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RBC Diamond Day May 2008. 1 Disclaimer This presentation and the information contained herein are not an offer of securities for sale in the United States.

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Presentation on theme: "RBC Diamond Day May 2008. 1 Disclaimer This presentation and the information contained herein are not an offer of securities for sale in the United States."— Presentation transcript:

1 RBC Diamond Day May 2008

2 1 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.

3 2 Overview Namakwa Diamonds Limited / NAD Issuer / Ticker Full listing on London Stock Exchange main board Listing location Shareholder Base 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 Use of proceeds Listing Date December 2007 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 Market Cap* £200.25m Outstanding Shares m (125,5 million including the A shares in issue) * as of April 28, 2008

4 3 Namakwas Non-Executive Board NamePositionRoles and Prior Experience Hans SmithChairman & Independent Non-Executive Director 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 Thomas KrugerDeputy 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 HaslamSenior Independent Non- Executive 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 CoulterIndependent 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 Alex DavidsonIndependent Non-Executive Director Member of health & safety committee Serves as Executive President, Exploration and Corporate Development of Barrick Gold Corporation Con FauconnierIndependent 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 Board is committed to be fully UK combined code compliant within 12 months of listing

5 4 Strong, Experienced Management Team Approximate Experience Prior Experience Average of almost 20 years experience NamePosition Corporate Nico Kruger10 yearsCEOCorporate finance and investment banking in diamond related projects Jean Nel10 yearsCFOCorporate finance at Investec Bank and SA resource sector Jacques Conradie16 yearsFinancial ManagerFinancial director of African Portland Industrial Holdings Mining Altie Krige26 yearsCOOGeologist and director of land operations at Trans Hex Richard Hall22 yearsChief GeologistExploration manager at De Beers, Namaqualand Mines, considered to be the single biggest alluvial mining operation in the world Noel Botha23 yearsChief MetallurgistMetallurgical manager at De Beers and Trans Hex Keith McCulloch32 yearsGeneral Manager MiningGeneral mining manager at Trans Hex, experience in Angola Andre Appel26 yearsRegional Manager NWEngineering Manager, Business Unit Manager and General Manager Trans Hex Engineering Manager First Uranium Beneficiation Tom Kruger30 yearsDeputy Chairman & FounderFounding member of the South African Rough Dealers Association with extensive experience in South African rough diamond trading Heno Kruger12 yearsHead of BeneficiationBeneficiation business at Namakwa Andries Janzen 27 yearsHead of Cutting & PolishingManaging director at Ochta Diamonds, founded Elite Diamonds in 1980 and currently manages Elite Diamonds Louis Janzen6 yearsSales of Polished DiamondsWorks at Elite Diamonds focusing on acquisition of polished diamonds Fred Strous13 yearsGlobal Manager: Rough DiamondsManager of buying stations in the DRC and in Angola for R. Steinmetz & Sons

6 5 Focus on Large, Gem Quality Fine Diamonds

7 6

8 7 Namakwas Consistent Strategy for Growth 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 Vision Summary Consolidate Vertical Integration Gem Quality Focus Afro-centric 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 Focus on mining assets with high quality product, short lead times and favourable capital intensity Grow beneficiation business 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)

9 8 Favourable Market Dynamics at IPO Supply / Demand Source: WWW International Diamond Consultants 2007 (Supply of rough diamonds and demand for diamond jewellery rebased to 100 in 2005) Strong Price Environment Rough Price Index Polished Price Index

10 9 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 Average Price: Feb 2007 – Feb 2008 Polished Diamonds Price Trend by Size* % Change Year-on- Year Size of Polished Diamond (Carats) % change year-on-year * As per the International Diamond and Jewellery Exchange

11 10 Well Positioned to Exploit Favourable Market Dynamics Focus on gem quality fine diamonds 83% of Namakwas mining revenues are generated by 27% of produced carats 2006 World ProductionNamakwa Production and Purchases¹ Fine Carats Fine Dollars +10ct 1% +5ct 3% +2ct 8% 3-6gr 17% -3gr 71% +10ct 6% +5ct 5% +2ct 16% 3-6gr 42% -3gr 31% +10ct 5% +5ct 12% +2ct 29% 3-6gr 30% -3gr 24% +10ct 58% +5ct 13% +2ct 12% 3-6gr 13% -3gr 4% Source: WWW International Diamond Consultants Ltd, 2007 ¹ Analysis undertaken by WWW International Diamond Consultants between 28 th March and 13 th July 2007

12 11 Vertical Integration Adds Value Diamond Mining PeersBeneficiation Source: IDEX 2006 Benefits Capture larger share of the value chain + Provide greater volume and range of diamonds for beneficiation + Expand diversified distribution channels + Strengthen long-term relationships Capture Product Premium & Higher Margins Namakwa $13.1bn$55.4bn

