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NORTHWEST TERRITORIES CANADA

D IAMOND FACTS

2 0 0 7 D I A M O N D I N D U S T R Y R E P O R T •

D I A M O N D F A C T S 2007 DIAMOND INDUSTRY REPORT

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N O R T H E R N

V I S I O NThe Northwest Territories (NWT) will be North America’s Diamond Centre. Between2003-2006, we produced 11.7% of the worlds’ diamonds on average by value. There will

be sorting and selling facilities. Polished diamonds will be produced from a number ofprocessing facilities. Northern jewellery will combine Northern diamonds and gold. Tour-ists will travel to North America’s Diamond Centre to learn about diamonds and to pur-chase them. Industrial diamonds will be sorted and sold from the NWT. GOVERNMENTCERTIFIED CANADIAN DIAMONDS ™ and jewellery will be recognized in NorthAmerica and around the world as unique, high-quality products.

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Introduction OverviewThe World Diamond Industry The Diamond Pipeline World Production of Natural Diamonds Polishing Centres Government Certied Canadian

Diamond™ (GCCD) Demands for Diamond Jewellery Synthetically-Produced Gem Quality

DiamondsThe Canadian Diamond Industry ExplorationThe NWT Diamond Industry Production Rough Diamond Marketing

Government in the Northwest Territories Summary of Diamond Developments

to Date Marketing Canadian Brands Value Added Impact

Contents

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The initial discovery of diamonds in the Lac De Gras area occurred more than ten yearsago. Since that discovery, the Northwest Territories (NWT) has become a major player in the world diamond industry. Our diamond mining industry continues to grow withtwo mines now operational, and a third under construction. When all three mines are inoperation Canada’s Northwest Territories will produce approximately 15% of theworld’s diamonds.

BHP Billiton’s Ekati Diamond Mine, the NWT’s first diamond mine began production inOctober 1998. This was followed by the Diavik Diamond Mine, which was completed inearly 2003. These first two diamond mines, have set a high standard for industryexcellence. In addition to exercising a high level of environmental stewardship, theyhave contributed to the NWT by providing community support, employment andbusiness opportunities. They have also played a key role in the development of theNWT’s manufacturing facilities by supplying rough diamonds for cutting and polishing.

NWT’s third diamond mine will provide further benefits for the NWT. Construction of De Beers’ Snap Lake project, commenced in February 2005. The Snap Lake Project ison schedule for start-up in the fall of 2007, and full production is anticipated by thethird quarter of 2008. De Beers’ Gahcho Kué project is slated to be the NWT’s fourthdiamond mine.

Exploration continues to hold promise for further opportunities. The NWT accounts for the largest portion of total Canadian diamond exploration expenditures. Explorationcontinues to expand with 579 active prospecting permits, totalling 27,524,264.68 beingtaken out in the NWT as of the end of June 2007. Exploration and deposit appraisalexpenditures in the NWT totalled $129.8 million in 2006, a significant increase from2005 ($96 million). Spending intentions for 2007 are estimated at $192.2 million.

We are also excited about the developments thathave occurred in the secondary diamond industryin the NWT. We have moved beyond our role as adiamond producer by developing a vibrantsecondary diamond industry. The NWT has threecutting and polishing facilities and is alreadybeing recognized for its leadership in training, itscraftsmanship and its high quality polisheddiamonds. We are also actively exploringopportunities in jewellery and tourism.

The future holds great potential for growth in theNWT diamond mining and secondary diamondindustries. Diamonds from the NorthwestTerritories, have found a niche in the globalmarket. I invite you to explore this uniquenorthern industry.Honourable Robert McLeod

Minister,Industry, Tourism ad Investment

DIAMOND FACTS 2007 1

MESSAGE FROM THE MINISTER

NORTHWEST TERRITORIES

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D IAMONDINTRODUCTION

Overview Nine years after the first diamonds were mined in the Northwest Territories, Canada isnow the world’s number 3 producer, by value, of diamonds behind Botswana andRussia. World production of natural rough diamonds in 2006 was 175 million caratsvalued at US$ 12.6 billion. Of this, Canada’s three mines supplied about 12% by value,of which 98% came from the Diavik and Ekati mines in the Northwest Territories.

De Beers’ two new Canadian mines: Snap Lake in the Northwest Territories which cameonstream in late 2007, and Victor in Ontario, planned to start operations in 2008, willconsolidate Canada’s position. Other new mines look likely to be brought onstream:Gahcho Kue in the Northwest Territories, the Star Kimberlite at Forte a la Corne inSaskatchewan and Otish Mountains in Quebec. With production from South Africa,Australia and Russia likely to be flat or reducing, Canada is set to retain its position for at least the next five years.

Most commentators predict that demand for diamonds is likely to exceed supply over the next five to ten years. Prices have already started to rise strongly but there is a clear split in the trend of price movement between the largest stones in the best colours andthe smaller lower quality stones with internal impurities. Whereas the overall rise inpolished diamond prices between 2003 and the end of 2007 was in the 35-40% rangethere has been a very wide range of rates of price increase for different categories. Tovarying degrees, depending on precise category of colour, quality and shape, thelarger, better stones over 1.5 carats polished have doubled in price over the past fiveyears and some have nearly tripled. By the end of 2007, due to shortage of supply and

high demand, an accelerating rate of increase was taking prices of these categories tospeculative levels.

Throughout the size ranges better colours and purities have been strong but smaller lower quality stones have been flatter. Moreover diamonds are priced in US dollars andthe fall in the US dollar over the past five years translates in other currencies, such asthe Canadian dollar, to a reduction in price in all but these largest and best qualities.

Can diamond prices be hedged and future trading be undertaken on the world market?The main problem has always been finding precise descriptions of the rough or polished diamonds being traded, given the many varieties of size, coulour, quality andshape and the large number of subjective judgements in grading assessments.A trading structure is being developed to overcome these subjective assessments. If

successful, potentially this could dramatically change diamond trading and stronglyinfluence diamond prices.

Global retail sales of diamond jewellery were estimated at US$68.5 billion in 2006,5% up from 2005. The USA is the largest market making up 50% of the total. India andChina remain small but growing strong, and increasing spending power from their booming economies, combined with a well-established tradition of wearing jewelleryas a symbol of prosperity is driving high year-on-year increases in diamond jewellerysales.

In all the world’s retail markets the desire for larger better colour diamonds of moreinternal purity is driving demand and the top luxury jewellers such as Tiffany’s and Harry

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FACTS INTRODUCTION

Winston are reporting record sales and expanding their sales networks. In the massmarket, competition from online sales and discount stores is reducing retailer margins,and the number of independent retail sales outlets is falling.

The search for new diamond deposits continues to be highly active and Canadiancompanies have been leading the way since Diamet Minerals first found diamonds atPoint Lake in 1991. Investment in exploration has been increasing steadily over the pastfive years. Out of estimated worldwide diamond exploration expenditure of US$800 million in 2006, about US$275 million was spent in Canada, just slightly lessthan in the whole of Africa.

Most of the exploration takes place in the Northwest Territories, Nunavut andSaskatchewan. The attraction is Canada’s highly prospective geology for diamonds with

new deposits regularly being discovered, as well as stable and secure mineral policies,contrasting with many other jurisdictions where diamonds are found.

