Transcript PPS - RBC Capital Markets

RBC Diamond Day
May 2008
Disclaimer
This presentation and the information contained herein are not an offer of securities for sale in the
United States. This presentation is an advertisement and does not constitute or form part of, and
should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy
or subscribe for, any securities of Namakwa Diamonds Limited (“Namakwa” or the “Company”) nor
should it or any part of it form the basis of or be relied on in connection with, any contract or
commitment whatsoever.
Statements contained within this presentation may contain forward-looking comments, which involve risks
and uncertainties that may cause actual results to vary from those contained in the forward-looking
statements. In some cases, you can identify such forward-looking statements by terminology such as 'may',
'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or
'continue'. Forward projections reflect management's best estimates based on information available at the
time of issue.
This Presentation and its contents are confidential and may not be further distributed or passed onto any
other person or published or reproduced, in whole or in part, by any medium or in any form for any purpose.
1
Overview
Issuer / Ticker

Namakwa Diamonds Limited / NAD
Listing location

Full listing on London Stock Exchange main board
Listing Date

December 2007
Market Cap*

£200.25m
Outstanding Shares

116.386m (125,5 million including the “A” shares in issue)
Shareholder Base





Founders, Management and Employees retain circa 20%
20 UK Institutional Shareholders
3 Swiss Institutional Shareholders
1 North American Shareholder
Recent inclusion in indices results in increasing institutional interest
Use of proceeds





Expand existing producing mining operations
Bring into production selected development projects
Pursue further growth and consolidation opportunities
Increase beneficiation inventory and expand diamond trading operation
Repay existing debt and finance general corporate activities
* as of April 28, 2008
2
Namakwa’s Non-Executive Board
 Board is committed to be fully UK combined code compliant within 12 months of listing
Name
Position
Roles and Prior Experience
Hans Smith
Chairman &
Independent
Non-Executive Director

Thomas Kruger
Deputy Chairman &
Executive Director


Founder of Namakwa Diamonds
30 years’ experience in South African diamond industry and founding member
of the South African Rough Dealers Association
Edward Haslam
Senior Independent NonExecutive Director


Member of audit committee and nomination committee
Serves as Chairman of Talvivaara and Non-Executive Director at Aquarius
Platinum (Chairman of remuneration committee and member of audit
committee). Previously CEO of Lonmin
John Coulter
Independent
Non-Executive Director

Chairman of audit committee and member of nomination committee and
remuneration committee
Served as CEO of Brait, CEO of JP Morgan South Africa and Chairman of JP
Morgan Investment Banking in CEEMA
Currently CEO of Morgan Stanley South Africa and Morgan Stanley Investment
Banking in CEEMA



Chairman of nomination committee and member of audit committee,
remuneration committee and health and safety committee
Previously CEO and Executive Chairman of Iscor and Non-Executive Chairman
of Kumba Resources. Served on the board of Western Areas
Alex Davidson
Independent
Non-Executive Director


Member of health & safety committee
Serves as Executive President, Exploration and Corporate Development of
Barrick Gold Corporation
Con Fauconnier
Independent
Non-Executive Director

Chairman of remuneration committee and health & safety committee and
member of nomination committee
Previously CEO of Exxaro Resources and CEO of Kumba Resources

