Crown Diamonds and Petra plan merger

Vancouver – A proposed marriage between Australian-listed Crown Diamonds and South African based, AIM-listed Petra Diamonds will create a diversified producer and explorer of the gemstones in Africa.

The agreement, anticipated to take a few months to consummate along with multi-jurisdictional regulatory and shareholder approvals, will see Petra as the surviving entity. The proposal will see every eight Crown shares swapped for one Petra share, resulting in the issuance of about 37.2-million new shares and increasing its share capitalization to just over 110 million.

Crown is one of the larger non-African companies producing diamonds on the continent. An experienced underground miner, it is ramping up production from its kimberlite fissure mining operations in South Africa. Its Messina and Star operations, as well as the recently acquired Helam and Dancarl mines, are expected produce over 160,000 carats of diamonds in 2005. Crown has seen some exceptional stones produced from its mines, including recent 56.6 and 42-carat, high gem-quality stones, selling for over Aus$650,000 and Aus$400,000 respectively.

In late-2004, Crown entered a joint venture with Canadian and AIM-listed Mano River Resources (MNO-V) whereby it will invest US$3-million over three years, earning a 51% interest in and become operator of Mano River’s subsidiary, Kono Diamond Corporation. Kono holds the Lion Kimberlite Dykes project, in eastern Sierra Leone, that is expected to see production by 2005-06.

Petra Diamonds’ principal project is Alto Cuilo in northeastern Angola, joint ventured with BHP Billiton (BHP-N). The advanced stage project will see BHP Billiton investing up to US$60 million in exploration and development to earn up to a 75% interest.

The 270,000 hectare Alto Cuilo concession has seen past work by De Beers and recent programs of geophysics and drilling by Petra that has so far identified 12 kimberlite pipes. Much of the exploration is focused on the area around the Mussunuige-Luangue River interfluve (ML Complex). In one area, a number of drill-tested anomalies appear to coalesce as a single large kimberlite complex, hosting about 115 million tonnes of material, albeit on widely spaced drilling. Sampling for macro-diamond content has yet to be undertaken; however the area does contain alluvial diamond deposits and adjacent, separate kimberlites that have produced a number of gem quality stones.

Interpretation from geophysics program conducted in mid-2004 suggests the area around anomalies 4, 13 and 14 in the ML Complex may have a size of around 70 hectares.

A diamond recovery plant commissioned in September-2004 has been processing gravels from the Luangue River and kimberlitic material from the AC2 complex. Through to November-2004, almost 2,700 macro-diamonds were recovered with a total weight of 680 carats, including 10.4 and 9.6 carat stones from kimberlite.

Petra, also partnered in the deal with Angolan state-owned company Endiama and local group Moyoweno, plans to commence alluvial production in 2005 while continuing to delineate and test the pipes.

The Alto Cuilo kimberlite cluster occurs at the intersection of the regional-scale Lucapa graben formation and Cassai Shield.

Petra also holds interests in two other large diamond concessions in Angola, Muriege and Medio Kwanza; and has the Syferfontein kimberlite pipe project (acquired from Gold Fields) in the Klerksdorp area of South Africa. A joint venture is also in place with Rio Tinto (RTP-N) who is exploring on several Petra leases in Limpopo province of northern South Africa.