In addition to the probable development of Gahcho Kue, Forte a la Corne and OtishMountains there are a number of promising prospects in Nunavut, the NorthwestTerritories and Ontario which could provide Canada’s next Diavik or Ekati.

In Botswana, South Africa and Angola also there are new mining projects which arelikely to come onstream, but industry analysts forecast that all of these will do no morethan replace reductions in output at older mines.

A note of caution has been sounded by the closure of the Jericho mine in Nunavut inJanuary 2008. This closure will act as a reminder that deposits in Canada, however diamondiferous they are, must have the size and value per tonne to cover the highmining costs and repayment of the substantial investment over the mine’s life. Therelative strength of the Canadian dollar to US dollar, in which diamonds are priced, hasincreased the risk involved in opening new mines in Canada’s remote areas.

It has not been an easy time for the diamond cutting and polishing industry.Manufacturers are having to get used to a fluctuating price of rough, which at timesmakes theirs a low or zero margin activity. The great majority of the 800,000 strongworkforce is in India, with China and other parts of the Far East providing most of therest. Other centres, traditional and newer, have fewer workers most of whom specializein higher value and larger stones where the skill level offsets much higher labour costs.

More diamonds are being polished in the countries where they are mined, because politicalpressure has brought about a change in attitude from mining companies. De Beers’marketing arm, the Diamond Trading Company (DTC), has recently announced a significantshift in the composition of its customer list towards companies operating in Southern Africa.

De Beers central sorting and aggregation operation will also be moving to Botswana in2009, ending the 350 year dominance of London of distribution of rough diamondsaround the world.

In December 2007, DTC announced that three manufacturers approved by theGovernment of the Northwest Territories of Canada: Arslanian Cutting Works, Laureltonand HRA would receive sights of rough diamonds from De Beers Canada’a Snap Lakemine production. This is a further boost for the small Northwest Territories industry


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D IAMONDINTRODUCTION

which already receives rough supplies from the Ekati and Diavik mines, from BHPBilliton and Rio Tinto Diamonds respectively.

Industry debt has risen by more than 30% over the past three years to over U$12 billion.The reasons are higher diamond prices, extended credit terms for sales of polished,and the inventory remaining in the pipeline from earlier rough stockpile sales by theRussians and De Beers. Despite low interest rates this is a potential threat to the healthof the industry in the present economic climate especially if a downturn in sales in theUS market leads to bankruptcies.

Reputational issues arising largely from anti-money laundering legislation and the issueof “conflict diamonds” are a continuing concern for the industry, although the Africancivil wars are mostly over and “conflict diamonds” scarcely exist any more. The

Kimberley Process (KP) certification system for rough diamond shipments set up in2003, following extensive liaison between governments and the diamond industry, isoperating successfully. It has been highly effective in ensuring that diamonds are notbeing used to subsidise war but it is now used more to combat smuggling, tax evasionand transfer pricing.

The need to prove that they are selling ‘clean’ diamonds, that is those which are notillicit or involved in the funding of wars in Africa, has been an important factor leadingthe major producers to introduce various forms of corporate branding in support of thedownstream marketing of polished diamonds. Some are using a system of trackingstones through polishing and then marking them to prove the clean source. Marksproving ethical sourcing include DTC’s Forevermark™ and BHP Billiton’sCanadaMark™.

In 2000, the Government of the Northwest Territories of Canada was the first tointroduce a program to support origin branding of diamonds through its “Mined andCut in the Northwest Territories” certificate. An unintended benefit of the programme,conceived before “conflict diamonds” were first publicized, is that the certificates alsoprove the diamonds are ‘clean’. It was to be the pioneer of a system which isincreasingly widely used.

Since 2006 synthetically-produced gem diamonds have been sold set in jewellery. Theyhave the same physical and chemical properties as natural diamonds. There is littledoubt that they represent a threat to the natural diamond industry, but only if they arenot transparently declared and become confused with natural diamonds at point of sale. At the moment the producers of gem synthetics diamonds differentiate their diamonds which they advertise as “cultured”. Gem laboratories say they are able toidentify synthetic stones and some will give certificates which state that the stones aresynthetic.

As the industry enters 2008 the global economic outlook has deteriorated significantlyand, although the looming threat of recession may be avoided, diamond sales areexpected to slow down in North America and Europe. However the underlyingfundamentals for the industry remain very positive.


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FACTS THE WORLD DIAMOND INDUSTRY

The Diamond PipelineThe diamond pipeline is a representation in value of the steps in the diamond chain,from mining of rough to retailing of polished diamond jewellery.

The progression through the diamond pipeline shows how world rough diamondproduction of US$12.5 billion becomes US$18.7 billion in polished diamonds producedat polished wholesale prices. Ultimately, it progresses to US$68.5 billion in worldwidediamond jewellery sales, estimated at US$34 billion in wholesale value. This valueincludes the non-diamond components such as precious metals, semi-precious stones,designs, distribution costs, marketing and advertising. Inventory movements within thepipeline can be a distorting factor to the simplified presentation shown below. In 2006,the polished ex-production is estimated to have exceeded that consumed in jewelleryby a net US$ 0.3 million at wholesale prices, but there is about an average one year delay between production and sale at the retail level.

Note:1. Simplified representation of the progressive increases in value through the pipeline reflecting added value and profits at the

various stages.

2. Except where mentioned, inventory sales contributing to some of these totals have not been separately identified.

3. Value of “Polished Diamond Content in Retail Sales” represents wholesale (ex-cutting centre) prices.

4. “Retail Sales of Diamond Jewellery” include the value of the precious metals, designs, distribution costs, other semi-precious stones, marketing and advertising.

World Production of Natural Diamonds

Mixture of qualities making up world productionWorld natural diamond production for 2006 is estimated at 176 million carats with a

value of US$12.5 billion.This was similar to 2005, with small increases in the volume produced by Botswana,Angola, Canada and Russia, the last of which had not previously been transparentlydeclared and was thought to be lower.

About 20% of the volume of world production are gem stones, which will be polishedand set into diamond jewellery and 45% are near gem qualities which would have beengraded as industrial 40 years ago, but are now polished by the vast low cost, Indiancutting industry. The balance is of industrial quality. Although more than 90% of industrial diamonds are produced synthetically there are still some industrial useswhere natural stones are preferred.


THE DIAMOND PIPELINE, 2006

Sources: Diamond Intelligence Briefs.

RoughDiamondProduction

US$12.5BN

Rough Purchasedfor Production(polishing)

US$14.2BN

Value of Polishedex-Production

US$18.7BN

Polished DiamondContent inRetail Sales

US$18.4BN

Retail Sales ofDiamondJewellery

US$68.5BN

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D IAMONDTHE WORLD DIAMOND INDUSTRY

Very strong consumer demand over the past five years for diamonds, especially thebest and largest categories, has stimulated the search to find and develop new mines,and to increase output from the existing ones. Many of the world’s older mines, inSouth Africa and Russia, are reaching the end of their economic lives. Where it isfeasible to do so, owners are investing to extend the life, for example by building anunderground mine, and new mines are being brought on-stream as quickly as possible.Four new projects have recently come on-stream: Lomonosov in Russia, the De BeersSouth African Sea Areas project, Jericho in Nunavut and Snap Lake in the NorthwestTerritories in Canada. It is expected that at least four more will soon follow: Victor inNorthern Ontario (2008), the re-opening of the Voorspoed mine in South Africa (2008),Lerala (2008) and AK6 (2009) both in Botswana.