3
Strong, Experienced Management Team
Name
Approximate
Experience
Position
Prior Experience
Corporate
Nico Kruger
10 years
CEO
Corporate finance and investment banking in diamond related projects
Jean Nel
10 years
CFO
Corporate finance at Investec Bank and SA resource sector
Jacques Conradie
16 years
Financial Manager
Financial director of African Portland Industrial Holdings
Altie Krige
26 years
COO
Geologist and director of land operations at Trans Hex
Richard Hall
22 years
Chief Geologist
Exploration manager at De Beers, Namaqualand Mines, considered to be the
single biggest alluvial mining operation in the world
Noel Botha
23 years
Chief Metallurgist
Metallurgical manager at De Beers and Trans Hex
Keith McCulloch
32 years
General Manager Mining
General mining manager at Trans Hex, experience in Angola
Andre Appel
26 years
Regional Manager NW
Engineering Manager, Business Unit Manager and General Manager Trans Hex
Engineering Manager First Uranium
Tom Kruger
30 years
Deputy Chairman & Founder
Founding member of the South African Rough Dealers Association with
extensive experience in South African rough diamond trading
Heno Kruger
12 years
Head of Beneficiation
Beneficiation business at Namakwa
Andries Janzen
27 years
Head of Cutting & Polishing
Managing director at Ochta Diamonds, founded Elite Diamonds in 1980 and
currently manages Elite Diamonds
Louis Janzen
6 years
Sales of Polished Diamonds
Works at Elite Diamonds focusing on acquisition of polished diamonds
Fred Strous
13 years
Global Manager: Rough Diamonds
Manager of buying stations in the DRC and in Angola for R. Steinmetz & Sons
Mining
Beneficiation
Average of almost 20 years experience
4
Focus on Large, Gem Quality Fine
Diamonds
5
Focus on Large, Gem Quality Fine
Diamonds
6
Namakwa’s Consistent Strategy for Growth
Vision Summary
Vertical
Integration
Consolidate

Key differentiator

Increased margins

Trading knowledge adds value across operations

Blends stability with ability to capture opportunities

Direction of integration crucial to success – i.e. beneficiation  mining

Huge opportunities in familiar territories (i.e. North West Province of SA)

BEE adds impetus in SA

Grow in each segment of diamond value chain
Small scale alluvial operations

Long-life mining assets

Beneficiation operations

Focus on mining assets with high quality product, short lead times and favourable capital intensity

Grow beneficiation business
Gem Quality
Focus
Afro-centric


with additional capital

extending retail distribution

Stable and attractive pricing due to strong demand and inconsistent supply

Significant deposits of target stones

Focus on southern Africa – well known and respected family

Commitment to country of origin beneficiation

Well established local presence (30+ years)
7
Favourable Market Dynamics at IPO
Strong Price Environment
2005 Indexed Performance
180
160
Supply of rough diamonds
Demand for diamond jewellery
140
120
100
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
80
Prices (Rebased to 100 in
Jan 2003)
Supply / Demand
Rough + 10 ct
Rough 3-6 gr
130
120
110
100
90
80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Indexed Performance
Indexed Performance
140
Rough Index
Polished Index
2003
2004
2005
2006
2007
Polished Price Index
Rough Price Index
150
160
150
140
130
120
110
100
90
80
2002
150
Polished + 5 ct
140
Polished + 50 pts
130
120
110
100
90
80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: WWW International Diamond Consultants 2007 (Supply of rough diamonds and demand for diamond jewellery rebased to 100 in 2005)
8
Favourable Market Dynamics Post IPO
 High quality gem diamonds continued price increase during the reporting period

Price increase of 30.2% for polished diamonds above 3 carats and 57.9% for polished diamonds above 5 carats over 12
months until 29 February 2008

Strong price environment expected to continue for rough and polished diamonds through 2008
 Disproportionate increase in prices of large and high quality diamonds
 Average price for rough diamonds recovered through mining operations was US$700 –
substantially ahead of expectations
 Substantial exposure to rising price of large stones –

