December 18, 2007
Diamond Core NI 43-101 Technical Report

Diamond Mining and Processing

• Diamonds will initially be produced from bulk sampling of four exploration projects.
• KIG Mining Plc requires that a representative bulk sample parcel of 2 000 cts be produced.
• Upon positive bulk sampling results being obtained, the process will advance to mine development, and diamonds will be produced from these operations.
• KIG Mining Plc's target diamond production rate is estimated at 65 000 cts per annum by 2010.

Diamond Recovery

• All diamonds recovered in the sort house will be weighed and each stone individually recorded.
• Where large numbers of small stones are recovered, these will be recorded in their sieve size fractions in lots.
• Diamonds will be sealed and securely transported to a diamond trading office.
• All information pertaining to the diamonds (sizes, number of stones, source) and the prices obtained will be recorded in a database for statistic and geological purposes.
• This database will be used to plot size frequency distribution curves.

Parcel Preparation

• Diamonds will be cleaned in acid, graded, and sorted into lots by KIG Mining Plc's appointed diamond evaluators.
• Any loss of carats as a result of the acid wash will be duly recorded.

Sale of Rough

• Diamond sales will take place at KIG Mining Plc's choice of diamond office on an unregulated basis over a period of time.
• Potential buyers will be selected by KIG Mining Plc, through specific criteria. Each parcel will be negotiated on its own merit.
• KIG Mining Plc will receive cash, upon receipt of which the change of ownership will take place.
• The required Kimberley Process Certificate is issued by the Diamond Board in Johannesburg, South Africa.

Cutting and Polishing

• Diamonds may be selected to be cut and polished by KIG Mining Plc as a stand-alone project to maximise profit.
• This vertical integration will only be considered if it is of benefit to KIG Mining Plc.

A Canadian-based mineral intelligence and research company, Metals Economics Group, has been tracking world exploration expenditures since 1989.

The Group has reported that world diamond exploration allocations grew another 33% in 2005 to US$ 626m, up from the previously highest-ever level of US$ 471m in 2004.This upward trend shows no sign of abating.

The quantum of capital being expended on diamond exploration in South Africa is not reported publicly.

It is possible from analysis and pro-rata allocation of this capital amount to determine the quantum that should have been expended in South Africa benchmarked against global spend.

South Africa produced an estimated 11% of the world’s rough diamonds in 2004. In order to remain a diamond producer of this magnitude, approximately 11% of the world exploration budget should be allocated to exploration in South Africa, the objective being to replace and increase the existing, but depleting, national diamond resource, in order to sustain the value added beneficiation industry, which is being promoted by stakeholders in the long term.

South Africa’s share of the world diamond exploration allocation should, therefore, not be less than US$ 70m per year (11% of the US$ 626m total budgeted or approximately R 500m).

In the current bull commodity cycle, capital for exploration worldwide is being allocated 40% for grassroots exploration, 40% for late stage exploration, and 20% for minesite exploration. Almost half of the exploration allocations are being made by junior companies and a little over a third by major mining companies. Intermediates account for around 13% of the allocations, and governments make up the rest.

The R500m estimated South African expenditure, benchmarked against world norms, should be roughly allocated as R200m on grassroots diamond exploration, R200m on late-stage exploration, and R150m on minesite diamond exploration.

Geological processes create two basic types of diamond deposits, referred to as primary and secondary deposits. Primary sources are kimberlite and lamproite pipes that raise diamonds from the Earth's mantle where they originate. Secondary, or placer, sources, created primarily by alluvial erosion, include such deposits as surface scatterings around pipes, concentrations in river channels, and fluxes from rivers moved by wave action along ocean coasts. Secondary deposits may be found far from active means of transport, in the fossilised channels of ancient rivers or under fossil beaches. Mining of these deposits depends upon sufficient concentration and quality of diamonds.

Kimberlites are igneous rock matrixes composed of carbonate, garnet, olivine, phlogopite, pyroxene,serpentine, and upper mantle rock, with a variety of trace minerals. They are found as dykes andvolcanic pipes, which are the source of rare and relatively small volcanoes. Kimberlite pipes are the most significant primary source of diamonds, yet only about one in every 200 kimberlite pipes is diamondiferous.