However the new mines, and the addition to recoveries at existing ones, are forecastonly to maintain the current level of world production, not increase it, and mostforecasts indicate that supply over the next 5 – 10 years will fall short of demand.

De Beers

De Beers remains the largest diamond miner in the world. In 2006 its mines inBotswana, South Africa, Namibia and Tanzania produced an estimated US$5.7 billion or 45% of world production by value, and 51.14 million carats representing 29% of thevolume. In the first half of 2007, output from De Beers’ mines was up 2% on the firsthalf of 2006, with all mining companies showing growth.

Through its marketing arm, the Diamond Trading Company, it sells all of theseproductions, as well as a share of Russian production (estimated at US$606 million in


WORLD DIAMOND PRODUCTION BY COUNTRY IN 2006CARATS

('000) US$ P.CT. US$M

Angola 10,000 135 1,350

Aust rali a 29,940 19 560

Botswana 34,293 100 3,422

Canada 13,206 106 1,400

Congo, Dem Republic 28,000 18 500

Namibia 2,402 375 901

Russia 38,360 67 2,574

Sierra Leone 604 207 125

South Africa 14,934 91 1,362

Other 4500 83 374

Total 176,239 71.3 12,568

Others include: Brazil, Central African Republic, Ghana, Guinea, Tanzania, Zimbabwe, Ivory CoastLiberia, China, Indonesia, Resotho, Venezuela, India, GuyanaSources: include De Beers, BHP Billiton, Rio Tinto,Kimberley ProcessPrices: Estimated at Antwerp market selling price

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2006) which it purchases under a trade agreement with the Russian state miningcompany, Alrosa. This gives De Beers 50% of the world rough diamond market which,although large, is a steep fall from the 70-80% the company used to market until themid 1990’s and were set to fall further following a ruling by the European UnionCompetition Commission in 2005, under which purchases from Alrosa had to bereduced progressively until 2008 and terminate from 2009. However in 2007 Alrosa’sappeal against the EU decision was upheld by the European Court, leaving open thepossibility of a resumption of sales by Alrosa to De Beers. This now depends on DeBeers’ future strategy and on further court decisions.

The following is a review, by producer country, of the world’s major diamond mines,together with new ones in the planning or construction phase.

CanadaIn 2006 Canada had three operating diamond mines ( Ekati and Diavik in the NWT and

Jericho in Nunavut). In the third quarter of 2007, the first diamonds were mined atSnap Lake which is located 220 kms northeast of Yellowknife, following an investmentof US$975 million by 100%-owner De Beers. The ore body consists of a kimberlite dykeof average 2.5 metres thickness which dips 12-15° from the northwest shore downunder Snap Lake, so it is Canada’s first fully underground mine. The resource contains26.4 million tonnes of ore with an estimated grade of 1.2 carats per tonne. De Beersexpect to mine 1.4 million carats per annum with an estimated value of US$144 per carat over a 20 year mine life. Snap Lake is De Beers’ first mine outside of Africa.


WORLD DIAMOND PRODUCTION 1999 THROUGH 2012(FORECAST)CANADA AS A PERCENTAGE

FORECAST AT 2005 PRICES

Sources: David Elliot Consulting

5.2%5.8%

5.9% 7.6%

12.5%

14.0%

10.8% 11.1% 13.5% 15.3% 15.8% 14.9% 15.0% 15.9%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

U

S$M

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Other producers

Canada

Ekati’s firstfull year ofproduction

Diavikopens

Murowa(Zimbabwe)

Lomonosov(Russia)

Jericho(Nunavut)

Snap Lake(NWT)SASA

Forecast Victor

(Ontario) Voorspoed

(SA)

ForecastAK6

(Botswana)

ForecastGahcho

Kué(NWT)

Star(Sask’n)

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In February 2007, De Beers Canada and the Government of the Northwest Territoriesannounced that De Beers would, through its selling arm the Diamond TradingCompany in London, make available 10% of diamonds from Snap Lake, by value ineconomically cuttable categories to manufacturers approved by the Government of theNorthwest Territories.

Other developments in Canada are De Beers’ Victor project in Ontario which isconstructed and approaching commissioning in early 2008. In the NWT Gahcho Kué isin the permitting phase. It is likely that Forte a la Corne in Saskatchewan, the Renard

properties in the Otish Mountains in Quebec, and a number of other prospects inNunavut could become operating diamond mines within 10 years.

In 2006, the total caratage mined in Canada was 13.2 million carats, up 7.3% from

2005, with a value of US$1.4 billion (US$1.59 billion), the same level as 2005. Itrepresents by value 11.1% of the estimated world total, and places Canada third in theleague of the world’s producer nations behind Botswana, Russia and at a similar valuelevel of mine output as both South Africa and Angola. Looking forward, increasedoutput from Diavik and the two new mines onstream are likely to bring Canada’s shareof world production into the 13-16% range, and clearly in third place from 2008-2012.

The Diavik mine , which is owned 60% by Rio Tinto and 40% by Harry WinstonDiamond Corporation (formerly Aber Diamond Corporation), is located about 300 kmsnortheast of Yellowknife. The mine is one of the richest deposits in the world in terms of value per tonne mined and has a very high grade.

Production in 2006 was a record 9.829 million carats. This represented an increase of

18% over 2005 and was attributed to operational efficiencies resulting in a 4.8%increase in ore processed despite early closure of the 2006 winter ice road, as well asan increase in grade from 3.7 to 4.2 carats per tonne. Ore was sourced approximatelytwo thirds from the high grade A154 South pipe and one third from A154 North. For the first half of 2007 the mine maintained record levels of production increasing outputby 30% over 2006 due to both higher grades and enhanced diamond recovery fromprocessing improvements. The mine is forecast to exceed 10 million carats in 2007.Most ore sourced is recovered from the A154S pipe with some contributions from A154North and A418.

The original mine life was 16 – 22 years, and phase 2 of the mine’s development is nowalmost complete. During this phase a dike was to be constructed around A418 pipe,(the third pipe in the mine plan), a feasibility study for the underground mining of pipesA154 South, A154 North and A418 prepared, and bulk sample extracted from theA21 pipe. The 1.3 kilometre long embankment that encloses the A418 pipe in Lac deGras was completed in 2005 and the dike was completed in 2006, and pool water removed. Overburden and waste rock stripping on the open pit was underway during2007 with the expectation the kimberlite pipe would be reached by the end of the year.Mining of the A418 open pit was projected to begin in 2008.

The underground development of pipes A154 South A154 North and A418 wassubstantially completed by the end of 2007 along with a feasibility plan for underground mining. A new mine plan was announced in November 2007 which


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extended the mine life to beyond 2020. As a result of the plan underground mining isprojected to begin at Diavik in 2009. The capital investment is US$787 million in total,of which US$224 million was spent in 2006/7 on development to date.

