Merlin Diamond Project. Making the Grade. Tom Reddicliffe Chief Executive Officer

Transcription

1 Merlin Diamond Project Making the Grade Tom Reddicliffe Chief Executive Officer World Diamond Conference Monday 15 th October 2007

2 FORWARD LOOKING STATEMENTS This presentation contains forward looking statements. Such forward looking statements may include without limitation (1) estimates of future earnings, the sensitivity of such earnings to diamond values and foreign exchange rate movements (2) estimates of future diamond production (3) estimates of future cash costs (4) estimates of future cash flow, the sensitivity of such flows to diamond values and foreign exchange rate movements (5) statements regarding, future debt payments (6) estimates of future capital expenditure (7) estimates of reserves, resources and statements regarding future exploration results. Where the Company expresses or implies an expectation or belief as to future events or results such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward looking statements. Such risks include but are not limited to diamond values, currency fluctuations, increased production costs and variances in grades or recovery rates from those assumed in mining plans, as well as political and operational risks in the countries and states in which the Company operates or sells product and governmental regulation and judicial outcomes. The Company does not undertake any obligation to release publicly any revisions to any forward looking statement to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, expect as may be required under applicable securities laws.

3 Road MERLIN DIAMOND PROJECT Location Bedevere Darwin Ector Kaye Gareth Katherine Admin Office & Camp Ywain Gawain MERLIN Tennant Creek 1 km Tristram Palomides Sacramore Alice Springs Excalibur Processing Plant Launfal Northern Territory Australia Perceval Mining Lease

4 1. Past Production History 2. Evaluation 3. Way Forward

5 PAST PRODUCTION HISTORY 2.4 Million tonnes 507,000 carats recovered Av. Value US$108/ct 5 year operation Closed 2003 Open pits optimised & mined No JORC mining reserve Limited resource definition No primary crushing circuit Acquired by NADL late 2004

6 PAST PRODUCTION HISTORY After 5 years of trial mining; Grade Diamond Value Size of Resource Diamond Size and Quality Known

7 PAST PRODUCTION HISTORY The Trial had not Answered two Fundamental Questions; What scale mining operation was required for a commercial mining operation? What scale mining operation could the resource support?

8 NADL Staged Investigation a. Liberation / Recovery b. Diamond Grade c. Diamond Value d. Scoping Study / Resource

9 a. Liberation / Recovery Issues revolved around - Liberation: Recovery: No primary crushing, limited secondary crushing X-ray fluorescing issues Upper and Lower Screen sizes Cause for Concern?? : +10ct gem diamonds in the Sorthouse tails : US$4,500/ct diamond in the Sorthouse tails : 100ct diamond caught in the upper screen : 25mm material in cyclone floats : Diminishing grade with pit depth

10 a. Liberation / Recovery Liberation Issues : no primary crushing Sizer Rejects

11 a. Liberation / Recovery Liberation Issues : no primary crushing Trommel Oversize Cyclone Floats

12 a. Liberation / Recovery Liberation Issue impacts grade and ROM value Palomides 180 Grade (carats/bcm) Surface Enrichment Clay poor recovery Optimum recovery 120 Hard rock poor recovery RL (m) Decreasing grade with depth Less obvious impact on ROM value

13 a. Liberation / Recovery NADL Micro Previous Operations (ROM) NADL 2006 HPGR Test Gawain Total Recovery Recovery HPGR Improved Fine Diamond Recovery 100,000,000 GAWAIN Micro Diamond Frequencies Gawain Macro and Micro Diamond Size Frequency 1,000, ,000 10,000 Micro diamonds 78cpht Room for additional improvement 1,000 49cpht (40cpht production grade) st/t 100 Inefficient recovery of fine diamonds Commercial diamonds cpht Bottom screen cut off Endicotts Sieve Size (MSS) 9DTC

14 a. Liberation / Recovery NADL HPGR Test Previous operations Recovery Gawain Improved liberation and recovery of fine diamonds in NADL tests NADL HPGR Test Grade Ct/bcm Previous operations cts +5cts +2cts +0.66cts +0.2cts +0.07cts cts Diamond Size Category Improved liberation and recovery leads to improved grade

15 b. Diamond Grade PalSac Gawain Single diamond population? % Contribution to Grade per size 30% 25% % Contribution 20% 15% 10% Gawain PalSac 5% 0% +10cts +5cts +2cts +0.66cts +0.2cts +0.07cts -0.07cts Diamond Size Category Gawain and PalSac have similar diamond populations