The location of alluvial (or placer) diamond deposits is controlled by the surrounding topography. Alluvial diamond deposits are usually located within river terrace gravels that have been transported from their location of origin, usually from kimberlite deposits,and deposited in a lower-energy meandering or braided stream environment.

The alluvial terrace gravels and marine gravels of the south-western coastline of Africa represent some of the world’s largest placer diamond deposits. The world's largest known gem-quality alluvial diamond deposit is located along the Namib Desert coastline of south-western Africa, known as the Sperrgebiet or "forbidden territory". Namibia's placer diamond deposits are up to 40 million years old.

The Kaapvaal Craton is the richest diamondiferous kimberlite province in the world and remains prospective with the most recent discoveries being Venetia (1982), Marsfontein (1997) and Klipspringer (1997). Alluvial and marine gravels deposited by rivers, such as the Orange River, draining this Craton are prospective for diamonds. Diamond Core and Samadi projects are based in this area.

Diamonds of exceptional quality and value are present in the paleo alluvial gravels associated with the Orange River system. These diamonds have been mined extensively from alluvial terraces adjacent to the river, as well as from marine deposits up and downthe West Coast adjacent from the Orange River mouth.

These diamonds originated from the erosion of kimberlites that erupted through the Kaapvaal Craton up to 80 million years ago, and were deposited and concentrated into the river gravels as the river gently eroded into what is today the Northern Cape landscape. The gravels of interest to Diamond Core today are preserved as abandoned river paleochannels on terraces, which at times occursome distance away from the current river course.

As the river system cut down into the bedrock formations, cycles of re-erosion, transport, deposition, re-erosion and additional transport took place. This process effectively brought about a natural form of enrichment and concentration, resulting in the larger and higher quality diamonds being preserved, the stones oflower quality being destroyed in the process.

Additional concentration took place during the creation of the Rooikoppie gravel, which is a thin layer that in places overlies the primary gravels. The Rooikoppie gravel is described geologically asbeing a deflationary product, created by weathering and erosion.

Weathering of the Rooikoppie primary gravels removed the softer clasts, resulting in a residual type of gravel in which only the more resistant rock types such as jasper, vein-quartz, agate and diamonds were preserved. Deflation of the lighter fraction in the package by wind further reduced the volume of the gravel,enhancing the diamond grade.

As a result of these processes, gravels along the Middle Orange River contain predominantly gem-quality stones. Current operations on the Middle Orange River produce an average 2-carat stone size, which typically sells in the market at prices of over US$ 1 200 per carat.Where there are indications that these stones occur at a grade of 0.5 carats per 150 tonnes (cpht) of gravel, or greater, and where more than five million tonnes of this gravel occur, it is usually economically feasible to construct a recovery plant to first bulk sample the alluvial deposit to determine grade and potential revenue per tonne. If the studies determine that the deposit is economically feasible, the plant and mine can be advanced to full-scale mining operations. Economically feasible alluvial deposits generally have a lowergrade than a kimberlite (0.5 cpht compared to 10 to 150 cpht for kimberlites), but can be mined at a lower cost per tonne andusually produce higher value diamonds. Kimberlites typicallyaverage US$ 150 per carat in South Africa.

EXPLORATION AND DEVELOPMENT METHODS FOR ALLUVIALDIAMOND DEPOSITS

There are two methods of prospecting for alluvial diamond deposits. Traditionally prospectors (diamond diggers) find a prospective gravel deposit, construct a small plant using their own capital, and then immediately advance to the mining stage. Sometimes capital can be raised to finance the construction of alarger plant to achieve economies of scale.

In order to operate successfully on low-grade deposits, it is necessary to process large volumes of gravel cost effectively. This process requires a substantial investment for which capital has to be raised; often equity necessitates this via systematic resource definition of the alluvial gravel to satisfy the requirements of potential investors and appropriate exchanges. This method requires a systematic and professional approach, and a number ofwell-defined stages has to be followed.

A project will normally commence with a desktop study, which will bring together a detailed knowledge of modern-day and historical mining operations, detailed production records, the appropriate geology and mineralisation models, grades, tonnages, diamond value, metallurgy, and the other technical inputs. A study of all available literature is conducted, with consideration given to the location of the continental craton boundaries, and the nature and location of the present and ancient drainage basins on the craton. Available maps are also studied and remote sensing datasuch as Landsat imagery are assessed.

