Petra is a producer of rough diamonds, with a gross resource base of 262 million carats. Petra’s operations in South Africa are largely comprised of a number of diamond mines acquired in recent years from De Beers, S.A. (“De Beers”) and the company is one of only a handful of publicly-traded pure-play diamond producers worldwide. Petra has interests in six producing South African mines – Cullinan, Koffiefontein, Kimberley Underground, Helam, Sedibeng and Star. In Tanzania, Petra has an interest in the Williamson mine. Petra is quoted on the AIM market of the London Stock Exchange (AIM: PDL). Petra’s major shareholders include: Al Rajhi Holdings (18.1%); Saad Investments Company Limited (17.3%); JP Morgan Asset Management U.K. Limited (9.3%); Scottish Widows Investment Partnership (6.2%); Capital Group International, Inc. (6.2%); BlackRock Investment (UK) Limited (5.4%); and the Directors (4.0%). Al Rajhi Holdings is part of the Al Rajhi Group, which is a Saudi Arabian diversified conglomerate that had a 37% direct interest in Cullinan until December 2009 when this interest was acquired by Petra. Saad Investments is a unit of the Saad Group, which is another Saudi Arabian diversified conglomerate. IFC has an existing 0.4% equity stake in Petra, having invested in Kalahari Diamonds Limited (“KDL”) in March 2003. KDL was acquired by Petra in September 2005 and IFC exchanged its shares in KDL for shares in Petra. Petra has undertaken to work only in countries that are members of the Kimberley Process. The Kimberley Process is a joint government, industry and civil society initiative to stem the flow of conflict diamonds. The Kimberley Process Certification Scheme imposes extensive requirements on its members to enable them to certify shipments of rough diamonds as “conflict-free”. As of December 2009, the Kimberley Process has 49 members, representing 75 countries.

The estimated total 3 year project cost (excluding financing costs) is $189.2 million and reflects Petra’s budget for its expansion programs in Tanzania and South Africa to be implemented over the next 3 years. The proposed IFC corporate loan of $40 million, with a warrants package, will be channeled exclusively towards the Williamson expansion program in Tanzania while the loan from SA Bank, with a warrants package, will provide the balance to complete the Project’s funding plan.

59.01 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
Equity	19.01

* These investment figures are indicative

Williamson is located at Mwadui, in the Shinyanga region of northern Tanzania. The capital of the Shinyanga Region is Shinyanga and is about 140 kilometers south of the town of Mwanza near Lake Victoria. The Williamson license encompasses 146 hectares and is the largest kimberlite pipe ever to be mined economically. The area has a population of about 30,000 mostly engaged in subsistence farming and cattle rearing.

Given that IFC’s investment is focused towards Williamson, the development impact of the Project is concentrated in Tanzania. The Tanzanian mining sector contributed about 3.5% of the country’s GDP for the 2008/09 fiscal year. Tanzania’s Development Vision 2025 aims to increase this contribution to 10% of GDP by 2025. The Williamson expansion, which contemplates the long-term and economic sustainability of a 70-year old mine, will support this government objective by setting an example and potentially attracting further investments into the Tanzanian mining sector. More specifically, the development impact from the Williamson expansion is expected to include: (i) Employment: Successful implementation of the Williamson expansion will help maintain the aggregate number of direct and indirect jobs and potentially create opportunities for further indirect employment. Williamson is also expected to introduce skills training to facilitate labor mobility and growth. (ii) Fiscal Contributions: The Williamson mine has been operating at a loss over the past few years. Petra plans to return the Williamson mine to profitability, and anticipates the mine to start generating royalty payments by FY2013 once the expansion is completed and becoming a tax paying entity by FY2016. As per IFC requirements, Williamson has agreed to publicly disclose all material revenue payments made to the Tanzanian government. (iii) Community Development: Williamson plans to spend about 2% of revenues on community development, starting in 2013. The mine already contributes directly towards community development through the provisioning of social, commercial, industrial, medical and administrative infrastructures. The Mwadui hospital, which is totally funded by Williamson, provides access to health care facilities for the community as well as various HIV and malaria treatment programs. In partnership with the Elizabeth Glazer Pediatric AIDS Foundation, Williamson conducts a community outreach program which provides education, care and treatment to HIV/AIDS patients in Mwadui and other neighboring communities. (iv) Support to Local SMEs: A large proportion of Williamson’s procurement is expected to be from Tanzanian suppliers, of which a significant percentage is expected to be from local and regional suppliers. Williamson is committed to supplier development and training, and expects to allocate a portion of its community development expenditure to such initiatives. Key indicators that are proposed to be used to monitor the development impact of the Williamson project during its life are: (i) aggregate direct and indirect employment, by gender, both at Petra and at Williamson; (ii) total taxes and royalties paid by Williamson to the government; (iii) total expenditures incurred by Williamson on community development activities; and (iv) amount of money spent by Williamson on purchases of local and national goods and services.

