eptember 2008 Continued Delivery S 1. Highlights 5. Botswana - - PDF document

Continued Delivery S eptember 2008

First Half 2008 in Review

1. Highlights 2. Lesotho 3. Australia 4. Indonesia 5. Botswana 6. Central Africa 7. Beneficiation

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H108 in Review

H108 Highlights

• Letšeng hard rock processing capacity successfully doubled

– S econd plant commissioned March 2008, full capacity reached August 2008 – LOM is 45 years— further production increases under investigation

• Ellendale turnaround progressing to schedule

– Capacity enhanced, production levels increased to record

• Gope mining license application progressed

– S

EIA submitted, feasibility study ongoing – S 51 negotiations to commence shortly

• Beneficiation strategy formalised

– Further successful trials on white and yellow diamonds – Key technology and skills acquired

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H108 in Review

H108 Financial Highlights

• Trading environment remains positive despite global economic

challenges

• Letšeng continues to perform ahead of expectations
• H108 results in line with internal targets, stronger performance

in H208: – Letšeng second plant at full production – Ellendale in ramp up, expected to contribute positively to 2008 Group earnings – Cempaka recommencing mining

• Discussions ongoing with various banks on Gope debt funding,

will introduce appropriate gearing to Group

• Cash at period end of US$144 million

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H108 in Review

H108 Financial highlights

US $ millions S ix months ended June 2008 June 2007 % Change Revenue 166.8 69.8 139% Royalty and selling costs (14.4) (5.5) 164% Cost of sales (87.7) (20.3) 332% Corporate expenses (8.2) (9.9) (17% ) S hare of loss in associate — 0.5 — EBITDA * 56.5 33.6 68% Depreciation (16.4) (2.1) 681% Other income 0.1 0.1 — Foreign exchange gain/ (loss) 2.3 5.1 (55% ) Net finance income/ (costs) 0.6 10.8 (94% ) Trading profit 43.1 47.5 (22% )

* EBITDA unless indicated to the contrary, is before exceptional it ems and share based payments. Exceptional items are significant items of income and expense which due to their nat ure or expect ed infrequency are presented separately in the income statement

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H108 in Review

Letšeng, Lesotho

• S

econd plant successfully commissioned – Full production in August 2008

• Rough diamond prices continue to

appreciate – US $2 512 for H108 from all sources (FY07: US$1 976)

• Main Pipe diamond values significantly

ahead of CPR expectations

• Further production increases under

investigation – Results of studies expected by year end

• S

ix megawatts of generating capacity acquired to mitigate potential power risks

Letšeng S econd Plant

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H108 in Review

Ellendale, Australia

• Acquisition fully integrated, new MD

appointed

• Ore supply improved through significant

waste stripping – 8.5 million tonnes of waste stripped

• Production significantly ramped up

– Processing capacity increased – Production records broken in June and July – 2008 forecast of 8.3 mt and 565 000 carats (6.3 mt and 475 000 carats in 2007) – 10.5 mt and 695 000 carats planned for 2009

Ellendale yellow diamond

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H108 in Review

• Diamond prices strong at US

$305 per carat

• Production ramped up in Q108

– 15 tph DMS plant constructed and commissioned – Target production of 216 000 tpm achieved in February

• Flooding in March hampered mining
• S

wift response to environmental concerns – Mining suspended – S uccessful negotiations with Provincial authorities – Water treatment facilities constructed

• Awaiting final approval

Cempaka diamonds Water treatment facilities

Cempaka, Indonesia

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H108 in Review

Gope, Botswana

• Bankable feasibility study targeted for completion H208

– Capex estimated at US $450 - 500 million

• S

51 negotiations to commence shortly – By law these take a maximum of 6 months

• S

EIA report submitted – Two rounds of PPM’ s— community support strong

• Management and proj ect team strengthened
• Financing discussions with and preliminary due diligence work

commenced by maj or international banks

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H108 in Review

Central Africa— Alluvial

• DRC

– Mbelenge grade improvement as sampling moves from terraces to flood plains and finally modern river – Lubembe sampling continued to yield high grades

• Mass mining technique remains to be determined

– Terrace and river resource definition ongoing at Longatshimo

• S

ampling of terraces and river planned for H208

• CAR

– S ignificant grade improvement in river —25 cpht average for H108 – Diamonds valued at US $175/ carat – In situ value of US $43/ tonne – Resource evaluation ongoing through bulk sampling of river gravels