Once an informed opinion has been obtained as to the prospectivity of an area, the most likely targets are identified for further investigation. An experienced geologist will need to visit the sites to give an appraisal of their potential prospectivity. At this stage prospecting rights must be secured to protect thepotential investment in the exploration.

Detailed ground investigations usually begin with geological mapping, with enlarged aerial photographs being used to plot field data. The geological character of the delineated target area is carefully studied on the ground. This information is combined with information derived from the desktop study so that a geological interpretation can be made, and a comprehensivegeological model established. This geological model forms the primary component delineating the potential mineralised depositand resource.

The next step in the evaluation of an alluvial diamond deposit is systematic percussion drilling to test the model and to determine the size of the gravel deposit, the thickness and nature of the overburden, the thickness and nature of the gravels, and the bedrock characteristics. The gravel tonnage of an alluvial deposit can be determined with relative ease. Boreholes are normally located at 50 m intervals along drill sections 150 m apart. More detailed drilling is undertaken in selected areas where the nature of the bedrock is important in establishing possible irregularitiesthat could result in diamond “trap”.

Normally bulk samples are required after drilling in order to establish the grade. The economic aspects of an alluvial diamond deposit are extremely difficult to predict with a high level of confidence, as diamond concentrations occur erratically. In addition, individual stones are by nature highly variable in size, shape, colour and clarity, further complicating the prediction of an average diamond value. There is a substantial “nugget effect” inany alluvial diamond deposits.

As a rule, a bulk sample of 2 000 cts should be presented to an independent diamond expert for an accurate estimate of the average value of the stones in the deposit. Producing this number of carats can involve mining half a million tonnes of gravel just for this purpose. On low-grade, technically challenging deposits such as the Middle Orange River, a substantial capital outlay is requiredin order to achieve this objective.

Once a deposit is mined, a greater level of confidence of the grade is obtained over time. If a mine is actively producing from a similar geological gravel deposit, historical results can confidently be used to predict the average future grade and diamond value ofthe deposit.

Diamond Core has chosen to classify alluvial deposits within andaccording to SAMREC resource/reserve guidelines as follows:

• An "Inferred Mineral Resource" is where systematic drilling has accurately established the size of the gravel deposit but where the average grade and diamond value can only be estimated with a low level of confidence. Only limited information is available on grade and diamond value from one or two small-scale workings on the property or from nearby properties that mine a geologically similar deposit.
• An "Indicated Mineral Resource" or a "Probable Mineral Reserve" is where the size of the deposit has been accurately established from detailed drilling. The average diamond grades and values can be fairly confidently predicted from bulk sampling or from historic mining results.

THE EXPLORATION INDUSTRY

The time of maximum value-add with mining projects is from discovery to feasibility. This is also the time of highest risk to the investor because very few exploration projects reach the advancedevaluation stage, let alone actual development and production.

The way to build a sustainable exploration business is for a company to turn over numerous projects in the early exploration stages and to be selective about the projects to which thecompany actually commits time and capital.

Creating a sustainable business out of mineral exploration requires focus, a high level of technical skill, and a competent management team, which is able to successfully evaluate projects. An exploration company’s most valuable asset is oftenmanagement with these skills.

Both open pit and underground mining methods are usedextensively to exploit economically viable diamond deposits in South Africa. As the primary objective of any commercial miningoperation is the optimal economic exploitation of the mineraldeposit, once an open pit reaches a threshold depth below surface,the economics of mining the deeper extensions of the orebody using underground methods becomes more favourable.

OPEN PIT MINING OF KIMBERLITE PIPES

The surface expression of kimberlite pipes on surface is roughlyspherical and mining takes the form of a benched open pit. Theultimate shape of the pit is an inverted cone with the pit wallsrocks being mined in a stepped bench and berm arrangementwhich ensures long-term pit slope stability.

Rock haulage is achieved via single or multiple ramp layouts, dependent upon the size and orientation of the deposit, with ramps circling out of the pit at slope angles appropriate for the machinery deployed. Waste and ore berms are pushed back in successive phases until the ultimate economic pit shell is achieved, informed by the cost and revenue parameters at the time of mining.

