Johannesburg, South Africa—De Beers Consolidated Mines (DBCM) announced last week that it has agreed to sell its Kimberley underground mines to Petra Diamonds.

The agreement follows an intensive and careful selection process conducted by DBCM with the help of its corporate advisors, Standard Bank.

Petra will operate the mines with its BEE (Black Economic Empowerment) joint-venture partner, Sedibeng Mining. Petra also operates the Dancarl Mine in the Barkley West District—also purchased from DBCM—with Sedibeng. The company also purchased the Koffiefontein Mine from DBCM in November 2006.

The terms of the deal came to approximately $11 million, including a cash payment and provision of a guarantee for the full environmental-rehabilitation liability. Petra will assume full responsibility for the underground mines from the signature date.

Petra, Sedibeng and DBCM now seek necessary approvals from the Department of Minerals and Energy that will allow the joint ventures to operate the mines at optimum levels once the transaction is completed. Petra expects the mines to have an economic life in excess of 10 years.

Since the Kimberley underground mines were shut down in 2005, the agreement could create new employment opportunities and facilitate the social improvement of the area, which remains a strategic goal for DBCM.

"To date, our transactions with DBCM have created approximately 1,000 new jobs and have further facilitated the aims of the government to optimize the resources of the country and create opportunities for BEE transactions that involve historically disadvantaged persons in real operations and asset ownership," Petra Chief Executive Officer Johan Dippenaar said in a statement. "Due to the economic multiplier effect of mining, these mines bring much-needed development and economic activity to the communities where they are situated."

Dippenaar thanked both the Department of Minerals and Energy and DBCM in making the deal happen.

The agreement follows De Beers' announcement in February that it would seek offers for its underground mines, as well as selected tailing mineral resources in and around Kimberley, and for the Cullinan Diamond Mine. The proposed sales are part of DBCM's drive to position itself for growth by focusing on resources that fit the company's strategy for sustainable development beyond 2014. The company is on track to finalize the remaining transactions before the end of this year.

In addition to its strategic goals, DBCM is committed to playing a leadership role in the South African diamond industry.

"We believe that there are opportunities for other players to take advantage of those assets that may not have a strategic fit with what we are doing," DBCM Managing Director David Noko said.

Noko said the agreement with Petra is a reflection of the company's commitment to wider industry growth and to facilitate broad BEE ownership and competition in South Africa's diamond sector.