USD20m Fund Raising

Petra Diamonds Ld
19 September 2006

19 September 2006



                             Petra Diamonds Limited

               US$20 million Interest Free Convertible Bond Issue


Petra Diamonds Limited ('Petra' or 'the Company' or 'the Group'), the AIM-quoted
and ASX-listed diamond mining group, announces the issue of a US$20 million
unsecured, interest free convertible bond ('the Convertible') as well as the
grant of accompanying warrants over 2 million Petra shares ('the Warrant'), both
convertible or exercisable at an exercise price of 130 pence per Petra share.


The Convertible and Warrant agreements were concluded on 18 September 2006 and
have been issued to Al Rajhi Holdings W.L.L. ('Al Rajhi'), a member of the Al
Rajhi group, a major Saudi Arabian based investment group.



Highlights:



  • The financing will strengthen Petra's treasury without burdening the
    Company with further interest bearing debt and without diluting existing
    shareholders at the current market price



  • Petra will now have the flexibility to act quickly on potential growth
    opportunities, such as acquisitions or investments in other diamond mines or
    related businesses



  • The Convertible is unsecured and interest free, repayable by Petra 36
    months from the date of issue if not converted



  • The Convertible is convertible by Al Rajhi into Petra shares at a price of
    130 pence per share - representing a 24.2% premium to the 30 day average
    Petra share price



  • Petra has granted Al Rajhi Warrants over 2 million Petra shares,
    exercisable at a price of 130p per share





Adonis Pouroulis, Petra's Chairman, comments: 'This convertible bond financing
gives Petra the ability to actively consider revenue and production growth
opportunities that have the potential to fast-track Petra's development and
further entrench the Company as a true mid-tier diamond producer. The financing
will also serve to underpin our treasury should we decide to expand our
exploration interests and exercise our warrants as part of the Xceldiam
cooperation agreement.  We are confident that the growing relationship with Al
Rajhi will only assist in Petra achieving its long term objectives.'



Details of the Convertible and Warrant

The Convertible is unsecured, interest free, and is convertible at the election
of Al Rajhi into Petra ordinary shares at a price of 130 pence per share ('the
Conversion Price'). The number of Petra shares to be issued will be calculated
by reference to the £/US$ exchange rate on the business day immediately prior to
the date of conversion. If not converted, the principal amount of the
Convertible (US$20 million) is to be repaid by Petra 36 months from the date of
issue, being 18 September 2009. The Convertible may only be converted in full.



The Convertible contains standard events of default and restricts Petra from
incurring additional debt in excess of US$2 million if such debt would rank in
priority to the outstanding amount under the Convertible, or  incurring
additional balance sheet debt in excess of US$10 million, save that these
restrictions do not apply to any guarantee provided by the Petra Group to the
South African Department of Minerals and Energy for the purposes of
environmental rehabilitation in relation to any existing and future mining
operations in South Africa or any debt incurred by the Petra Group to fund a new
property or asset where security for such debt is granted over such property or
asset.



The Conversion Price represents a premium of 29.3% over the 30 day average Petra
share price up to and including 25 August 2006 of 100.5 pence, when the term
sheet between the parties was signed. On 18 September 2006, when the formal
binding legal documentation was signed, the Conversion Price represented a
premium 24.2% over the 30 day average Petra share price up to and including 18
September 2006.



As there is no interest chargeable on the Convertible, Petra has granted Al
Rajhi the Warrant over 2 million Petra ordinary shares, the Warrant being
exercisable at  a price of 130 pence per share at any time from the date of
drawdown under the Convertible until 18 September 2009, being 36 months from the
date of grant. The Warrant will remain exercisable should Al Rajhi elect to
convert the Convertible.



Reasons for issuing the Convertible

Petra's stated objective is to become a true mid-tier diamond group, and with
that objective in mind the Company continues to scrutinise acquisitions and
business opportunities in the diamond sector. The Company has decided not to
issue new Petra shares at this time as consideration for any such acquisitions,
or as a method of raising equity finance by the placing of new shares at the
current market price.



