Petra Diamonds said a plan to raise about $100 million in a share placement will dilute the stake held by its largest shareholder, Saudi Arabia’s Saad Group, Bloomberg reported.



The shares will be sold partly to pay for a stake in the Cullinan diamond mine in South Africa, where Petra found a chicken-egg sized diamond earlier this year, the report said.



The sale will cut the proportion of Petra Diamonds held by Saad to 25% from 44%, Petra Chief Executive Officer Johan Dippenaar said today in an interview with Bloomberg.



“If we raise $100 million, that will be a good number,” he said in London. Saad’s shares are “going nowhere” with no pressure to “throw them out in the market,” Dippenaar said.



Saad, a family owned construction, finance and property company, has units in administration after struggling to repay debts. Saad won’t take part in the placing and its finances are in the hands of accounting firms and administrators, Dippenaar said. No one at Saad could immediately be reached for comment.



“That stock is with the administrator and a home has to be found for it,” Investec Ltd. analyst Jonathan Guy said in London. “That clearly provides an overhang on the share price."



Petra Diamonds increased 6.25 pence, or 9.5%, to 72.25 pence in London trading, the biggest one-day gain since October 20.



The Jersey, Channel Islands-based company agreed an option to buy 37% of the Cullinan diamond mine from Al Rajhi Holdings W.L.L., doubling its stake to 74%, the company said in a statement.



The fundraising will be used to exercise the option, cut debt and refurbish diamond mines, Dippenaar said. Shareholders have until December 18 to decide on whether to approve the option.



Petra said on September 29 it found a 507.6 carat diamond at the mine the size of a chicken egg and weighing more than 100 grams (3.53 ounces.)



“The Cullinan diamond mine acquisition gives shareholders access to the future growth of value in the mine,” Dippenaar said.



“The rough diamond market has improved significantly in recent months,” he said in a statement. “Our recent tenders have been particularly successful and this positive price environment bodes well for the overall earnings of our operations as we continue."