The Ekati mine , which is 80% owned by BHP Billiton, is situated about 30 kmsnorthwest of Diavik. Production was 3,149 million carats in 2006, a 21.9% reductioncompared to 2005, and the lowest level of output since year 2000.

The main reason for the decline was the lower average grade of the mixture of pipesbeing mined. Processing of ore from the high grade, but low average value, Miseryopen pit was much lower in 2006 with ore being sourced from mining of the lower grade Fox open pit, as well as the Beartooth open pit, and the high value Panda pipe,after building of the underground mine was completed in early 2006. This project is

planned to deliver 4.7 million carats over a six year life. A further investment of US$250 million is being made to build an underground mine at the Koala pipe. Thisproject is projected to produce 9.8 million carats over an 11 year life with firstproduction planned for December 2007. Open pit recoveries from both these twopipes had a high proportion of high purity white stones and had the highest value per carat of the eight pipes in the current mine plan. Options to extend the mine lifebeyond 2015 by bringing additional reserves into the mine plan are being examined, aswell as expanding plant capacity to increase throughput of ore.

The average grade of recoveries was 0.70 carats/tonne in 2006 compared with0.91 carats/tonne in 2005. In 2007 Ekati has been comfortably exceeding the 2006level of output by processing more higher grade ore but which contain lower qualitydiamonds.

The volume of diamonds recovered is expected to fall further as the transition tounderground mining takes place, but the average quality of the diamonds and valueper carat is planned to improve.

The gem content of both the Diavik and Ekati productions has a high proportion of thebest colours (equivalent to D-I in polished grading) and the good qualities, which arecurrently in very strong demand in jewellery.

In January 2006 Canada’s third mine, the Jeri cho mine , which is located in Nunavut80 kms to the northwest of the Ekati Mine, produced its first diamonds. Smaller thanboth Diavik and Ekati, it was projected to deliver a total of 4.7 million carats over a9 year mine life with an average price of US$95 per carat.

However the start-up was negatively impacted by the early closure of the 2006 winter ice road which resulted in a fuel and explosives shortage. In total 539,000 tonnes of kimberlite were processed in 2006 resulting in production of 296,000 carats at a gradeof 0.55 carats per tonne. These were sold at an average price of US$93 per carat, andincluded one high quality large stone of 59 carats, valued at over US$400,000.

Both grade and output were below those in the mine feasibility plan and this continuedinto 2007 with production falling in the early part of the year.

The project is 100% owned by Tahera Corporation. On January 16, 2008, after failing toraise additional finance through a rights issue and in the absence of any other viable


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strategic alternative, Tahera filed for protection from its creditors under the CompaniesCreditors Arrangement Act.

New mining projectsWork is underway on the environmental assessment for Gahcho Kué , located about90 kms southeast of Snap Lake. The project is a joint venture in which De Beers Canadahold 51%, with the right to increase their interest to 60% following construction andcommissioning of the mine, and Mountain Province Diamonds with 49%. De BeersCanada are the operators and are responsible for funding the project, which theyestimate at C$720 million. Based on a technical study De Beers consider the 5034,Hearne and Tuzo kimberlite pipes to be economically viable. A full feasibility study isplanned to be completed in 2009. The Environmental Impact Review is underway and is

expected to take two years. Subject to satisfactory outcomes, permitting is anticipatedto be completed in 2010. The mine should be built by 2011 with first productionexpected in 2012. The mine is expected to deliver 3 million carats per year over a15 year life. Modelled valuations of samples from the pipes showed average prices in2006 of US$101 per carat for 5034, US$54 per carat for Hearne and US$43 per carat for Tuzo, at June 2006 price levels, with an average diamond value for the project of US$83 per carat.

In August 2007, De Beers Canada and the Government of the Northwest Territoriesannounced a similar agreement to that previously agreed for Snap Lake for supply of 10% of production in economically cuttable categories to Northwest Territoriesmanufacturers

The Victor project in the James Bay Lowlands in Ontario, which is 100% owned by DeBeers, completed Federal and Provincial Class Environmental Assessments in thesecond half of 2005, and De Beers concluded an Impact Benefit Agreement with theAttawapiskat First Nation. An investment of C$982 million is being made and, followingpermitting, construction of the mine began in 2006. It is expected to be completed inthe first quarter of 2008 with production scheduled to start in the second quarter of 2008. The grade is highly variable but averages 0.23 carats per tonne. During theprojected 12 year life of the open pit the Victor mine is expected to produce 600,000carats per year of very high quality diamonds with an estimated price of over US$400per carat, the highest of any Canadian mine to date and among the highest averagevalue mine productions in the world. Victor is one of 18 kimberlites which have beendiscovered on the property, 16 of which are diamondiferous. The geology is complex,comprising of pyroclastic crater facies and hypabyssal facies.

BotswanaBotswana has been producing diamonds since the early 70’s and is now the world’slargest diamond producer.

The country’s four mines, Jwaneng, Orapa, Letlhakane and Damtshaa , are owned byDebswana, a 50/50 joint venture between De Beers and the Botswana Government. Atthe present rate of extraction, reserves are expected to last for at least 20-25 years.Mining costs per carat are also among the lowest in the world.


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In May 2006 the Botswana Government and De Beers signed an agreement renewingthe Jwaneng mining licence and harmonising the Orapa, Letlhakane and Damtshaalicences, for a further 25 years.

Botswana’s diamond production for 2006 had an estimated value of US$3.4 billion(about 27% of world total). After increasing output over the past ten years and with thefall in output at the Argyle mine in Australia, the country has also effectively becomethe world’s second largest volume producer. Although Russia’s production is greater itis believed to include a large quantity of stones considered too small by other mines torecover.

34.3 million carats were mined in 2006, 7.5% more than 2005, with both the Jwanengand Orapa mines achieving record output of 15.64 million carats and 17.34 million

carats respectively, due to improved plant utilization.New mining projectsDe Beers are planning to complete both the pre-feasibility and feasibility studies for the AK6 project, near to the Orapa and Letlhakane mines, and apply for a mininglicence. De Beers owns 51% of the project and must finance the exploration. Irish-based African Diamonds hold the balance. The two companies formed the Boteti Joint

Venture in 2004. Stones recovered from drilling are reported as similar to the highaverage quality diamonds of the Letlhakane mine. The partners plan to start producingin late 2009 and reach full production in 2011 at a rate of 4.2 million tonnes per year which at a grade of 25 carats per hundred tonnes could deliver a million carats per year at an average value of US$130 per carat.

Australian publicly-listed company DiamonEx Ltd has received final funding to bring itsLerala diamond mine located in eastern Botswana into production. The mine comprises5 diamondiferous kimberlite pipes ranging up to 2.34ha in surface area and has anindicated diamond resource of 13.5M tonnes at an average of 27.41 carats per hundredtonnes. The company envisages production to reach about 330,000 carats per annumstarting in late 2007. The weighted average price of diamonds for Lerala has beenestimated at US$53 per carat (on a 2005 base).The first sale is expected in Februarynext year and the company will sell by tender in Antwerp, the first Botswana diamondsto be marketed outside the De Beers Diamond Trading Company channel.

