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Annual Report and Accounts 2011

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Notes to the Annual Financial Statements
For the year ended 30 June 2011

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22. Interest-bearing loans and borrowings


US$ million 2011 2010
Current
Bank loan – secured (i) 0.1
Bank loan – secured (ii) 0.3
Bank loan – secured (iii)
Bank loan – unsecured (vi) 17.0
Deferred consideration (vii) 18.7
18.7 17.4
Non-current
Bank loan – secured (i) 0.1
Bank loan – secured (iv) 36.5
Bank loan – secured (v) 33.1
Loan – unsecured (vi) 15.0
Deferred consideration (vii) 32.0
Associate loans 1.8
71.4 47.1

(i) Bank loans – secured

First National Bank

During the year, Helam Mining (Pty) Ltd settled its term loan facility (capital and interest) of R0.9 million (US$0.2 million) with First National Bank. The Group's borrowings at 30 June 2010 were R0.9 million (US$0.2 million) with an effective interest of 9.92%.

Helam Mining (Pty) Ltd, Star Diamonds (Pty) Ltd, Messina Diamonds (Pty) Ltd and Directors Mr Dippenaar and Mr Davidson have been released from the general notarial bond over moveable assets, unlimited letters of suretyship and letters of joint suretyship signed for the loan facility in favour of First National Bank.

(ii) Bank loan – secured

Industrial Development Corporation of South Africa

On 1 October 2010, the Sedibeng JV settled its loan (capital and interest) of R2.8 million (US$0.4 million) with the Industrial Development Corporation of South Africa ("IDC"). The Group's borrowings at 30 June 2010 were R2.2 million (US$0.3 million) with an effective interest rate of 9.92%.

Messina Diamonds (Pty) Ltd has been released from the suretyship as co-principal debtor and the general notarial bond over its moveable assets in favour of the IDC.

(iii) Bank loans – secured

First National Bank

The Company's South African subsidiaries have a total loan facility of R70.0 million (US$10.2 million) (30 June 2010: R70.0 million (US$9.1 million)) with First National Bank of which Rnil (US$nil) (30 June 2010: Rnil (US$nil)) has been drawn down.

The above facility is secured by a guarantee issued by the Company, suretyships from Star Diamonds (Pty) Ltd, Helam Mining (Pty) Ltd, Sedibeng JV and Blue Diamond Mines (Pty) Ltd, and cessions of inter-group loans payable in favour of First National Bank.

(iv) Bank loans – secured

Rand Merchant Bank ("RMB")

On 4 November 2010, the Company announced the financial close and completion of a R300 million (US$43.5 million) loan facility with RMB. The loan facility is available for the Company's draw-down for up to 24 months from the agreement date and has a capital repayment holiday period to 14 September 2012. The loan is repayable in eight semi-annual payments commencing after the capital repayment holiday period with the final payment due on 15 March 2016. The loan incurs interest at the South African three month JIBAR rate plus 4.5% and is payable in semi-annual payments from the commencement date of the loan facility. The effective interest rate for the debt facility at 30 June 2011 is 14.0%.

On 3 November 2010, as a term of the debt facility, RMB was granted 6.3 million warrants over Petra shares. The warrants vest on grant and the warrant expiry dates will be in equal tranches at the end of years two, three and four from the warrant grant date. The warrant exercise prices for each tranche are 90 pence, 95 pence and 100 pence respectively. The Black-Scholes methodology as outlined in IFRS 2 has been used to value the warrants, as set out in note 28.

The portion of facility fees and warrant fair value charges of R17.6 million (US$4.4 million) associated with the facility drawn-down have been debited against the gross draw-down value of R267.1 million (US$39.0 million), in accordance with IAS 32 and IAS 39, to reflect a net interest bearing liability of R249.5 million (US$36.5 million). The remaining R6.5 million (US$0.9 million) of facility fees and warrant fair value charges associated within the undrawn facility are held in prepayments as the loan facility is expected to be utilised.

The above facility is secured by various encumbrances and pledges, concluded in respect of certain assets belonging to the Group including the Cullinan mine mining right; moveable and immovable assets at Cullinan mine; the shares in Cullinan Diamond Mine (Pty) Ltd, Blue Diamond Mines (Pty) Ltd and Williamson Diamonds Ltd.

(v) Bank loans – secured

International Finance Corporation ("IFC")

On 4 November 2010, the Company announced the financial close and completion of a US$40.0 million loan facility with the IFC. The loan facility is available for the Company's draw-down for up to 24 months from the agreement date and a has capital repayment holiday period to 14 September 2012. The loan is repayable in eight semi-annual payments commencing after the capital repayment holiday period, with the final payment due on 15 March 2016. The loan incurs interest at the US$ six month LIBOR rate plus 4.5% and is payable in semi-annual payments from commencement date of the loan facility. The effective interest rate for the debt facility at 30 June 2011 is 8.9%.

On 3 November 2010, as a term of the debt facility, the IFC was granted 6.3 million warrants over Petra shares. The warrants vest on grant and the warrant expiry dates will be in equal tranches at the end of years two, three and four from the warrant grant date. The warrant exercise prices for each tranche are 90 pence, 95 pence and 100 pence respectively. The Black-Scholes methodology as outlined in IFRS 2 has been used to value the warrants, as set out in note 28.

The portion of facility fees and warrant fair value charges of US$4.2 million associated with the facility drawn-down have been debited against the gross draw-down value of US$36.5 million, in accordance with IAS 32 and IAS 39, to reflect a net interest bearing liability of US$33.1 million. The remaining US$0.4 million of facility fees and warrant fair value charges associated within the undrawn facility are held in prepayments as the loan facility is expected to be utilised.

The above facility is secured by various encumbrances and pledges, concluded in respect of certain assets belonging to the Group including the Cullinan mine mining right; moveable and immoveable assets at Cullinan mine; the shares in Cullinan Diamond Mine (Pty) Ltd, Blue Diamond Mines (Pty) Ltd and Williamson Diamonds Ltd.

(vi) Loan – unsecured

Al Rajhi

On 20 November 2010, the Company settled its loan (capital and interest) of US$32.8 million (30 June 2010: US$32.0 million) with Al Rajhi. The Group's borrowings at 30 June 2010 were US$32.0 million with an effective interest rate of 8%.

(vii) Deferred Cullinan consideration

Al Rajhi

The deferred consideration of US$35.0 million, which formed part of the consideration paid for the acquisition of the additional 50% interest in CIHL, has been discounted over a period of 24 months using a discount factor of 6%. The discounted deferred consideration balance is being accreted over the period of 24 months to the full settlement value. During the year, a portion (US$15.0 million) of the deferred consideration capital amount was repaid leaving a capital balance of US$20 million to be settled in December 2011. At year end the discounted deferred consideration balance is US$18.7 million (30 June 2010: US$32.0 million).

There are no significant differences between the fair value and carrying value of loans and borrowings.

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