Petra Diamonds Focused on Africa Growth but Keeps Eye on M&A-CEO

By Alex MacDonald

CAPE TOWN--Petra Diamonds Ltd. (PDL.LN) is focused on developing its portfolio of diamond mines in Africa rather than pursuing acquisitions but keeps a close eye on opportunities given the scarcity of large diamond deposits globally, the company's chief executive said.

Diamond producers Rio Tinto PLC (RIO) and BHP Billiton Ltd. (BHP) said last year they wanted to quit the diamond business, in part because it has become harder to find large new deposits that can be mined on a large scale.

BHP is selling its remaining diamond operations in Canada to Harry Winston Diamond Corp. (HW.T) while Rio Tinto is looking for a buyer for its portfolio of diamond assets, which includes stakes in Canada's Diavik mine, Australia's Argyle mine, and Zimbabwe's Murowa mine as well as the Bunder diamond project in India.

When asked whether Petra Diamonds would be interested in Rio Tinto's assets, Johan Dippenaar said: "Because there are such few mines, you always look to see what's available...[but] We are Africa-based and it's much easier to do things here. We are focused on our current portfolio of assets." Mr. Dippenaar was speaking to Dow Jones Newswires on the sidelines of this week's Mining Indaba conference in Cape Town.

Petra Diamonds has five key operating mines in South Africa, a sixth mine in Tanzania and an exploration program in Botswana.

More than 90% of the world's diamonds come from 30 mines, he said, and global diamond production has been falling steadily since peaking at 177 million carats in 2005. Global rough diamond output in 2012 is expected to be similar to the 124 million carats produced in 2011, according to Bain & Co.

Mr. Dippenaar said he expects diamond prices will continue to rise given the limited supply and growing demand from China and India. Bain & Co estimates that supply will grow by an average of 2.7% a year until 2020 while demand will grow at an average 5.9%.

Petra Diamonds is aiming to spend about $546 million to grow its rough diamond production to an estimated 5 million carats in 2019 from an estimated 2.6 million carats in 2013. This would involve processing 21.2 million metric tons of ore and tailings in 2019, up from an estimated 16.9 million tons in 2013. In other words it hopes to recover nearly twice as many diamonds in 2019 by only processing 25% more tons of material than 2013.

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