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H108 in Review

Central Africa—DRC Kimberlite

• Kimberlite exploration in the DRC ongoing

– S tream sediment sampling – Geophysical anomaly drilling

• Ten higher interest anomalies drilled in H108, no kimberlite

intersected

• 27 higher interest anomalies remain to be followed up with ground

geophysics and drilling

• Detailed stream sediment sampling indicates two key target areas in

Lubembe and one in Longatshimo

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H108 in Review

Angola

• Appropriate site established and operational
• Geophysical survey completed and initial results derived

– S ub-surface expression of 50— 60 ha – S ignificant thickness of fine grained kimberlite sediments

• Diamond drilling to refine geophysical model commenced

– LDD to follow

• 10tph DMS

sampling plant on site and commissioned

• 2 000 tonnes treated, 500 carats recovered – 25 cpht
• First diamonds recovered, valuations expected to be circa

US$150— 200 per carat

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H108 in Review

Beneficiation

Pear shaped polished diamond

• Trials on Letšeng and Ellendale diamonds

– Margin up to 100% , averaged 30%

• Beneficiation strategy being implemented

– Facilities being established in Dubai – Matrix Diamond Technology team recruited – Fully operational from 2009 onwards

• S
• me 60%
• f all +5 carat polished D colour

diamonds estimated to come from Letšeng*

Cushion shaped polished diamond

* Based on Bloomberg research and Company estimates

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Global Diamond Industry Overview

Beneficiation captures significant extra margin

5% 8% 7% 20% 50% 51% Mining Rough Trading Cutting and Polishing Polished Trading Jewellery Manufacturing Branded Retailing 13

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Diamond Market Review

1. Market overview 2. Impact of HNWI growth 3. Impact of emerging economies 4. Long term outlook

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Diamond Market Review

Polished Diamond Price Grow th 2005— 2007

11.0% 2.0% 7.0% 10.0% 35.0% 78.0% 66.0% (2.5)% (20)% 0% 20% 40% 60% 80% 100% Melee 0.5 1 1.5 2 3 4 5 Stone size— Carats % Growth in Prices

“ Long t erm diamond indust ry fundament als suggest t hat at t he aggregat e level, diamond demand will exceed supply, result ing in sust ained price growt h over t he next decade.” Rio Tinto, Diamonds Annual Review 2008 “ Polished demand and corresponding price growt h was st rongest for large st ones and smaller, bet t er qualit y diamonds. This was driven by st rong demand from China and consumers t rading up in t he US .” Rio Tinto, Diamonds Annual Review 2008

Source: Tacy Ltd. 2008

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Diamond Market Review

“ While demand for high-end diamonds is likely t o remain robust , t he smaller, lower qualit ies, which are more dependent upon US demand, are expect ed t o remain subdued.” De Beers H108 financial result s “ The average cumulat ive increase in DTC rough diamond prices since t he beginning of 2008 has been 16.0% . S

• me boxes have been af fect ed

more t han ot hers, and t he st rongest increases t his year have been predominant ly in rough t hat produces highly sought aft er S I+ and +1ct polished.” DTC announcement August 2008

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Diamond Market Review

“ Our j ewellery business has t urned in except ional sales growt h, principally from global cust omers beyond t he US … ” Harry Winston Q109 financial results “ The current quart er saw cont inuing price rises in t he larger, bet t er-qualit y rough diamonds, while t he price of lower-qualit y rough diamonds remained unchanged in response t o soft ening US

• demand. The demand in t he Asian

market s remained robust in all price ranges” Harry Winston Q109 financial results “ The global luxury diamond j ewelry market cont inued t o show st rengt h in t he first quart er of calendar 2008. Luxury ret ailers wit h operat ions out side of t he US have experienced solid sales result s, especially in t he Asian, Russian and Middle East ern market s.” Harry Winston Q109 financial results

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Diamond Market Review

Rise of HNWI wealth augurs well for larger diamonds

HNWI Population growth % (2004— 2005)

6.8% 6.8% 7.3% 14.4% 14.7% 15.9% 17.4% 19.3% 21.3% 13.4% 0% 5% 10% 15% 20% 25% USA China UK Singapore Hong Kong Indonesia

• S. Africa

Russia India

• S. Korea
• HNWI (US

$1 million +) constitutes a growing segment of the global population

• UHNWI (US

$30 million +) are growing at greater rate – 11% YOY growth 2006 – 13% CAGR 2002— 2006