Productivity from open pits is dependent upon the deposit size and pit orientation, but large kimberlite pits in southern Africa can yield up to 10 000 tpd with mining costs in the range of $12/t to $18/t.

OPEN PIT MINING OF ALLUVIAL TERRACES

Mining of alluvial terraces focuses on the extraction of successiveaprons of tabular in situ gravels in a scattered cut and fill miningconfiguration. The overlying barren sand overburden ispre-stripped and used for the rehabilitation of the preceding miningcut, and each gravel horison extracted sequentially in parallel cuts.Depending on the extent of calcretisation, or cementation, of thegravel and intermediate waste sequences, drilling and blastingmay be required, a key variable when considering the economicsof the deeper, often high grade, gravel beds.

Similarly, productivity from cut and fill mines is dependent uponthe number of production faces available on the deposit, but largefleets deployed on extensive deposits can achieve in excess of30 000 tpd at costs of between $8/t and $12/t.

UNDERGROUND MINING OF KIMBERLITE PIPES

Sub-level Cavin

Sub-level caving methods are best suited to steeply inclined,medium width ore bodies enclosed in relatively weak host rock. Ifthis method is commonly used in near surface ore deposits whenmining progresses underground from the bottom of an open pit asillustrated. The method consists of driving a series of sub-levelsfrom the vertical shaft access points commencing at the upperlimit of the ore body. A starting vertical slot is cut at one end ofthe zone to be mined and a series of holes drilled in a ring patternare blasted into this opening.The broken ore from the blast is thendrawn using either load-haul-dump (LHD) excavators orrail-mounted pneumatic loaders. The pattern of drilling, blastingand drawing is repeated as the stope retreats. The ore remainingin the stope on the upper sub-level is recovered on the lowerlevels as mining progresses with depth. Some dilution of the ore is inevitable with this method from wall rock dilution.

Productivities from sub-level caving stopes vary considerably butare in the range of 150 to 150 tonnes per man shift. Mines usingthis type of mining method as a sole source of productiontypically produce in the 5 000 tpd to 15 000 tpd range. Miningcosts are variable and usually range between $18 t to $25/t.

Block Caving

Block caving refers to the mining layout which divides thevertically oriented orebody into large cylindrical blocks withvolumes of several thousand cubic metres. A typical orebodysuitable for block caving is a porphyry-type deposit with welldisseminatedmineralisation and of fairly large lateral and verticalextent. This method is also applied to steeply dipping fissuredeposits of sufficient width. The rock strength can be fairly weakor fairly strong, but the total rock mass must have sufficientfractures in different orientations to allow it to break up undergravity into fragments small enough to pass through thedrawpoints into the production drifts. The drilling and blastingrequired for ore production are minimal, while developmentvolumes are extensive. The lateral extent of the orebody must begreat enough to ensure that a cave can be established.

Block caving operations are initiated by undercutting the area tobe caved and establishing a series of drawpoints through whichthe caved ore is drawn. The method of creating the initial cavearea depends on a number of factors, but generally involvesopening up sufficient area at the bottom of the ore so that theoverlying mass becomes unstable and caves. Continued pressurebreaks the rock into smaller pieces, feeding through conesinto drawpoints where the ore is handled either by loaders or bywinch-operated scrapers. The initial openings are usuallyaccomplished by coning out the ore from a series of short raisesdriven up from closely spaced parallel drifts, which have beendriven below the ore zone. Once caving begins, broken ore iscontinuously drawn off as the caving progresses upwards.

Daily production from block caving operations can range from30 000 tpd to over 60 000 tpd. Mining costs are typically in the$5/t to $12/t range.

Shrinkage Stoping (Underground Fissure Mining)

Shrinkage stoping is applicable to ore zones with a dip of at least55 degrees and that range in width from roughly 1.2 m to 4.5 m.The host rock must be competent in such a way that, when theore is drawn from the stope, dilution is kept to a minimum. Thecontact between the country rock and the ore zone must berelatively sharp without any abrupt changes in either strike or dipalong the stope interval.

The stope is usually accessed by crosscuts driven into the ore bodyat regular intervals from a drive excavated in the footwall alongthe strike of the fissure. The stope is mined by drilling 2 m to 3 mlong holes along the strike of the fissure and the ore is blasteddown. Access to the next lift is gained by standing on the brokenore, and repeating the process until the kimberlite is exhausted, atwhich point new raises are developed on deeper levels to replaceproduction faces depleted on the upper levels.

