XLD Xceldiam

RNS Number:0927S
Petra Diamonds Ld
01 March 2007

                                 JOINT NEWS RELEASE



For release: 1 March 2007




                  Petra Diamonds Limited and Xceldiam Limited


        Proposed Acquisition of Frannor Investments and Finance Limited



Petra Diamonds Limited ("Petra") (AIM / ASX: PDL) and Xceldiam Limited 
("Xceldiam") (AIM: XLD), the diamond mining and exploration groups, announce 
that they have entered into a conditional agreement ("the Agreement") whereby
Petra will acquire the entire issued share capital of Frannor Investments and
Finance Limited ("Frannor BVI") from Xceldiam Limited ("Xceldiam") ("the
Transaction"). Frannor BVI and its subsidiary hold Xceldiam's interests in the
Luangue diamond exploration project ("Luangue"), which borders Petra's Alto
Cuilo project ("Alto Cuilo") in north-eastern Angola.



Highlights


  * The Transaction, which is conditional on the approval of Xceldiam
    shareholders at an extraordinary general meeting ("EGM") scheduled to be
    held on 19 March 2007, is an all share transaction and Petra will issue
    19,674,584 shares ("the Consideration Shares"), representing 13.1% of
    Petra's current issued share capital, to Xceldiam in consideration for the
    sale of the entire issued share capital of Frannor BVI to Petra. It is
    proposed that, subject to the approval of Xceldiam shareholders, the
    Consideration Shares will in turn be distributed to shareholders of Xceldiam
    (excluding Petra), by way of an interim dividend ("the Interim Dividend").
    Xceldiam shareholders will therefore maintain an interest in Luangue, as
    well as having an interest in Petra's other operations.

  * Based on the number of Consideration Shares, each Xceldiam shareholder
    (other than Petra which holds 1,555,555 Xceldiam shares that it subscribed
    for when Xceldiam was admitted to AIM in November 2005) is expected,
    assuming none of Xceldiam's quoted warrants ("the Warrants") or warrants
    held by WH Ireland (that were issued to WH Ireland at the time of Xceldiam's
    admission to AIM) ("the WHI Warrants") are exercised before the record date,
    to receive (subject to rounding) 368.65 Petra shares for every 1,000
    Xceldiam shares held. Petra has waived its right to receive any Petra shares
    by way of the Interim Dividend. Certain of Xceldiam's shareholders will be
    subject to a twelve month orderly market undertaking in respect of the
    shares they will hold in Petra.

  * Based on Petra's mid market closing price on 27 February 2007 of 157
    pence, the Transaction values Frannor BVI at #31.79 million. Taking into
    account the US$1.25 million cash that will remain in Xceldiam when the
    Transaction is completed, the Transaction values Xceldiam at #32.43 million,
    representing a 20.5% premium to the Xceldiam share price on 27 February 2007
    and a 44% premium to the Xceldiam share price on 19 January 2007, being the
    trading day prior to Xceldiam's announcement that it was in advanced stage
    negotiations which may lead to an offer being made for Xceldiam or one of
    its subsidiaries.

  * Timothy George (Chairman and CEO, Xceldiam), Robert Kaplan (Finance
    Director, Xceldiam) and Richard Rice (Technical Director, Frannor BVI) will
    work with Petra to ensure a smooth and effective integration of Frannor BVI
    into the Petra group. Timothy George, Robert Kaplan and Tobin Prior, who are
    currently directors of Xceldiam, will resign from Xceldiam when the
    Transaction is completed.

  * It is proposed that Xceldiam's shares continue to trade on AIM and that
    Xceldiam pursues new investment opportunities in the mining sector in
    accordance with an investing strategy, details of which will be announced
    separately by Xceldiam in due course ("the Investing Strategy").


Xceldiam acknowledges that on 21 February 2007 it announced that it had received
an unsolicited second offer for either Xceldiam or its subsidiaries which was
being considered by the Board. However, on 27 February 2007, Xceldiam received a
letter formally withdrawing that second offer and accordingly the offer by Petra
is the only offer available for consideration.