80% of US$ value of the inventory at the end of the reporting period comprised of 5 carats and larger diamonds
% change year-on-year
Polished Diamonds Price Trend by Size*
Average Price: Feb 2007 – Feb 2008
% Change Year-onYear
80
51.6
60
30.2
40
20
57.9
1.3
5.8
4.6
1.5
0.5
1.0
1.5
2.0
0
3.0
4.0
5.0
Size of Polished Diamond (Carats)
* As per the International Diamond and Jewellery Exchange
9
Well Positioned to Exploit Favourable
Market Dynamics
 Focus on gem quality fine diamonds
 83% of Namakwa’s mining revenues are generated by 27% of produced carats
2006 World Production
Namakwa Production and Purchases¹
Fine Carats
Fine Carats
+10ct
6%
+5ct 5%
+5ct 3%
+2ct 8%
+10ct 1%
-3gr
31%
3-6gr 17%
-3gr
71%
+2ct 16%
3-6gr
42%
Fine Dollars
Fine Dollars
-3gr
4%
+10ct
5%
+5ct 12%
-3gr
24%
+2ct
3-6gr
29%
30%
3-6gr 13%
+2ct 12%
+10ct
58%
+5ct 13%
Source: WWW International Diamond Consultants Ltd, 2007
¹ Analysis undertaken by WWW International Diamond Consultants between 28th March and 13th July 2007
10
Diamond Mining Peers
Beneficiation
$13.1bn
$55.4bn
Benefits
Capture larger share of the
value chain
68.5
4.5
7.5
0.6
13.1
Provide greater volume and
range of diamonds for
beneficiation
18.5
(0.2)
1.1
+
+
Expand diversified
distribution channels
5.0
+
Retail Sales of
Diamond
Jewellery
Value of Diamond
Sold to Retail
Inventory
Overhang
Cutting &
Polishing
Dealer Margins
Rough Diamond
Supply
Inventory
Depletion
Mines Value
Added
Strengthen long-term
relationships
Direct Mining
Costs
Diamond Value Chain ($bn)
Vertical Integration Adds Value
Capture Product Premium
&
Higher Margins
Namakwa
Source: IDEX 2006
11
Diverse Portfolio of Mining Assets at IPO
Country
Project Area
South Africa North West Province
Albetros
Angola
DRC
Resource
Classification
Volume
Gravel (m3)
Total
Attributable
Carats (ct)
122,137,840
0.01731
2,110,196
600
Inferred
115,732,000
0.01791
2,071,647
394
Indicated
5,322,735
0.094
500,337
400
Inferred
2,282,700
0.131
298,212
400
Tchipoia
Inferred
NA
Santechifunga2
Inferred
NA
Cuangula
Inferred
NA
Kasai and
Tshikapa Rivers
Indicated
Tidal Diamonds
Ave Diamond
Value (USD/ct)
Indicated
183,690
13.79
1,266,688
150
7,992,200
1.747
5,206,054
150
Indicated
NA
NA3
212,009
175
Inferred
NA
NA4
4,891,258
175
Inferred
Namibia
Recovered
Grade (ct/m3)
Indicated
4,089,230
Inferred
12,467,171
Indicated & Inferred
16,556,401
1
Recovered grade equivalent to 0.865 cpht for indicated resources and 0.895 cpht for inferred resources
Santechifunga licence expires in Q1 CY2008. Namakwa is unlikely to apply for the renewal of this licence
3 Recovered grade of 0.114 ct/m 2
4 Recovered grade of 0.147 ct/m 2
Source: Venmyn Rand (Pty) Ltd – December 2007
2
12
Consolidation Opportunities
 Independent status, relationships and experience in beneficiation support mine sourcing, acquisition and execution
capabilities
 Management’s track record of purchasing production from mines across southern Africa, enhanced by
advanced geological techniques
 Consolidating contiguous properties
 Have developed attractive land position in North West Province
North West Province (SA): Pre-Consolidation Phase
May 2007
North West Province (SA): Consolidation Phase
February 2008
13
North West Province Resource Nodes
Consolidation Phases: Post-IPO
South African Assets
North-West Province Resource Nodes
Consolidation Phases: post-IPO
North-Eastern Node
Northern Node
‘Bamboesspruit
Run’
Western-Node
Phase 1-x1 mine plus 1 prospect
Phase 2-x3 addnl. operating mines
Phase 3-x46 addnl. packagedeal & option properties-all
proven diamondiferous
Phase 4-additional option
properties
‘Soutpan Run’
Central Node
‘Mooifontein Run’
‘Sewefontein Run’
Southern Node
South Western-Node
South-Eastern Node
14
How We Have Unlocked Value
Value Creation Pre IPO
 Acquisition of North West four producing
assets, grouped in nodes
 Namakwa’s four producing nodes increased
production over 20 times since April 2007
 From 111 carats in April 2007 to 2,425
carats in August 2007 (almost 25,000 to
30,000 carats annualised)
Planned Value Creation Post IPO
 Expand existing production and bring into
production selected development projects
 Expand production projects in the
North West Province
 Bring into production selected longer
term development projects in South
Africa, Angola, the DRC and Namibia
 Equipment capacity doubled to 2,115 tph from
1,306 tph
 Again double equipment capacity to 3,915
tph
 Significant value creation in the DRC by
consolidation and resource development
 Pursue further growth and consolidation
opportunities
 Completion of vertical integration strategy and
increasing beneficiation volumes and margin
 Increase beneficiation inventory and
expand diamond trading operations
 Inventory scale to facilitate
differentiated parcels of diamonds
 Develop the cutting and polishing
business
15
1. Beneficiation Business Overview
2. Mining Business Overview
3. Interim Results Overview
4. Financials and Other
Appendix: Relevant Information
Beneficiation Value Chain
Rough
Diamond
Polished
Diamond
Diamond Pipeline
Diamond Pipeline 2006
Cost of
Diamond
Production
Rough
Diamond
Sales
Value of
Polished
ExProduction
Polished
Diamond
Content in
Sales
Retail
Sales of
Diamond
Jewellery
US$5.0bn
US$13.1bn
US$18.7bn
US$18.5bn
US$68.5bn
Value Chain Themes
