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Koidu Kimberlite Project Location Profit Sharing Geological Setting Project History No. 1 Pipe Background Vertical Pit Development Production Exploration Geological Model No. 2 Pipe Dyke Zone A and B Blows From Pit to Polish

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Production

The Koidu Kimberlite Project reached steady state production from the No. 1 Pipe vertical pit during the third quarter of 2006, despite set-backs due to the delayed arrival of capital items required to meet the production schedule, breakdowns of the hoisting arrangement, and variable stripping ratios encountered due to the irregular geometry of the pipe.

SRK Consulting was commissioned to undertake an underground mining feasibility study on No. 1 Pipe. The initial study was completed in September 2006, before the core drilling programme which was intended to delineate resources down to 250m below the base of the vertical pit had been completed. The results of the core drilling indicated that the geology of No. 1 Pipe is complex, with unexpected kimberlite intersections at depth which interfere with the preliminary underground designs. With the available information, the geological model was revised and reviewed by Snowdon. It was concluded that additional core drilling and the application of geophysical techniques were necessary to understand the complexities of the ore body at depth, prior to finalisation of the feasibility study.

Production from the No. 1 Pipe Vertical Pit progressed satisfactorily during the first three quarters of 2007, with the headfeed target of 26,000 tonnes per month being exceeded on three occasions. In addition to the higher tonnages mined and processed, an increase in the average grade of the orebody was observed. In comparison with the fairly consistent average grade of approximately 0.53 carats per tonne recovered from 2004 to 2006, the average grade for No. 1 Pipe increased by 20% to 0.63 carats per tonne in 2007.

Mining activities were brought to a halt in August 2007 after the Vertical Pit experienced a significant rock fall on the southern margin of the pipe. Fortunately there were no injuries to personnel and no equipment was damaged. The cause of the failure was attributed to the unusually high rainfall measured during the season and its destabilising effect on the kimberlite in the sidewall, as well as the large size of the rock wedge. After investigation by SRK Consulting and concern for the safety of those working inside the pit, it was decided to implement further support measures and to wait until the end of the rains before resuming mining activities in the vertical pit.

In order to keep the operation running in the interim, the mine plan was modified to include the development required to access ore from the small blow on Dyke Zone A which was in the process of being drilled and modelled. By the end of November 2007 a small pit had been established on the blow with 12,061 tonnes of ore mined and processed, yielding 6,644.980 carats at a grade of 0.55 carats per tonne.

In preparation for the underground mining development phase as per SRK's Feasibility Study, overburden stripping at the proposed position of the decline portal commenced in July 2007. With delays in production from the vertical pit and the possibility that the pit would not reach its final designed depth due to stability issues, it was considered necessary to revisit the underground Feasibility Study and review the access options (i.e. decline vs shaft). Earthmoving at the portal site was put on hold pending the outcome of the Feasibility Study, the results of which are expected in April 2008.