Namibia

Namibia is not one of the world’s major producers by volume but the output has a veryhigh proportion of small but good quality gem stones with a high average value.Diamonds are recovered from its beaches, which have been swept for alluvial depositssince 1908, as well as from the sea bed. The majority of both the land and sea concessionsare licensed to Namdeb, the government’s 50/50 joint venture with De Beers which is byfar the largest Namibian diamond producer. In 2006 Namdeb’s operations recovered2.08 million carats, 87% of Namibia’s total. This was a 17.5% increase compared with2005, which could be attributed to the success of mining coastal accretion in the MA1 areaand elsewhere, as well as positive performance from the no. 3 Plant and the OranjemundMine. 2006 was also the first year in the history of Namibian diamond mining that morecarats were recovered from marine mining than from land-based operations.


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South AfricaFormerly the world’s leading diamond producer South Africa has, over the last 30 years,been passed by Russia, Botswana, and Canada as large-scale mining began in thesecountries. Although there are many small independent miners and mining companiesworking alluvial deposits in ancient river systems, the country’s diamond mining hasbeen dominated for over a hundred years by De Beers. Until recently they owned allthe large mines, from where over 95% of South Africa’s production came in 2006.However most are old underground mines with the bulk of economically recoverablereserves exhausted. In respect of these De Beers have been implementing a policy of disposing of projects they consider marginal in feasibility and which no longer fit withinthe business model for the future. In November 2006, they entered into an agreement

with Petra Diamonds to sell the Koffiefontein diamond mine and associated assets toPetra Diamonds. In September 2007 the deal was completed and Petra bought themine for US$11.75 million. In the same month De Beers announced the sale of theKimberley Mines to Petra and in November 2007 a deal was concluded to sell theCullinan mine for US$140 million to a consortium led by Petra. During 2007 De Beersalso arranged to merge its Namaqualand assets with those of state diamond miner Alexkor, thereby completing the disposal of all its loss-making South African mines,except the smaller The Oaks mine in Limpopo Province which may be closed. Theyhave retained the profitable Venetia and Finsch mines.

The Venetia mine, which opened in the early 1990’s, is easily the largest producingmine in South Africa, but its production dropped by almost 5% in 2006 to 8.1M caratsdespite a 2% increase in tonnage treated. Due to this and the closure of theKoffiefontein mine De Beers’ total South African output dropped by almost 4% in 2006to 14.57M carats with a value estimated at US$1.36 billion.

In May 2006, 26% of De Beers Consolidated Mines Ltd was sold to Ponahalo Holdings,in compliance with Black Economic Empowerment legislation.

New mining projectsThe Voorspoed mine in the Free State Province received the first “new order” mininglicence in October 2006 for a diamond mine. De Beers will invest US$170M in the minewhich is expected to start production of almost one million carats a year by 2009.

Another new De Beers project in South Africa is the SASA marine mining project . Thisfollows 22 years of exploration and investigation into the mining of the deep sea areas

off the Namaqualand coast. The company have invested US$145 million equipping ahigh-tech vessel with a large crawler and a treatment plant to recover and process thegem rich gravel from the seabed. The project is expected to recover 280,000 carats per year having commenced production in mid-2007.

In 2007 the company also planned to invest US$ 74 million in upgrading the treatmentplant at the Finsch mine which is forecast to recover an additional 500,000 carats per annum.


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RussiaRussia is the world’s second largest diamond producer, mining diamonds valued atUS$2.6 billion in value in 2006, 3.2% more than 2005. The volume this represents incarats is believed to have increased in recent years from 33M carats in 2003 to 38Mcarats in 2006, which includes a large volume of very small diamonds below theminimum recovery size of most other diamond mines. All the mines are operated bystate diamond mining company, Alrosa, and all but one are in Western Yakutia. Some of the largest are old and the open pits are almost fully mined out which limits the scopefor any increase in output. Alrosa is therefore investing heavily in making a transition tounderground mining to expand reserves and extend the mine life. The Internationalmine started mining underground in 2005, and the company’s development

programme includes taking the Mir, Aikhal and Udachny pipes underground over thenext five years, and preparing plans for underground mining at Botuobinskaya andNyurbinskaya . By 2015 about 40% of Alrosa’s production will be from undergroundmining. The Russian Federal Government have stated that Alrosa has sufficientresources to be able to produce at its present levels and with the current mix of qualities until at least 2029.

The Federal government are in the process of gaining a controlling interest in Alrosa,and had expected to have this completed by November 2007 by acquiring 50% plusone share, through a trade in state-owned shareholdings in other companies, whichalso has the effect of diversifying Alrosa’s interests into other minerals, including oil andgas. The Republic of Yakutia would still own 40% in total.

Alrosa has embarked on an ambitious programme of exploration, and in September 2006 entered into an exploration joint venture with De Beers.

New mining projectsDuring 2005 Alrosa’s 92.3% subsidiary, Severalmaz, started limited commercialproduction at the Archangel pipe, one of five pipes in the Lomonosov deposit inWestern Russia. During the first half of 2006, 167,000 carats were recovered withoutput planned to reach 450,000 carats for the full year. Plant throughput is currently1 million tonnes per year but it is being upgraded to handle 5-6 million tonnes by 2010and an output of 3.5 million carats. The main processing plant is expected to comeonline in 2008.

AngolaAngola is one of the most prospective countries for diamond exploration, and thedevelopment of new diamond mines. It hosts enormous reserves, principally in theprovinces of Lunda Norte and Lunda Sul, and there are several new projects in thepipeline. There is both a formal and large informal mining sector.

About half of Angola’s diamond production comes from the Catoca mine , which is theworld’s fourth largest kimberlite with reserves estimated at 60 million carats. Statediamond mining company Endiama has a 32.8% interest, the same as Alrosa which isthe operator, with Odebrecht of Brazil holding 16.4%. It is the largest contributor to theformal sector. Investment in a second processing plant has greatly increased the mine’s


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output. 5.76 million carats were recovered in 2006, a 27% increase over 2005, at agrade of 0.61 carats per tonne, and sold at about US$70 per carat which is well belowAngola’s average. Two Israel-based diamantaires, Lev Leviev, who also holds a 16.8%interest in the mine through Daumonty Finance BV, and Dan Gertler, buy much of therough from the mine, the latter through a joint venture with Alrosa called Sunland thatbuys 50% of the output. Leviev is active through a joint venture with Angola’s state-owned marketing company Sodiam.

In the informal sector independent diggers mine alluvial deposits. Because of a singlechannel marketing system through Sodiam, which offers low buying prices, charges a5% royalty and 2.5% marketing fees, there is serious leakage as diamonds aresmuggled through the region’s ‘porous’ borders to be sold in neighbouring states,mostly the Democratic Republic of the Congo. The government is trying to introduce asystem of licensing of the alluvial miners, many of whom are foreign. The level of smuggling makes it difficult to estimate the country’s full diamond production but it isgenerally thought to be well above the official export figure for 2006 of US$1.13BN.