 Inefficiencies caused by limited information flow for margin protection
 Margins, inventory holding period, working capital and cost increase down the chain
 Beneficiation link necessary for successful integration: from mines to luxury goods
Source: IDEX 2006
17
Beneficiation Overview
 Diamond value chain margins
 Key differentiating factor
 Value maximization
Relationships
Product
Knowledge
Market
Insight
Distribution
Channels
Diamond Information Chain
Information
Flow
Increased
Margins
Industry
Integration
18
1. Beneficiation Business Overview
2. Mining Business Overview
3. Interim Results Overview
4. Financials and Other
Appendix: Relevant Information
North West Province Overview
Consolidation in the North West Province
Phase 2
North West Province
Northern Node
North-Eastern Node
Western-Node
Central Node
‘Bamboesspruit
‘Soutpan Run’ Run’
South-Eastern Node
‘Mooifontein Run’
‘Sewefontein Run’
Southern Node
Location
Effective Interest1
Description
Production start date
South Western-Node
North West Province, North West South Africa
100%
Comprises of 8 regions (7 nodes and the Pypklip area). There
are four producing mines in four of the nodes. Resources:
2.110 m cts indicated and 2.072m cts inferred
Consolidation in the North West Province
Phase 3
South African Assets
North-West Province Resource Nodes
Consolidation Phases: post-IPO
Northern Node
2006
North-Eastern Node
Northern Node
Mining type/ Plants
Open cast alluvial, DMS plants
‘Bamboesspruit
Run’
Western-Node
Capex2
Phase 1-x1 mine plus 1 prospect
Phase 2-x3 addnl. operating mines
$76.0m for 2008-2012 ($38.7m in 2008)
Phase 3-x46 addnl. packagedeal & option properties-all
proven diamondiferous
Phase 4-additional option
properties
cts (000)
‘Soutpan Run’
Central Node
70 - 75
30
‘Mooifontein Run’
‘Sewefontein Run’
Production
Southern Node
$/cts
584
602
2008
2009
South Western-Node
1. Source: Venmyn Rand (Pty) Ltd
2. Based on Venmyn Rand (Pty) Ltd. Capex is calculated based onl forecasted Capex in rand terms and forecasted FX rate (US$/ZAR)
South-Eastern Node
20
DRC Overview
DRC Concession Map
Start of exploration 641
Northern Node
Western-Node
South Western-Node
Location
Effective Interest1
Description
Production start date
Mining type/ Plants
Capex2
Tshikapa Triangle, DRC
50% to 100%
Highly prospective flats on 2306
Comprises of 27 concessions which covers almost 1000
km2. There are four nodal areas for exploration.
Exploration moving to production, bulk sampling end 2008
Open cast alluvial, DMS plants
$34.0m for 2008-2009
21
1. Beneficiation Business Overview
2. Mining Business Overview
3. Interim Results Overview
4. Financials and Other
Appendix: Relevant Information
Strategic Highlights
 Enhancement of vertically integrated model
 Concluded marketing agreement with Harry Winston Inc
 Provides access to retail network and end customer requirements
 Margin and volume enhancement
 Beneficiation margin outperformance
 Leveraging in-depth knowledge of diamond value chain
 Strong pricing environment for rough and polished diamonds
 Economies of scale increase margin
 Strengthening and broadening customer and supplier relationships
 Continued consolidation progress
 Acquired significant alluvial deposit close to North West Operations
 Consistent with stated alluvial consolidation objectives
Namakwa Delivering on its Strategic Objectives
23
Harry Winston Agreement
 Entered into marketing agreement with Harry Winston
Inc. in March 2008
 Namakwa to provide Harry Winston with high value
polished diamonds for sale through its stores
 Namakwa shares in the retail margin achieved for
specific stones
 Product profile suited to Namakwa’s production profile
and buying expertise
24
Key Events for the Reporting Period
Completion of IPO raising £87m of primary capital before costs
North-West mining operations adversely impacted by Eskom electricity outages, unusual
heavy rainfall and mining dilution
Substantial progress made in expansion of North-West mining operations
 First DMS plant scheduled to recover diamonds before the end of 2008
DRC infrastructure and delineation programme on track
Achieved a trading margin of 10% for rough diamonds and 13% for polished diamonds
exceeding management expectations
Improvement in quality and quantity of gem diamond inventory
Underperformance of mining segment mitigated by beneficiation
operations
25
North West Production Adversely Impacted
 Mining segment produced 9,517 carats at a cost of R19.01 ($2.71) per tonne
 Reduced production levels partly offset by higher received prices - $700 per carat before
beneficiation margin
 Production impacted by Eskom interruptions, unusual level of rainfall and resulting mining
dilution
 Significant increase post interim period through
 Installation of stand-by generators at all four mining operations
 Appointment of ore quality controllers to improve quality of ore mined and processed
 Scheduled introduction of DMS plants during 2008 and 2009 will increase throughput and
recovery capacity
 Improved roads, mining equipment and production planning measures
26
North West Expansion Progress
 Namakwa’s intention to ramp up production to 100,000 carats in FY2009 has been affected
by power shortages across South Africa