16 b. Diamond Grade Size Frequency Distribution Ywain Gawain Pal-Sac Launfal Excalibur Merlin Modeled Diamond Sizes Frequencies 100,000 10,000 1, st/bcm Bottom screen cut off Micros mm Macros +0.4mm 1-5 DTC mm 5-9 DTC mm 9DTC-0.66ct mm ct mm ct 6.5-8mm ct +9.8ct Mean Stone Size [ct/stone] All the evidence from mining & sampling indicates that there is a single diamond population

17 Depth(m) EVALUATION b. Diamond Grade PalSac high grade sweetener Sacramore Palomides High grade material in base of pit Current Resource 6,728,000 tonnes 1,346,000 carats 0 m Previous mined grade = 20cpht Grade (carats/tonnes) Surface Enrichment Clay - poor recovery 40 Optimum recovery VK1 = 76cpht (10% by vol) Modelled from mini bulk sample Depth (m) Hard rock - improved recovery due to VK1 kimberlite phase Increased grade at depth Expected average grade = 28cpht Subject to further testing Sacramore Pit 480 m

18 c. Diamond Value History of Sales few true ROM sales Ashton Sales Rio Sales PPC Achieved (US$) Gawain valuation Market dipped No detailed data Average? US$108/ct Large diamonds removed Includes tails diamonds 79cts stocked US$4,102/ct 24% goods stocked US$218/ct US$146/ct 0 May-99 Jun-99 Jul-99 Sep-99 Oct/'Nov-99 Feb-00 Mar-00 Jun-00 Aug/Sep-00 Nov-00 Feb-01 May-01 Oct-Jan02 Apr-Dec Date of Sale

19 Size 2002 Valuation 2006 NADL Sale c. Diamond Value 10cts 9cts $1, $2, $2, $2, Gawain Price Model 8cts 7cts $ $ $1, $1, cts $ $1, Value = 3,623 carats NADL Sale = 5,300 carats 5cts 4cts 3cts 8-10gr $ $ $ $ $1, $ $ $ gr $ $ This represents a 22% increase in value 5gr 4gr 3gr +11 $ $81.21 $58.37 $41.53 $ $ $ $54.14 Well within market increases within this period $34.49 $23.33 $18.71 $9.90 $3.00 $50.87 $38.24 $32.37 $21.82 $20.56 Total $ $178.59

20 c. Diamond Value Expected ROM Value Grade Models % Contribution to Grade Diamond Size PalSac Gawain Gawain ROM price model = US$ Valuation = US$ cts +5cts PalSac ROM price model = US$ sales = US$113 +2cts +0.66cts +0.2cts cts cts One diamond population with respect to size, frequency and quality implies similar ROM values for each pipe ROM values are sensitive to the presence or absence of large diamonds

21 d. Scoping Study Resource Status Current 2kms Northern Cluster Central Cluster 7.67 M tonnes 9.4 cpht 719,200 carats 2.29 M tonnes 38.6 cpht 883,700 carats TOTAL M tonnes 18 cpht 3.5 M carats Southern Cluster 9.48 M tonnes 20.3 cpht 1,925,600 carats MLN1154

22 d. Scoping Study Potential project identified based on higher grade pipes 1.5 MT pa / 400,000 cts year Scoping Study Northern Cluster 2kms Central Cluster Southern Cluster 4 M tonnes 1.6 M carats 11 M tonnes 3.2 M carats TOTAL 15 M tonnes 4.8 M carats MLN1154 Drilling to commence on Central cluster this year

23 WAY FORWARD 2004 Evaluation Work Scoping Study Measure Resource Feasibility Study 2009 Decision to Mine

24 WAY FORWARD Potential to be a significant diamond producer 1.5 Mt pa for 400,000cts pa 53,560 85, , , , , , , , , , , ,891 1,014,132 1,097,231 1,304,653 1,896,893 2,215,643 2,600,000 4,000,000 8,515,045 9,280,000 9,800,000 14,890,436 15,599,427 30,350,000 30,500,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 World Diamond Production per Year Gem : Letseng De Beers : The Oaks De Beers : Koffiefontein Petra : Helam, Sedibeg, Star De Beers : Williamson Kimberley : Ellendale Rio : Murowa European Dia : Liqhobong De Beers : Damtshaa Tahera : Jericho NADL : Merlin De Beers : Diamond Area 1 De Beers : Contractors De Beers : Namaqualand De Beers : Lethakane De Beers : Cullinan (Premier) De Beers : Kimberley De Beers : Finsch Endiama / Alrosa : Catoca BHP : Ekati De Beers : Venetia Alrosa : Nyurba Rio / Aber (40%) : Diavik De Beers : Orapa De Beers : Jwaneng Alrosa (Russia) Rio : Argyle Total Production in Carats / Year Diamond Mine/Operations

25 10.60ct stone recovered in 2006 sold for US$153,170 / US$14,450/ct Thank you