Although the Company has reported solid production growth in the year to June
2006 and is aiming to increase production still further in the 2007 financial
year, Petra does not wish to take on significant interest bearing debt burden
into the Group. The structure of the Convertible means that Petra will have
funds on hand for opportunities that pass the Company's stringent criteria, and
that the Company will be able to enter into negotiations knowing that it has the
treasury in place to have active discussions.



The Company is currently evaluating opportunities that the board of Petra
believe may have the potential to grow revenue and cash flow, and the Company
will provide further information should any of these opportunities progress to
formal agreements.  In the meantime, the proceeds of the Convertible will be
held by Petra and accrue bank deposit interest and any acquisitions or other
business development will be subject to the Company's demanding review criteria.



Use of proceeds

The proceeds of the Convertible may be applied to the following purposes,
depending on developments over the coming months;

(i)    the acquisition of, or investment in, further operating diamond mines;

(ii)   the acquisition of, or investment in, further diamond or related and
       complementary businesses;

(iii)  the possible exercise by Petra of warrants to subscribe for shares
       in Frannor Investment and Finance Limited, a subsidiary of Xceldiam 
       Limited (at Petra's discretion) pursuant to the terms of the Strategic 
       Cooperation Agreement announced between Petra and Xceldiam Limited on 
       30 May 2006; and

(iv)   any other purpose that the Petra board considers to be a sound
       business development for the Petra Group.



Al Rajhi Group

Al Rajhi Holdings W.L.L. and Al Rajhi Partners (together 'Al Rajhi') represent
the business interests of Sheikh Abdulrahman Saleh Al Rajhi and his immediate
family in Saudi Arabia.



Al Rajhi has a substantial portfolio of assets under management, comprising
investments in financial services; infrastructure; telecoms and utilities; real
estate; oil, gas and petrochemicals. Key investments include Bank Al Bilad,
DanaGas; Saudi Telecom; Saudi Cement Company (Khalid al Rajhi, CEO of Al Rajhi,
is a director of each of these companies);



Al Rajhi already holds (via Al Salam Opportunities) 6.8 million ordinary Petra
shares, representing 4.58% of the Company's ordinary issued share capital. Based
on this current holding and current £/US$ exchange rates, on conversion of the
Convertible (approximately 8.2 million shares) and Warrant (2 million shares) Al
Rajhi would then hold approximately 17 million ordinary Petra shares,
representing 10.0% of the Company's fully diluted ordinary share capital.



 Ends





For further information, please contact:

 Justine Howarth / Cathy Malins             Telephone: [phone]
 Parkgreen Communications, London





Notes to Editors:



Overview of Petra's Operations


  >  Petra is focused on the exploration and mining of diamonds in Africa.
     Petra's strategy is to continue to build its portfolio of revenue producing 
     and exploration assets, achieving the objective of becoming a 'mid-tier'
     diamond group.


  >  Petra has operations in Angola, South Africa, Botswana and Sierra Leone.
     Petra is well placed to achieve high yielding results from the increasingly
     robust market for diamonds.


  >  Petra's exploration activities at Alto Cuilo in Angola continue to deliver 
     ever more exciting results and the joint venture with BHP Billiton has
     expedited exploration with the identification to date of over 50 
     kimberlitic occurrences together with diamond indicator mineral results 
     comparable with some of the world's economic diamond deposits .


  >  In May 2006 Petra announced that it has entered into a strategic
     cooperation agreement with AIM quoted Xceldiam Limited, with regards to the
     neighbouring Luangue and Alto Cuilo diamond projects


  >  The South African operations delivered a significant increase in
     production to 175,000 carats for the year to June 2006. Further increases 
     in production are expected for the year to June 2007 and beyond. Two large
     stones were reported in the twelve months, one 76 carat stone which sold 
     for US$465,000 and also a 67 carat stone which was sold for US$704,265.


  >  In Botswana, exploration is currently focused on the Gope area where
     Petra holds diamond prospecting licences covering ground that is known to 
     host several diamondiferous kimberlites.


  >  In Sierra Leone, Petra has earned a 51% interest in the Kono Project,
     following the expenditure of US$3million on the project. This JV with AIM 
     and TSX-listed Mano River Resources Inc is progressing well and first 
     production from the Lion fissures was reported for June 2006.



For further information on Petra Diamonds, please visit www.petradiamonds.com






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