 Namakwa expects to be able to install 3 of the 6 planned DMS plants within the stated
timeline
 If DMS installation is delayed:
 Continue to use existing rotary pan plant fleet
 Increase production by using mining contractors
 Acquired mineral rights over significant alluvial deposit in the North-West Province close to
current mining operations (2121 hectares)
 Aim to commence production on this property before end of CY2008
 Currently assessing a number of opportunities in the North West
27
DRC Development on Track
 Currently engaged in resource delineation programme moving into bulk sampling and small
scale production in 2009
 Key Milestones:
 Board sub-committee chaired by Dr. Con Fauconnier oversees capex programme
 Significantly increased management capacity
 Established infrastructure in DRC to provide base for development
 Local contractor appointed and started work on upgrading road infrastructure
 Geological contractor employed to define ore bodies on four concession nodes
 Installation of small sample plants to improve grade confidence towards increased
indicated resources
 Earthmoving equipment procured and shipped
 Alternative technology for economically mining the Lizeria being developed
 Commence small scale production and bulk sampling – Due Jan 2009
28
Beneficiation Segment Outperformance
 Acquired 9,533 carats of rough diamonds from South African, Indonesian and DRC based third party
producers at an average price of US$ 785 p.c.
 Acquired 9,517 carats from the Namakwa mining segment at average value of US$ 700 p.c.
 During the period Namakwa sold predominantly lower value diamonds at higher than expected margins
 Sold 13,098 carats of rough diamonds at an average value of US$481 per carat
 Trading margin of 10% for rough diamonds and 13% for polished diamonds
 AIM: Namakwa continues to increase the quality of its diamond inventory
29 Feb 2008
cts
Rough
Polished
31 Aug 2007
$/ct
cts
$/ct
10,564
982
7,709
537
834
3,353
1,582
2,358
 Efforts continue to expand and further develop beneficiation operations
 Namakwa experiencing higher margins than market through
 Critical mass, access to funding, knowledge of industry and strong pricing environment
29
1. Beneficiation Business Overview
2. Mining Business Overview
3. Interim Results Overview
4. Financials and Other
Appendix: Relevant Information
Salient Profit & Loss Statement
(US$m)
6 months to
45 weeks to
29 Feb 2008
31 Aug 2007
Revenue
12.4
8.4
Gross loss
(1.8)
(2.4)
Exploration related expenses
(7.0)
(11.7)
Listing expenses
(4.1)
-
Net finance expenses
(1.2)
(1.2)
(19.4)
(18.9)
Loss for period
31
Balance Sheet
(US$m)
28 Feb 2008
31 Aug 2007
Property, plant and equipment
43.8
35.5
Inventories (mainly diamond)
13.9
8.0
Cash
138.6
6.4
Total liabilities
(15.3)
(61.4)
32
Cash Flow Statement
(US$m)
6 months to
29 Feb 2008
45 weeks to
31 Aug 2007
Net cash used in operating activities
(17.5)
(15.7)
Net cash used in investing activities
(14.5)
(25.5)
Net cash from financing activities
164.2
47.6
33
Questions
Track record of
value creation
Favourable market
dynamics, notably for
gem quality diamonds
Capability to
consolidate alluvial
mining (BEE
compliant)
Unique vertically
integrated mining
group
Experienced
management team
Alluvial mining focus
Diverse portfolio of
high quality, long-life
mining assets
34
1. Beneficiation Business Overview
2. Mining Business Overview
3. Interim Results Overview
4. Financials and Other
Appendix: Relevant Information
Further Management Expertise
Name
Approximate
Experience
Position
Prior Experience
Mining
Neil Shadwell
22 years
Project Manager - DRC
Engineering Manager with Ingwe Coal (BHP) and Chief Engineer ITM – Angola
Lourens Myburg
12 years
Geological Manager - West Coast
Geologist; Snr Geologist Namaqualand Mines
Colyn Purdon
29 years
Metallurgical Manager
Metallurgical Manager Sheba; Snr Manager: Metallurgical Projects, Trans Hex; Principal
Engineer Bateman
Louis Pienaar
44 years
Geological Manager - NW
Marine diamonds in Namibia, Grasdrif and Oena mines, Orange
River
Deon Bowers
16 years
Geological Manager-NW Production Ore-Quality Controller; Senior Geologist Koingnaas Mines (De Beers)
Edward Monoketsi
13 years
Human Resource Manager NW
Snr Human Resource Office, Human Resource Superintendent, Trans Hex Group
Basil Andrews
13 years
Chief Safety Officer
Safety Officer, Chief Safety Officer Trans Hex Group
Human Resources
36
A Significant Development Project Pipeline
North West
Albetros
DRC
Namibia
Angola
North West, South Africa
Namaqualand, South
Africa
South West of DRC near
Tshikapa town
55 km North of Port
Luderitz, Namibia
North East of Angola
Effective
Interest1
50% – 100%
90% – 95%
50 – 90%
100%
37 – 70%
Resources
(k cts)
1,440 inferred
500 indicated and 298
inferred
1,267 indicated and
5,206 inferred
212 indicated and 4,891
inferred
NA
Location
1. Source: Venmyn Rand (Pty) Ltd.
37
Beneficiation Overview
Own and 3rd party
Product knowledge
Sorting process
Categorization
determines optimal
strategy for
maximum value
 Critical mass effects
strategy
 Understanding
demand & supply
dynamics
 Market intelligence
for ultimate value
creation
 Strategy is a
function of
 Cashflow
 Market dynamics
 Product mix
 Distribution
channels
 Beneficiation
pressures in
country of origin
 Procurement
knowledge