Xceldiam Extraordinary General Meeting

The Transaction requires under the AIM Rules (as a disposal resulting in a
fundamental change in business under AIM Rule 15) the approval of a simple
majority of Xceldiam's shareholders. A notice of EGM (the "EGM Notice"),
including an explanatory letter from the Xceldiam Board, will be dispatched by
Xceldiam to its shareholders and a further announcement confirming that it has
been sent will be made in due course.

The EGM Notice will include three ordinary resolutions ("the Resolutions") as
set out below:


    (i)    that the Transaction be approved;


   (ii)    that the Xceldiam Investing Strategy as set out in the
           Xceldiam circular be approved; and


  (iii)    that the Interim Dividend in specie of the 19,674,584 Petra shares be 
           approved and declared payable to Xceldiam shareholders on record as 
           at 9 March 2007 in proportion to the number of shares held by such 
           Xceldiam shareholders.

It is also a requirement, under the AIM Rules, that following a fundamental
disposal which results in a company holding only cash, it must adopt an
investing strategy which outlines, inter alia, the nature of the investments it
intends to make over the next twelve months. The Investing Strategy will be
included within the EGM Notice and explanatory letter from the Xceldiam Board to
be dispatched by Xceldiam to its shareholders in due course.

The directors of Xceldiam have confirmed to the Petra Board that they intend to
unanimously recommend to Xceldiam shareholders that they vote in favour of the
Transaction and have themselves irrevocably undertaken to vote in favour of the
Resolutions in respect of a total of 16,950,000 Xceldiam shares, representing
approximately 30.8 % of Xceldiam's issued share capital. The Company holds
irrevocable undertakings from the holders of a further 11,646,555 Xceldiam
shares to vote in favour of the Resolutions, which together with the Directors'
irrevocable undertakings, represents in total approximately 52% of Xceldiam's
issued share capital.

Adonis Pouroulis, Chairman of Petra, said "We are delighted to announce the
proposed acquisition of Frannor BVI which will significantly enhance our
presence in Angola. We are confident that Luangue has the potential to match the
exceptional exploration developments announced at the neighbouring Alto Cuilo.
We believe that Angola offers substantial potential for the discovery of major
new diamond deposits, a view which we believe is shared by majors who are now
focusing their diamond exploration programmes in this area."

Timothy George, Chairman and CEO of Xceldiam, commented "Our progress and
promising exploration developments on Luangue have been followed by Petra since
we started activities in Angola. It is sensible now that Luangue continues to be
developed alongside Alto Cuilo, improving the potential for the development of a
kimberlite mine in the area."


Background

Petra also has diamond interests in Angola, the main focus being the Alto Cuilo
concession which borders Xceldiam's interests in the Luangue concession. Petra
has extensive experience of operating in this region and, in addition, Petra and
Xceldiam share a common joint venture partner, Endiama, on their respective
projects.

Xceldiam's current activities are focused on the Luangue concession, where
Xceldiam, through its interest in Frannor BVI, is prospecting for kimberlite and
alluvial diamond deposits. Frannor BVI, through its wholly owned subsidiary,
holds a 39% interest in the Luangue exploration licence for kimberlitic diamond
deposits and a 40% interest in the Luangue exploration licence for alluvial
diamond deposits. Frannor BVI and its wholly owned subsidiary do not currently
generate any profits.

Luangue and Alto Cuilo are situated in a highly prospective diamond area of
north east Angola. The concession areas share a common border, with Luangue
being directly north of Alto Cuilo, and it is the area either side of this
common border that each concession is, based on geology and diamond
prospectivity, focusing its exploration activities.  Petra and Xceldiam consider
that there is potential for the geology of the northern part of Alto Cuilo, the
area which has so far led to exceptional exploration developments, to continue
into the Luangue area.

Petra and Xceldiam have had a close working relationship since Xceldiam's
formation in late 2004 and this relationship was formalised in May 2006 when a
strategic co-operation agreement was executed. This agreement enabled Xceldiam
to use exploration and other data from Alto Cuilo to accelerate exploration
activities in Luangue. As detailed information emerges on the Alto Cuilo
kimberlitic occurrences from the large diameter drilling ("LDD") and bulk
sampling campaign underway there, it will significantly enhance the selection
and prioritisation of LDD targets at Luangue.


