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Petra Diamonds and Xceldiam have reached a 'strategic co-operation agreement' over their neighbouring gem prospects in North-Eastern Angola.

Under the deal, Petra, headed by second-generation entrepreneur Adonis Pouroulis, will share data and experience about its Alto Cuilo project with fellow AIM counter Xceldiam, which is hoping to develop an adjacent prospect at Luangue. Petra has the right to earn 26 per cent of Frannor, Xceldiam's operating subsidiary for Luangue, by paying £14 million over three years at a price which Xceldiam's boss Tim George says is the equivalent of 69p per Xceldiam share – a distinct premium to its current price.

Many years ago, Alto Cuilo, where Petra has a joint venture partner in the shape of mining giant BHP Billiton, was part of the same concession as Luangue. Pouroulis says, 'we give our knowledge to Xceldiam and double our acreage' adding that, if Petra earns 26 per cent of Frannor, it will also be entitled to bring in a third partner.

This could conceivably be BHP BIlliton, of course. But Petra, whose proposed £35 million merger with another African explorer Mano River was thwarted by shareholders late last year, does not stand to reap all the potential benefits from the agreement.

George, a De Beers veteran who says Petra's data should greatly help Xceldiam to develop Luangue, argues the agreement could 'put us six months to one year ahead', no trivial consideration when exploration drilling costs £425,000 a month. He adds that, while tying the deal to Frannor and not its parent ring-fences Luangue from BHP Billiton, all parties want to speed up the process and test the more promising kimberlite deposits without too much preliminary testing of micro-diamonds and other indicators.

Petra has other fish to fry. The company is in production in South Africa, its Sierra Leone joint venture starts producing next month, and drilling results from Botswana are due soon.

'We are Number Two after De Beers,' boasts Pouroulis, who says Petra should have produced an annual 200,000 carats by the end of June. Petra shares have managed a 1p rise today to 97.5p, 50 per cent up since late last year when the Mano deal fell through.