Production
Planning
Value
Maximisation
Information
Flow
Distribution Channels
Rough
Polished
Function of Product
Type
Understand
Destinations
 Tender process
 Open Market
 Relationship driven
sales
 Wholesale
 Partnerships
 Jewellery high
diamond content
 Luxury goods
markets
 Branding
opportunities
Customers
Beneficiation Strategy
Strategy Decision
Sourcing of Rough
38
Production Distribution Profile
Size Frequency Distribution Curves for the Operational Nodes
Size Revenue Distribution Curves for the Operation Nodes
90%
90%
80%
80%
70%
70%
60%
60%
50%
40%
50%
40%
30%
30%
20%
20%
10%
10%
0%
8/8
1gr
2gr
3gr
4gr
6gr
8gr
3ct-4ct
+4.8
% Revenue
100%
% Carats
100%
0%
8/8
1gr
2gr
3gr
4gr
6gr
8gr
3ct-4ct
+4.8
Diamond Size
Diamond Size
Southeastern Node
Southwestern Node
Southeastern Node
Southwestern Node
Southern Node
Central Node
Southern Node
Central Node
Source: Venmyn Rand (Pty) Ltd
39
A share salient terms
 Namakwa designed the A share structure to facilitate economic participation in
Namakwa by SA shareholders
 In terms of South African Exchange Control Regulations South African
residents are precluded from owning shares in non-South African companies
(save for some exemptions not relevant to Namakwa)
 Namakwa’s South African subsidiary, Namakwa Diamond Holdings (Pty)
Limited issued 9,05m A shares to SA residents
 The A shares mirror the economic benefits accruing to Namakwa ordinary
shares save that dividends and any proceeds from a sale are paid in SA in
Rands to comply with Exchange Control Regulations
 From a valuation perspective Namakwa views the A shares as part of the fully
diluted share capital of Namakwa and hence the number of A shares (9,1m)
should be added to the ordinary shares of Namakwa (116.4m) for total fully
diluted number of shares for valuation purposes (125.5m)
40
BEE Considerations
 The BEE Requirements require that a New Order Prospecting Right applicant must
be at least 26% owned and controlled by historically disadvantaged South Africans
(HDSAs)
 For New Order Mining Right applications, the applicant must show how it will reach
the targets of 15% BEE participation by May 2009 and 26% by May 2014
 Namakwa has a registered HDSA trust for the benefit of all HDSA employees
which will be the anchor project for all South African mining operations
 This structure is currently being implemented with a view of finalisation by 2008
 BEE requirements for the beneficiation industry have not yet been determined –
once these are clear, Namakwa will implement an appropriate structure
41
Environmental Responsibility