13 12 1 Recovered grade equivalent to cpht for indicated resources and cpht for inferred resources 2 Santechifunga licence expires in Q1 CY2008. Namakwa is unlikely to apply for the renewal of this licence 3 Recovered grade of ct/m 2 4 Recovered grade of ct/m 2 Diverse Portfolio of Mining Assets at IPO South AfricaNorth West ProvinceIndicated122,137, ,110,196 Inferred115,732, ,071,647 AlbetrosIndicated5,322, ,337 Inferred2,282, ,212 AngolaTchipoiaInferredNA Santechifunga 2 InferredNA CuangulaInferredNA DRCKasai and Indicated183, ,266,688 Tshikapa Rivers Inferred7,992, ,206,054 NamibiaTidal DiamondsIndicatedNANA 3 212,009 InferredNANA 4 4,891,258 TotalIndicated4,089,230 Inferred12,467,171 Indicated & Inferred16,556,401 CountryProject Area Resource Classification Volume Gravel (m 3 ) Recovered Grade (ct/m 3 ) Attributable Carats (ct) Ave Diamond Value (USD/ct) Source: Venmyn Rand (Pty) Ltd – December

14 13 Consolidation Opportunities Independent status, relationships and experience in beneficiation support mine sourcing, acquisition and execution capabilities Managements 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 PhaseNorth West Province (SA): Consolidation Phase May 2007February 2008

15 14 North West Province Resource Nodes Consolidation Phases: Post-IPO

16 15 How We Have Unlocked Value Acquisition of North West four producing assets, grouped in nodes Namakwas 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) Equipment capacity doubled to 2,115 tph from 1,306 tph Significant value creation in the DRC by consolidation and resource development Completion of vertical integration strategy and increasing beneficiation volumes and margin 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 Again double equipment capacity to 3,915 tph Pursue further growth and consolidation opportunities Increase beneficiation inventory and expand diamond trading operations Inventory scale to facilitate differentiated parcels of diamonds Develop the cutting and polishing business Value Creation Pre IPO Planned Value Creation Post IPO

17 1. Beneficiation Business Overview 2. Mining Business Overview 3. Interim Results Overview 4. Financials and Other Appendix: Relevant Information

18 17 Beneficiation Value Chain 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 Value Chain Themes Rough Diamond Polished Diamond Diamond Pipeline Diamond Pipeline 2006 Cost of Diamond Production US$5.0bn Rough Diamond Sales US$13.1bn Value of Polished Ex- Production US$18.7bn Polished Diamond Content in Sales US$18.5bn Retail Sales of Diamond Jewellery US$68.5bn Source: IDEX 2006

19 18 Beneficiation Overview Diamond value chain margins Key differentiating factor Value maximization Relationships Product Knowledge Market Insight Distribution Channels Information Flow Increased Margins Industry Integration Diamond Information Chain

20 1. Beneficiation Business Overview 2. Mining Business Overview 3. Interim Results Overview 4. Financials and Other Appendix: Relevant Information

21 20 North West Province Overview Location Effective Interest 1 Description Production start date Mining type/ Plants Capex 2 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: m cts indicated and 2.072m cts inferred 2006 Open cast alluvial, DMS plants cts (000) $/cts Production $76.0m for ($38.7m in 2008) Consolidation in the North West Province Phase 2 North West Province Consolidation in the North West Province Phase 3 Bamboesspruit Run Soutpan Run Western-Node Central Node South Western-Node Northern Node South-Eastern Node North-Eastern Node Southern Node Sewefontein Run Mooifontein Run Northern Node 1. Source: Venmyn Rand (Pty) Ltd 2. Based on Venmyn Rand (Pty) Ltd. Capex is calculated based onl forecasted Capex in rand terms and forecasted FX rate (US$/ZAR)

22 21 DRC Overview Tshikapa Triangle, DRC 50% to 100% Comprises of 27 concessions which covers almost 1000 km 2. There are four nodal areas for exploration. Exploration moving to production, bulk sampling end 2008 Open cast alluvial, DMS plants $34.0m for Start of exploration 641DRC Concession Map Highly prospective flats on 2306 Western-Node South Western-Node Northern Node Location Effective Interest 1 Description Production start date Mining type/ Plants Capex 2

23 1. Beneficiation Business Overview 2. Mining Business Overview 3. Interim Results Overview 4. Financials and Other Appendix: Relevant Information

24 23 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

25 24 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 Namakwas production profile and buying expertise

26 25 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

27 26 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

28 27 North West Expansion Progress Namakwas 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