Angola’s future production potential is huge and it is largely untapped. Whileremaining high risk, if the country continues to be peaceful it seems probable it will bethe source of a far greater increase in mine production over the next few years than anyother producer country. The quality on average is high and contains a high proportionof larger stones of over 2 carats and a good proportion over 10 carats.

Endiama, the state mining company which must be a stakeholder in all diamond miningprojects, is confident Angolan production will continue to rise, and predicts reaching alevel of 15 million carats within 5 years, over 60% more than the current officialproduction level.

New mining projectsProjects at Luo, Camatchia-Camagico and Camafuca are in the pipeline for development. Camafuca, like Catoca, is one of the world’s largest kimberlitecomplexes, with an in-situ diamond reserve of 23 million carats. The project is a jointventure between Endiama, Southern Era, and Welox Ltd (a Lev Leviev company), whoare waiting for final government approval for the formation of the operating company,and the issuing of a mining licence.

Australia

Australia’s largest diamond mine, Argyle , first produced in 1983 and for much of thetime since then the mine has been the world’s largest volume producer of roughdiamonds. The mine, which is 100% owned by Rio Tinto, produced 29.2 million caratsin 2006, a drop of almost 5% over 2005, for an estimated value of US$450 million but,of this, about US$100 million was stocked at the end 2006 because of weaker demandfor the low quality rough diamonds which make up the majority of Argyle production.The open pit of pipe AK1 is now almost mined out and was slated to reach the end of its life in 2007. In order to extend the life of the mine to 2018, the company planned toinvest US$760 million in building an underground mine, but with a cost overrun this isnow projected to reach a total of US$1.5 billion. Construction commenced in early2006 by the end of the year 10.4 out of a total of 40 kilometres of underground


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development in the four main access declines had been completed. US$150M is beinginvested to enable the continuity of production between the termination of open-pitmining in 2008 and the ramp up of the underground mine. The average annualproduction of the underground mine from 2007 to 2018 is projected at 20-25 millioncarats a year, down from the 30 million+ being mined annually from the open pit at itspeak during the 1990’s. At the end of 2006 Argyle’s estimated total ore reserves were106 million tonnes at an average of 2.1 carats per tonne or 222 million carats.

Although most of the output is small and of very low quality, the mine is also famous for its very valuable pink stones which the owner, Rio Tinto, polishes and sells byworldwide tender.

Also in Australia, the Ellendale project , which is owned by Kimberley Diamond

Company, came on-stream in 2003 with a small but increasing production of highquality stones including some fancy yellow colours: 213,000 carats were recovered in2006. The company is investing in two recovery plants to boost throughput at pipeEllendale 9 and start recoveries at Ellendale 4 with a target of increasing annual outputthreefold to 600,000 carats over the next year. Kimberley Diamond Company iscurrently in the process of being taken over by Gem Diamonds.

Democratic Republic of the CongoThe Democratic Republic of the Congo is the other major producer of lower qualitysmaller diamonds which are mostly all polished in India. The bulk of the production ismined by independent diggers from alluvial deposits around the one kimberlite mine,Miba, and there are also high quality alluvial deposits around Tshikapa in the South andKisangani in the East. There is increasing interest in exploring the rich potential of thisformerly war-torn country.


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Polishing centresIndiaOver the past 30 years, India has taken over from Belgium and Israel as the dominantdiamond polishing centre. 95% of all diamonds representing about 55% by value of theworld’s rough diamond production are now cut and polished in India. In 2006, Indiaprocessed an estimated US$8.4 billion of rough diamonds, to produce polisheddiamonds with an estimated value of US$10.8 billion. The main destinations for polished exports are Hong Kong and USA followed by UAE and Belgium.

The Indian industry was built on the polishing of lower quality stones, in particular those classified as industrial quality 30 years ago but now referred to as near-gem.

These days, India processes the full range of sizes and qualities of gemstones utilizingnot only a very cheap and abundant workforce, estimated at 700,000 persons, but alsothe latest technology and qualified technicians. They cut the large stones greater than10 carats in size previously processed in the traditional cutting centres, but the bulk of the production is in small stones. India has also become a major mass producer of diamond jewellery.

De Beers DTC’s decision to give direct supplies to sightholder customers in producer countries from the beginning of 2008 is certain to have a negative impact on capacitybut Indian manufacturers will compete hard to ensure that their manufacturing sector remains dominant

ChinaChina has evolved relatively recently as a major cutting centre. Since the 1990’s, whenthe PRC became more open to foreign investment, factories have been set up mostlyby foreign diamond companies based in Belgium, India and Israel. They were initiallyattracted by a cheap and plentiful supply of labour, government incentives and roughsupplies from De Beers. Since then the skill level of the Chinese workforce has beenimproving.


VALUE OF POLISHED OUTPUT BY CENTRE US$BN - 2006

Source: Diamond Intelligence Briefs

10.8

2.6

1.2

0.4

0.3

0.8

2.6

IndiaIsraelRussiaBelgiumUnited StatesSouth AfricaFar East and others

US$BN10.82.61.20.40.30.82.6

Total 18.7

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China is now the second largest diamond polishing centre in the world in terms of employment. The workforce has grown over the past five years from 11,000 to a current25,000, working in over 100 polishing companies. Of these about 12,000 are inGuangdong, 8,000 in Shandong, 1,500 in Shanghai and the remainder in other areas.There are about 70 major factories employing over 100 workers and operatingalongside them are an additional 60-100 cottage factories. Manufacturing costs areslightly higher than India, in the range of US$ 10-15 per carat. They cut mostly small,gem-quality stones of less than half a carat and the cut standard is considered better on average than India. Exports of polished diamonds are believed to exceedUS$1 billion per year.

Israel

Of the high labour-cost manufacturing centres, Israel has the highest level of polishedproduction and currently employs about 2,000 workers in cutting and polishing. In2006, the net value of locally polished diamonds was estimated at US$2.6 billion.

The industry, which is concentrated in Tel Aviv and Nethanya, has grown to its presentstrength since the end of the Second World War. It has been highly innovative indeveloping automated processing equipment, and its cutters are renowned for obtaining the highest yields from rough stones.

The USA is the dominant market for Israel’s polished diamonds, taking 60% of exportsin 2006, followed by Hong Kong, Belgium, Switzerland and England.

Although the domestic industry generally only processes rough stones of half a carat

and larger, Israeli companies polish the smaller sizes and increasing volumes of larger stones at lower cost in their own factories in the Far East, Russia and China.

Since De Beers cut back supplies of rough after 2004, Israelis have been aggressivelypursuing direct sources in Russia and Africa.

Armenia

Since the break up of the old Soviet Union in 1991, Armenia has developed a small butsignificant polishing industry currently employing about 2,500 persons. This skilledworkforce has rapidly learned how to polish to very high standards. Labour costs arecomparatively low.

There are over 30 polishing factories, including 7 large plants, each of which employs

more than 100 cutters. There are also large jewellery-making enterprises. In total thediamond and jewellery sector provides employment for 5,000 persons.