Responsibility for the environment is an important
consideration for Namakwa

Alluvial mining does not require the use of hazardous
chemicals

Environmental liabilities are significantly lower than
other forms of mining

Shallow, open cast mines also mitigate ultimate
environmental liability

Current environmental liability, net of ring-fenced cash,
estimated by independent consultants to be $1.3m

Namakwa currently uses borehole water which is returned
to mined out areas (over 80% returned to the water table)


Rehabilitation of an Old Mine
When DMS plants are installed, water will be
recirculated and only 20% of required volume will be
fresh
Backfill of mined ore is part of current processes to ensure
low impact mining
Source: Company
42
Track Record of Value Generation
 Private placements of equity: US$3m (July 2006), US$3.5m (Dec 2006) and US$5.1m (Feb 2007) from
founders, investors and entrepreneurs
 Used to fund acquisitions of additional mining concessions
 Preference Share institutional private placement: US$45m (May 2007)
 Expand trading and beneficiation business through increase in inventory and acquisition of Elite
Diamonds
 Supported development of Namakwa’s projects, proving the resources
 Successful Initial Public Offering on the London Stock Exchange: Raised US$185m (Dec 2007)
 Largest institutional holders include Och-Ziff Capital Management Group, Capital International,
Blackrock, Goldman Sachs Principal Strategies and Pala Investments amongst others
 Further expand and upgrade mining operations and take advantage of consolidation opportunities
 Successful IPO indicative of investor appetite for vertically integrated model
16.6m ct2
Resources
5.1m ct1 Resources
No Producing Assets
~US$54m
Pre-IPO
Financing
Increased beneficiation activity
and margin
~US$185m
IPO Proceeds
~ 30,000 cts
Production³
1.
Management estimate of attributable resources as of December 2006
2. Indicated and inferred resources (Source: Venmyn Rand (Pty) Ltd)
3. Annualised August 2007 production
43
Alluvial Diamond Focus
 Lower capital expenditure and shorter
development time than kimberlite mining
 Alluvial mining involves relatively shallow
mining operations (<40m), with limited
overburden
 Cost effective machinery and plant which can
be operated in remote locations with poor
infrastructure
 Higher than global average in-situ diamond
value
 Low, variable grades mitigated by broader
production base and high value production
Time to Production1
8 years
 Very low environmental impact
1 year
Alluvial
Kimberlite
¹ Source: Company estimate
44