Considerable development work is required to prepare a shrinkagestope for production. The productivity of the method during thedevelopment cycle is low and capital intensive, with productionfrom shrinkage stopes largely dependent on the width of the orezone. Mines using this method as a sole source of ore typicallyproduce between 200 tpd and 800 tpd, with mining costs varyingbetween $28 t and $35/t.

Beach Mining

Mining of present-day beaches requires the stripping of overburdenand the construction of sea-walls to hold back the sea, temporarilyallowing access to diamond-bearing gravels found in depressionson the continental bedrock. Beach mining is especially detrimentalto the sensitive coastal environment and can result in significant land modification and alteration of the seashore. The visualimpact and duration is modulated however, in time, by wind andwave action, in addition to on-going beach material replacementrehabilitation.

Marine Mining

Marine mining technology only became commercially viable inthe early 1990s. In Africa, westward draining river systemstransported diamonds to the continental coastline for depositingin the form of on-shore and deeper marine terrace gravels. Oceancurrents along the coast have resulted in extensive marine andbeach terrace developments along Africa’s west coast from Angolato Cape Town. Diamonds in marine areas are typically trapped inbedrock depressions such as gullies, potholes, depressions,channels or other trap sites.

Marine diamond mining involves the use of an offshore vesselwhich deploys vertical and horizontal mining mechanisms toextract gravel from the sea floor.

Vertical marine mining takes place in one of two ways:

• Mining heads in the form of heavy hollow steel rods are suspended from a ship into which compressed air is forced. The flow of circulation extracts marine gravels and water through the nozzles via the mining hoses to the processing plant on board; and
• A six-metre diameter drill head is issued,which acts as arouter on the sea bed, loosening and extracting the gravels.

Horizontal marine mining is highly mechanised. A Seabed Crawleris employed and controlled remotely to direct a trackedunderwater mining vehicle, which moves across the seafloor,pumping gravel to the vessel.

There are two principal diamond recovery technologies, Dense Medium Separation (DMS) and Rotary Pan Plant circuits. Both systems have their advantages and are applied to specific types of diamond deposits. Both have ore preparation (front-end) circuits, diamond concentrate, and diamond and water recovery circuits. The capital required for an equivalent (high) throughput DMS plant is in the order of ten times higher than the capital required for a Rotary Pan Plant but can offer better recoveries.

The major considerations when making the choice of which technology to apply to a project are set out below:

	Rotary Pan Plant	DMS Plant
Throughput	High throughput for lower capital	Higher capital for equivalent
Recovery efficiency	Medium to high	High
Water usage	Low	Higher
Capital expenditure	Low	High
Operating costs	Low per tonne	High per tonne
Upgradeability	Upgradeable	Upgradeable
Mobility	Mobile	Mobile
Re-use for other projects	High	High

As a general guideline, Rotary Pan Plants are applied on alluvial deposits and DMS plants on kimberlite deposits. This is, however, always subject to factors such as throughput, point of principal production and anticipated grade. Plants treating kimberlite material are less sensitive to the higher capital requirement of a DMS plant, caused by the high costs of crushing, washing and classifying of material in these plants. Large alluvial deposits with long life of mine can justify the cost of a DMS plant.

Examples of recovery process technology considered for the Diamond Core projects are:

Project	Recovery plant	Motivation
Silverstreams	Rotary Pan Plant	High throughput, low capex & opex
De Kalk	Rotary Pan Plant	High throughput, low capex & opex
Uitdraai	Rotary Pan Plant	High throughput, low capex & opex
Paardeberg East	DMS Plant	Low throughput, higher costs justifiable

Recovery process technology for all additional projects will be applied according to project specific requirements.

The industry perception that poorer recoveries will be recorded from Rotary Pan Plants is only partly correct. The efficiency of the plant depends on the skill of the operator and the technology applied. There have been many instances where Rotary Pan Plants have been used without proper process design or operator training. Experience shows that, with proper process design and automated control of the critical variables, approximately the same efficiency can be obtained from Pan circuits as from DMS circuits.

Courtesy Craig Miles (CDM)