africa, comprising Absa, FirstRandBank and Nedbank. The remainder will cover operating expenses, which have risendue to the strengthening of the rand against the dollar. "Whilst Petra has successfully delivered on the majority ofmilestones associated with our expansion programs, cash-flow generation overthe last two years has been impaired by a combination of the operational delaysin fiscal 2017, combined with a number of business challenges experienced inthe first half of fiscal 2018," Petra CEO Johan Dippenaar said. The miner has accumulated high debt levels as a result ofthose difficulties, it said. Production delays at its Cullinan and Finsch minesin South Africa in the fiscal year ending June 2017 resulted in a cash-flowdeficit of about $130 million. The company later suffered from strikes at itsSouth African mines, while the Tanzanian government's seizure of a parcel of roughdiamonds from its Williamson mine has dented revenue, as the company is stillunable to sell those stones. That incident, combined with other financialproblems related to the Williamson mine, has reduced liquidity by $35 millionto $40 million, it added. The appreciation of the South African rand between Novemberand February has further impacted debt levels, the miner continued. The companyhas had to seek waivers from its lenders three times to avoid breaches ofcovenants, it said. Even so, Petra is on track to meet its production forecastof 4.6 million to 4.7 million carats for the fiscal year ending June 31, afterit reduced the outlook in January from an earlier projection of 4.8 million to5 million carats. The miner noted a "firm" market at its May tender, withrough-diamond prices in line with guidance at its Finsch and Kimberley mines,and above expectations at Koffiefontein and Williamson. Prices at Cullinan werebelow the forecast, it added.