Petra Diamonds and Mano River propose merger

Vancouver Though still subject to due diligence and various approvals, Petra Diamonds (PDL-A, PDL-L) plans to merge with Mano River Resources (MNO-V, MANA-L) to create a large diamond exploration and mining group focused in Africa.

The proposed merger would be executed on the basis of one new Petra share for each 5.5 common shares of Mano River. The new Petra would focus exclusively on diamonds, which means Mano would sell or otherwise divest its gold assets as close to market value as possible.

Petra operates several South African diamond mines that are collectively expected to produce 167,000 carats this year, rising to 207,000 carats in 2006. The company also has diamond projects in the Alto Cuilo region of northeastern Angola, and in the Koidu diamond mining region of Sierra Leone.

Petra and Mano River are already partners at the Kono diamond project in Sierra Leone, where production is planned for the first half of next year. Mano River also has a large portfolio of advanced diamond projects in Guinea, Liberia, and Sierra Leone, including several optioned to senior mining companies.

The transaction would combine the skills and experience of the two companies. Mano is headed by Tom Elder, who has extensive diamond and gold exploration experience in West Africa. The company’s work programs are overseen by diamond geologist Karl Smithson, who will join the new Petra. Petra will contribute a team experienced in mine development and management.

Looking ahead, the companies note that the new Petra would have increased ability to develop new projects, either on its own, or in partnership with major companies.

In addition to Kono, another high-priority project for the new Petra is the Bouro kimberlite-dyke deposit in Guinea, where Mano River had previously estimated an in-situ grade of 500 carats per 100 tonnes. Production from this project is described as having potential to be ramped up to 250,000 carats per year within three years.

Once the deal is executed, existing shareholders of Petra and Mano would own about 76% and 24%, respectively, of the new enlarged Petra.