IFC’s contribution to the Williamson expansion includes: (i) Long-term Partnership and Debt Mobilization: IFC is establishing a long-term partnership with Petra through the provision of loan financing. IFC's investment will decrease the perceived funding risk and help Petra to complete the Williamson expansion. Notwithstanding the December 2009 successful Equity Placement, Petra has (as noted publically by Petra management at the time of the placement) additional project funding needs. IFC’s support will provide comfort to potential investors that the Project is expected to have a complete financial plan and be developed in compliance with international best practices. (ii) Comfort and Stamp of Approval: IFC’s support for the Project will provide a stamp of approval for a rapidly growing junior mining company, operating in the diamond sector. This will help to enhance Petra’s image and credibility in international financial markets. (iii) Demonstration Effect: The involvement of IFC and the World Bank will bring credibility to the Tanzanian mining sector and assist the government's efforts of accelerating private sector-led mineral development in the country. Through the Mineral Policy of Tanzania (1997), the government has stressed that it wants to ensure that the wealth generated from mining activity supports sustainable economic and social development in Tanzania. (iv) Value-added services: Petra has a range of community development plans. Through IFC’s support for the Project, IFC will also provide value-added advice on developing local supply chain linkages and enhancing the impact of Petra’s community development initiatives. (v) Environmental and Social Expertise: IFC's involvement will strengthen Petra’s environmental and social policies and procedures, which in turn will attract additional investors and promote sustainable investment practices.

This is a Category B project according to IFC’s procedures for Environmental and Social Review of Projects because, as an existing brownfield site the IFC investment will not result in any significant new impacts. An Environmental Management Plan (EMP) for Williamson consistent with ISO 14001 was developed by the previous owners De Beers between 2003 and 2005 and Petra are commissioning a full Environmental & Social Impact Assessment (ESIA) and a fully updated EMP for the expansion project. IFC has reviewed the outline scope of work for this process and will work with Petra and its consultants to ensure that the operation will meet the requirements of the IFC Performance Standards.

Pre-existing environmental management issues associated with the Williamson project include water management, dust control, waste management; public safety, hazardous materials management and mitigation of transportation risks on roads leading to the site. Petra have developed plans to proactively manage all these impacts (and those related to the expansion) through the EMP. In particular, Petra will focus on sustainability of water resources to ensure that there are sufficient supplies for the local communities as well as for mine needs.

The most significant direct social impact associated with this project is positive and involves the protection of employment for the workforce for an expected further 20 years as well as their dependents and people employed by businesses supporting the mine. Petra has a strong commitment to achieve demonstrable socio-economic improvements in the communities to be impacted by the Project.

In evaluating this investment, IFC considered a variety of governance metrics, including the World Bank Institute’s Governance Indicators, the Country Policy and Institutional Assessment (CPIA) and Transparency International’s Corruption Perception Index (CPI). While Tanzania does not have strong governance capacity, the government has placed a priority on improving governance and tackling corruption. Moreover, the World Bank Group is actively engaged with the government authorities to promote good governance through a range of activities: advisory, technical assistance and capacity building. The government of Tanzania has indicated its commitment to increased transparency, and since February 2009 the country is a candidate to the Extractive Industries Transparency Initiative (EITI). Tanzania is also a member of the Kimberley Process.