Although entitled to an annual quota of 400,000 carats from the Russian state diamondmining company Alrosa, Armenia did not take advantage of this in 2006 due to highprices, preferring Israel and Belgium as sources of rough supply. In August 2007Armenia concluded a new agreement with Alrosa to supply Armenian factories withdiamonds not viable for polishing in Russia. It is intended that, after a review of activities during the first half of 2008, plans for expansion of cooperation for thefollowing three years are to be formulated.


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Prevailing conditions in the industry and competition from the Far East caused a smallreduction in Armenia’s capacity in 2006. Polished diamond output was US$241 million,22% less than 2005. Despite this, diamond jewellery and polished diamonds made up40% of the country’s exports in 2006.

BelgiumAntwerp has been the world’s premier diamond centre since the end of Second WorldWar and used to polish the majority of the world’s rough diamonds until the 1970’s,when 30,000 persons were employed in manufacturing. Since then the industry hasmoved to lower cost locations in India and the Far East. There are now believed to befewer than 1,000 polishers working in Belgium and, with an aging workforce, the skillsbase is being eroded. Belgium now has a small niche polishing industry working onlythe larger and technically more challenging stones, which cut an estimatedUS$400 million of polished diamonds in 2006.

Over the same period, the diamond trade has remained and Antwerp has flourished asthe leading trading centre in both rough and polished. However, rationalisation of theglobal industry has led to a lowering of Antwerp’s market share. A significantproportion of rough diamonds purchased in Africa is now imported to Israel and Dubai,challenging Antwerp’s formerly-unassailable position. De Beers also distributes a muchlower proportion of its rough supplies to companies based in Antwerp. Nonetheless,the city continues to have a very strong infrastructure specialised for the diamondindustry as well as being highly accessible internationally and, unlike some of its rivals,it is secure and politically stable.

New YorkNew York is a small manufacturing centre employing about 400 polishers. They arehighly skilled and because labour costs are the highest in the world, they only work thelargest, most valuable stones of two carats and larger. The industry has about 100companies, and most employ fewer than 20 polishers. Sub-contractors do much of thework.

It is estimated that the value of annual polished output is about US$300 million.

ThailandLike China, Thailand only started polishing diamonds on a large scale in the 1980’s. Theindustry soon took off and was cutting small, high-quality gem diamonds to a highstandard. There are an estimated 9,000 persons employed in the industry, currentlyproducing US$700 million in polished diamonds annually.

Sri LankaSri Lanka has about 20 polishing factories employing about 3,000 persons, working arange of gem qualities similar to Thailand’s and also producing a high standard of cut.


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More diamonds being cut and polished where they are minedPolishing in factories close to the mine has a chequered past but the concept hasundergone a dramatic change of fortune recently. In the past there were many failures.Not only have many factories simply lost money and required government or producer subsidies, or a combination of both, to survive but factories have also been used asconduits for the unauthorized export of rough. Except in Russia, it was on a small scaledue to the general lack of support from producers. Now polishing factories arespringing up in Southern Africa, and to some extent Canada, as governments havecome to view local job creation from the downstream secondary industry as a favouredpolicy option.

The producers are also giving their support. For example, having for most of their history resolutely opposed sales of rough to polishers in producer countries on thegrounds of viability, De Beers have recently made a virtue out of political necessity byembracing the concept with their government partners in Botswana, South Africa,Namibia and Canada. Since 2006 they have actively encouraged sightholders to moveto these countries, get a manufacturing license and set up a factory if they want a sight.For the new three year contract periods starting in 2008 they have appointed manynew sightholders (customers) in all those countries as well as three in the NorthwestTerritories of Canada.

The company has also taken action to move its own sorting and aggregation operationSouth to Gaborone Botswana from 2009, ending the 350 year dominance of London in

distribution of rough diamonds around the world.The new factories face the challenge of surviving with a shortage of indigenous skillsand generally higher costs. DTC have stated that there will be no subsidies of roughdiamond sales prices, which will be the same globally.


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Not surprisingly there is plenty of scepticism about the prospects for this new policy,but DTC sightholders have moved south willingly in pursuit of the coveted right to adirect supply.

New and creative ways are being examined to add value through original marketingideas, of which branding by origin is one. The lead for this has been taken in theNorthwest Territories of Canada where value has been added through the issuing of Government certificates stating that the stone was “mined and cut in the NWT”. Theyhave proved successful particularly, but not only, in the Canadian market. It is notknown if stones from other origins will have a similar type of appeal.

Another initiative is the promotion of diamond sales together with tourism. This hasalready been successful in South Africa as well, to a lesser extent, as Botswana,

Namibia and the Northwest Territories of Canada.Botswana

Polishing in Botswana started in the early 80’s with one factory in Gaborone. By 2005this had grown to five factories employing 1,000 workers.

As a result of the actions of De Beers, employment in the polishing sector is growingfast and within five years it is expected to reach 5,000.

The Diamond Trading Company Botswana has invested US$83 million in its large newsorting and aggregating facility in Gaborone and, from there, it will supply the 16sightholders appointed for new three year contracts starting in 2008, with salesexpected to represent US$ 500 million in value once the new factories reach capacity.

South Africa

In 2005 the South African government passed legislation with the objective of stimulating local polishing of domestically-mined rough. The Diamonds AmendmentAct has introduced a State Diamond Trader, with the job of buying locally rough andselling to the domestic polishing industry, and imposed a tax on rough exports, whichhas been set at 5%.

Unlike Botswana and Namibia, South Africa has a long established cutting andpolishing industry which now employs an estimated 1,500 persons. DTC already supply19 sightholders.

In the past DTC has provided these customers with sight boxes from the “London Mix”of its mixed origin productions but in the new contract period 2008-11, DTC says it willfollow the footprint of the production of its South African mines. DTC estimate 40-50%can be polished domestically but sightholders will have to move down to smaller average sizes and take more stones of 0.2 – 1 carats and less 2 – 10 carats, whichpreviously made up 75% of DTC’s annual sales of US$500 million to South Africa.

Although DTC South Africa will bring in diamonds aggregated in Botswana it will notincrease the amount of carats above that in their South African mine footprint.

De Beers will also be obliged under the new law to offer up to 10% of its annual SouthAfrican output to the State Diamond Trader.


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On April 5, 2006, an agreement was signed to sell 26% of De Beers’ South Africaninterests to Ponahalo Holdings in compliance with the legal requirement for BlackEconomic Empowerment.

Namibia

As in Botswana, De Beers has taken the initiative and set up a local distributioncompany, the Namibia Diamond Trading Company, a 50/50 joint venture between DeBeers and the Namibian Government . In October 2007, the company announced theappointment of 11 sightholders in Namibia for the contract period 2008-11. By 2009NDTC say they will be supplied with an estimated US$ 300 million a year of Namibian-mined rough diamonds from Namdeb the country’s 50/50 De Beers/NamibianGovernment joint venture mining company.

The government provides fiscal incentives including tax exemptions for factories inspecial export processing zones (EPZ) and sales of Namibian mined rough to localpolishing factories gain exemption from the 10% export tax.

Russia

Russia has had a policy dating back to the Soviet era of encouraging domestic cuttingand polishing. It now has the largest manufacturing industry in any diamond-producingcountry. There are about 130 registered cutting and polishing factories and about5,000 workers are believed to be employed in the industry, with labour cost in themiddle range.