29 28 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

30 29 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$481 per carat Trading margin of 10% for rough diamonds and 13% for polished diamonds AIM: Namakwa continues to increase the quality of its diamond inventory Efforts continue to expand and further develop beneficiation operations Namakwa experiencing higher margins than market through Critical mass, access to funding, knowledge of industry and strong pricing environment 29 Feb Aug 2007 cts$/ctcts$/ct Rough10, , Polished8343,3531,5822,358

31 1. Beneficiation Business Overview 2. Mining Business Overview 3. Interim Results Overview 4. Financials and Other Appendix: Relevant Information

32 31 Salient Profit & Loss Statement (US$m) 6 months to 29 Feb weeks to 31 Aug 2007 Revenue Gross loss(1.8)(2.4) Exploration related expenses(7.0)(11.7) Listing expenses(4.1)- Net finance expenses(1.2) Loss for period(19.4)(18.9)

33 32 Balance Sheet (US$m)28 Feb Aug 2007 Property, plant and equipment Inventories (mainly diamond) Cash Total liabilities(15.3)(61.4)

34 33 Cash Flow Statement (US$m) 6 months to 29 Feb 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

35 34 Questions Favourable market dynamics, notably for gem quality diamonds Unique vertically integrated mining group Experienced management team Diverse portfolio of high quality, long-life mining assets Alluvial mining focus Capability to consolidate alluvial mining (BEE compliant) Track record of value creation

36 1. Beneficiation Business Overview 2. Mining Business Overview 3. Interim Results Overview 4. Financials and Other Appendix: Relevant Information

37 36 Position 36 Further Management Expertise Approximate Experience Prior ExperienceName Mining Neil Shadwell22 years Project Manager - DRCEngineering Manager with Ingwe Coal (BHP) and Chief Engineer ITM – Angola Lourens Myburg12 yearsGeological Manager - West CoastGeologist; Snr Geologist Namaqualand Mines Colyn Purdon29 yearsMetallurgical ManagerMetallurgical Manager Sheba; Snr Manager: Metallurgical Projects, Trans Hex; Principal Engineer Bateman Louis Pienaar44 yearsGeological Manager - NWMarine diamonds in Namibia, Grasdrif and Oena mines, Orange River Deon Bowers16 yearsGeological Manager-NW ProductionOre-Quality Controller; Senior Geologist Koingnaas Mines (De Beers) Human Resources Edward Monoketsi13 yearsHuman Resource Manager NWSnr Human Resource Office, Human Resource Superintendent, Trans Hex Group Basil Andrews13 yearsChief Safety OfficerSafety Officer, Chief Safety Officer Trans Hex Group

38 37 A Significant Development Project Pipeline North WestDRC Location Effective Interest 1 North West, South AfricaSouth West of DRC near Tshikapa town 50% – 100%90% – 95% AlbetrosAngola Namaqualand, South Africa North East of Angola Namibia 55 km North of Port Luderitz, Namibia 50 – 90%37 – 70%100% Resources (k cts) 1,440 inferred500 indicated and 298 inferred 1,267 indicated and 5,206 inferred NA212 indicated and 4,891 inferred 1. Source: Venmyn Rand (Pty) Ltd.

39 38 Beneficiation Overview Sourcing of Rough Own and 3 rd party Product knowledge Sorting process Categorization determines optimal strategy for maximum value Critical mass effects strategy Beneficiation 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 Distribution Channels Tender process Open Market Relationship driven sales Wholesale Partnerships Jewellery high diamond content Luxury goods markets Branding opportunities Rough Polished Production Planning Value Maximisation Information Flow Strategy Decision Customers Function of Product Type Understand Destinations

40 39 Production Distribution Profile Size Frequency Distribution Curves for the Operational NodesSize Revenue Distribution Curves for the Operation Nodes 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% +4.83ct-4ct8gr6gr4gr3gr2gr1gr8/8 Diamond Size % Carats Southeastern NodeSouthwestern Node Southern NodeCentral Node 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% +4.83ct-4ct8gr6gr4gr3gr2gr1gr8/8 Diamond Size % Revenue Southeastern Node Southwestern Node Southern Node Central Node Source: Venmyn Rand (Pty) Ltd

41 40 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) Namakwas 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)

42 41 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

43 42 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) 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 Rehabilitation of an Old Mine

44 43 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 Namakwas 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 ~US$185m IPO Proceeds ~US$54m Pre-IPO Financing 5.1m ct 1 Resources No Producing Assets 16.6m ct 2 Resources Increased beneficiation activity and margin ~ 30,000 cts Production³ 1. Management estimate of attributable resources as of December Indicated and inferred resources (Source: Venmyn Rand (Pty) Ltd) 3. Annualised August 2007 production

45 44 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 Very low environmental impact Time to Production 1 ¹ Source: Company estimate


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