• HNWI growth greatest in emerging markets, where diamond consumption is

also growing

Source: 2006 Global Wealth Report

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Diamond Market Review

Emerging economies set to make significant impact

“ Brand invest ment by ret ailers and manufact urers in China and India is st rong and t here is a cult ural preference t o display wealt h and invest in j ewellery. As urban incomes increase, diamond j ewellery demand is expect ed t o t rack luxury goods consumpt ion. Rio Tinto, Diamonds Annual Review 2008

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Diamond Market Review

Emerging economies set to make significant impact

• Growth in emerging middle class in new economies
• Diamond engagement ring gaining acceptance in mainland China

– 51%

• f S

hanghai engagements celebrated with a diamond

• Diamond content in Indian j ewellery increasing

India— Value of Diamond Content in Jew ellery (US$ million) 200 400 600 800 1,000 1,200 1,400 2002 2003 2004 2005

Source: Tacy Ltd. 2008

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Diamond Market Review

Long term diamond market outlook

Remaining rough diamond reserves¹ World diamond j ewellery sales (US $ billion)

30 60 90 1970 1975 1980 1985 1990 1995 2000 2005 1971:Orapa S tart production 1982:Jwaneng and Argyle Enter production 1983:Jwaneng and Argyle S tart to ramp up production 1986:Argyle (AK1) S tarts full production Ekati Diavik 10 20 30 40 50 60 ‘ 80 ‘ 81 ‘ 82 ‘ 83 ‘ 84 ‘ 85 ‘ 86 ‘ 87 ‘ 88 ‘ 89 ‘ 90 ‘ 91 ‘ 92 ‘ 93 ‘ 94 ‘ 95 ‘ 96 ‘ 97 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 S

• urce: BHP Billiton

¹ Reserves of maj or operating mines at annual production Source: De Beers

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Diamond Market Review

Letšeng rough diamond prices continue to show strong appreciation

1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 FY06 H107 H207 H108 US$ per carat average

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Gem Diamonds Investment Case

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Gem Diamonds Investment Case

One of the largest independent diamond companies

Listed Diamond Companies’ Market Capitalisations US$ millions

Harry Winston, $1,218 Shore Gold, $321 Petra Diamonds, $348 Namakwa, $298 Vaaldiam, $43 Trans Hex, $113 Rockwell, $74 Mountain Province, $255 Gem Diamonds, $1,226

Total Diamond Revenue US$ millions

Gem Diamonds*, $360 Harry Winston, $414 Petra Diamonds, $76 Namakwa, $21 Rockwell, $45 Trans Hex, $122 Vaaldiam, $13

Market capitalisations as at August 2008 and forecast production is for 2008 year ends

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Gem Diamonds Investment Case

Production growth from four mines

250,000 500,000 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000 2,250,000 2007 2008 2009 2010 2011 2012 Carat s Let seng Gope Cempaka Ellendale

Revenue forecasts based on current diamond prices

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Gem Diamonds Investment Case

Letšeng is a long life, low risk asset

• Two kimberlites and two plants —lower risk
• Long life mine – 45 years at current extraction rates
• S

ignificant resource of 3.94 million carats, in-situ value of US $9.9 billion

• Located in low soft currency cost base geography vs. hard currency

revenue

• S

table political and fiscal regime

220 220 220

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Gem Diamonds Investment Case

Current share price only captures Letšeng’ s value

Remaining Group Asset s, 113 Let šeng Diamonds, 1,080

• Letšeng’ s value accounts for 91%
• f

Gem Diamonds’ current value

• At average market valuations of 15.6%
• f in-situ value*, 70%
• f Letšeng =

US $1.1 billion

• Cash of US

$144 million

• Implies negative valuation for

remaining assets

* Based on RBC Capital Markets Equity research

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Gem Diamonds Investment Case

Opportunities for expansion

• Beneficiation will deliver extra margin
• Potential further increase in Letšeng production
• Ellendale resource extensions and increases

– 42 undeveloped lamproites – Potential resource extension on E4 and E9

• Cempaka ramp up

– Could increase production by a multiple – Lower unit costs

• Mambéré grades suggest mine development
• Diamonds recovered at Chiri—

initial favourable results

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Gem Diamonds Investment Case

Conclusion

• Current share price undervalues assets
• Track record of delivery extended
• Global foot print of producing assets in ramp up
• Existing and future kimberlite mines secure supply for the long term
• Blue sky opportunities remain an important part of the portfolio
• Margin capture from beneficiation
• Investment opportunity with niche exposure to UHNWI

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Gem Diamonds Limited +44 203 043 0280 www.gemdiamonds.com Gem Diamond Technical S ervices +27 11 560 9600

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