Rationale for the Transaction

For Petra, the Transaction represents a further step in its long-term growth
strategy of becoming a significant player in the diamond industry, by building a
quality exploration portfolio to complement its current producing mines. One of
Petra's objectives has been to increase its geographical spread of assets across
the African continent, focusing on areas that are known to hold major diamond
deposits, and the Transaction gives Petra an enhanced geographical spread of
diamond assets in the diamond belt of north east Angola.

For Xceldiam, the Transaction offers its shareholders continued exposure to
Luangue alongside a broader exposure to Petra's production and advanced
exploration activities.

The combined Petra and Frannor management teams will have the depth and
knowledge to develop diamond opportunities anywhere on the African continent.
The combination of the management teams and corporate structures will also give
rise to costs savings.


Terms of the Agreement

Xceldiam owns 100% of Frannor BVI, which in turn manages the interests of
Xceldiam in both the kimberlite and alluvial exploration activities on the
Luangue concession. Pursuant to the Agreement, the entire issued share capital
of Frannor BVI will be transferred by Xceldiam to Petra.

In view of this change in ownership, the ultimate responsibility for ensuring
Frannor BVI complies with its responsibilities and obligations with regards to
the Luangue exploration licenses will no longer rest with Xceldiam but will be
assumed by Petra. In order to effect the change of responsibility with a minimum
of disruption, Xceldiam and Petra have agreed details of transitional
arrangements:


   (i)    Timothy George, Robert Kaplan and Tobin Prior will resign from the 
          board of Xceldiam and Mark Summers will resign from the board of 
          Frannor BVI when the Transaction is approved at the EGM;

  (ii)    the remaining directors of Xceldiam will remain on the board to guide 
          Xceldiam in accordance with the Investing Strategy;

 (iii)    Robert Kaplan will sign a permanent employment contract with Petra 
          and also enter into a short term consultancy agreement with Xceldiam 
          to manage the Interim Dividend distribution; and

  (iv)    Timothy George and Richard Rice will enter into consultancy 
          agreements with Petra for a minimum of six months to ensure a smooth
          handover period of Frannor BVI and Luangue.


An amount of US$1.25 million of the approximate US$3.5 million cash reserves of
Xceldiam will be retained by Xceldiam to cover ongoing overhead costs and to
provide working capital in pursuit of the new interests outlined in the
Investing Strategy, the balance being transferred to Frannor BVI's bank account
in accordance with the terms of the Agreement.

Xceldiam anticipates that both the Warrants and WHI Warrants will be re-priced
in due course following the completion of the Transaction.


Conditions Precedent

Completion of the Proposed Transaction is conditional, inter alia, upon the
following key conditions being satisfied:

   *    the posting of the circular to Xceldiam shareholders by 2 March 2007;

   *    the passing of the Resolutions at the EGM;

   *    Admission of the Consideration Shares to trading on AIM;

   *    Xceldiam transferring the entire balance held in its bank accounts,
        less US$1.25m, to Frannor BVI's bank account;

   *    Xceldiam surrendering all loan accounts that it holds against Frannor
        BVI to Petra;

   *    Frannor confirming to Petra that the expenditure under the Luangue
        kimberlite and alluvial exploration contracts is in accordance with 
        the terms of such contracts; and

   *    no event, change or circumstance becoming known to Petra or Xceldiam
        from 28 February 2007 to completion which would render any of the 
        warranties in the Agreement materially inaccurate.


It is expected that the conditions will be satisfied on or before 31 March 2007.



Anticipated Timetable



  * Xceldiam circular to be sent to Xceldiam shareholders       around 28 February 2007

  * Xceldiam EGM to approve the Transaction                     around 19 March 2007

  * Completion and Transaction becomes unconditional            around 31 March 2007



 Ends



For further information with regards to Petra Diamonds, please contact:


Parkgreen Communications, London

Cathy Malins / Annabel Leather           Telephone: +44 (0) 20 7851 7480



For further information with regards to Xceldiam, please contact:


WH Ireland

David Youngman                            Tel: +44 (0) 161 832 2174



Xceldiam

Timothy George                            Tel: +27 82 573 4199



Conduit PR

Ed Portman                                Tel: +44 (0) 207 429 6607





                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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