Over the last 15 years an increasing proportion of Alrosa’s Russian output has been soldto local polishing factories in Russia and Yakutia, reaching currently 50%.

Most of the factories are in Moscow and Smolensk, where 80% of the polished diamondoutput, estimated at US$1.2 billion per year, is manufactured. There is a continuinglevel of state ownership, including one of the largest factories, Kristall of Smolensk,which is 100%-owned by the state mining company Alrosa. However there are alsolarge privately-owned factories. There are some units, mostly small, in the SakhaRepublic near the mines. Sizes produced range from 0.01 carats to large stones of + 5 carats.

For cost cutting reasons in January 2008, Alrosa imposed the 6.5% export levy onrough exports onto its foreign buyers ending a practice under which it had absorbed

the tax itself. In a similar decision in late 2007, Alrosa imposed the 18% value addedtax on sales to domestic manufacturers reversing the company’s previous practice of itself also paying this tax. However legislation to adopt a zero rate VAT for domesticpurchases is to be introduced to parliament, restoring the incentive for localprocessing.


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Prices of larger and better diamonds soar while smallerand lower categories remain flatter

RoughRough diamond prices used to be stable, growing slowly but never falling. This was theold De Beers’ Central Selling Organization’s contribution to industry stability for over half a century. When the company sold their buffer stockpile in 2001 and stoppedtrying to control the market, a fluctuating rough price was an inevitable consequence.

It has become increasingly apparent since then that prices of rough diamonds havebegun to show volatility over short-term cycles of 6 months to a year moving within arange of +/- 15%, whereas prices of all but the larger better polished diamonds haveremained on a more stable, consistent track.Rough prices have fluctuated in response to the volume of supply from the producers,the level of liquidity in the market and of inventory in the pipeline, and periods of highdemand for polished.

The lack of a De Beers’ balancing mechanism between supply and demand is being feltas the industry moves from being supply driven to demand driven.

A consequence of the fluctuations has been that, for certain periods, rough was at ahigh price level which guaranteed a loss on polishing, but at other times normalprofitability prevailed.

There is no authoritative general index for rough prices because it is not possible to

independently assess the impact on the mix of world production of actual price


POLISHED ROUND, G VS2 – PRICE MOVEMENTSIN 3 SIZES

Source: Antwerp Diamond List

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

U S D

p e r

C A R A T

5.00 - 5.99

carats

0.50 - 0.69

carats

1.00 - 1.49

carats

M a r - 0

3 J u n

- 0 3 S e p

- 0 3 D e

c - 0 3

M a r - 0

4 J u n

- 0 4 S e p

- 0 4 D e

c - 0 4

M a r - 0

5 J u n

- 0 5 S e p

- 0 5 D e

c - 0 5

M a r - 0

6 J u n

- 0 6 S e p

- 0 6

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changes of different sizes, colours and qualities of rough. In addition most producersdo not announce their price changes publicly, but from available information andanecdote a picture emerges.

Open market rough prices climbed overall by about 15% in 2003 having fallen sharplyin 2002. Through 2004 to mid-2005 they continued to climb by about a further 33% onaverage, before starting to fall back by about 20% over the following 15 months to thethird quarter of 2006. Towards the end of 2006 and in the first half of 2007 the fall wasreversed before the upward trend slowed in the third quarter.

The level of price movement within the mixture of sizes, shapes, colours and qualitiesof diamonds making up a production have varied widely with the better stones abovethree carats staying stronger and rising in price, reflecting strong polished demand and

shortage of rough supply. High colours and qualities throughout the size ranges havegenerally performed more strongly better than the lower categories. Fancy coloureddiamonds have shown the biggest rises because of comparative rarity.

Whereas the rough price level as announced by De Beers pre-2000 was the reliablemarker of diamond prices, and polished prices often followed, recently it has beenpolished prices which are the more reliable measure.

Polished

The market prices of specific categories of polished stones are tracked through anumber of price lists.

Over the period of the mid-90’s through to 2003 prices of stones above 0.50 caratschanged very little. Smaller stones decreased in price slightly.


POLISHED ROUND, ONE CARAT – PRICE MOVEMENTSIN 3 CATEGORIES

Source: Antwerp Diamond List

0

2000

4000

6000

8000

10000

12000

14000

M a r - 0

3 J u n

- 0 3 S e p

- 0 3 D e

c - 0 3

M a r - 0

4 J u n

- 0 4 S e p

- 0 4 D e

c - 0 4

M a r - 0

5 J u n

- 0 5 S e p

- 0 5 D e

c - 0 5

M a r - 0

6 J u n

- 0 6 S e p

- 0 6

U S D

p e r

C A R A T

D IF

L I2

G VS2

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Polished diamond prices started to rise in the second half of 2003 and continued acrossthe full range of sizes, colours and qualities throughout 2004 and early 2005, rising byabout 18% on average. After slowing down in 2005 and the first half of 2006 theupward trend resumed in the second half of 2006 and has continued through 2007 intoearly 2008. However it has been larger stones of over 1.5 carats and the best coloursand qualities which have risen most strongly.

In colour, grades F-H (white) have grown the fastest with grades L and below (tintedwhite to slightly yellow) rising less. Clarities graded VVS and VS, with only the smallestinternal imperfections, grew faster than stones graded I or P (pique) with more visibleinternal flaws.

Whereas the overall rise in polished diamond prices between 2003 and the end of 2007

was in the 35-40% range this masks of a very wide range of rates of price increase for different categories. Stones of above 1.5 carats mostly doubled and some of the bestcolours and qualities nearly trebled in price over the period. By the end of 2007, due toshortage of supply and high demand an accelerating rate of increase was taking pricesof these categories to speculative levels. For example a 5 carat G colour VS2 roundbrilliant stone rose by 140 % during 2003-2007 but the rise in 2007 a lone was 40%.Movements in smaller stones below a carat were at a lower rate – mostly between10-20% over the period 2003-2007, but in these sizes also higher colours and qualitiesperformed better than lower ones.

The two graphs below illustrate the differing levels of price movement firstly by size(colour G, quality VS2 round stones of half a carat, one carat and five carats) andsecondly by specific colour/quality category (one carat round stones of colour/quality DIF,G VS2 and L I2) over the last five years.

Diamond price rises mitigated by fall in US DollarDiamonds are priced in US dollars and, because of the US dollar’s weakness over theperiod since 2003, they have not only not risen when priced in other currencies butmost categories have fallen in price. The dotted line above illustrates the diamondprice in Canadian dollars. For miners who must pay their cost in local currencies the fallin diamond sales revenues in local currency has become an important issue reducingthe operating profit and threatening marginal projects.

Are derivatives the future?

Producers would like a mechanism to hedge their risk through derivatives but to datediamonds cannot be traded, unlike all other commodities. There is much discussion inthe industry to correct this anachronism and various groups are trying to create aderivatives market. The prime reason why this has not been possible in the past is thedifficulty in reliably defining consistent standards for describing the diamonds since alldiamond grading has some degree of variability which can affect value. Thereforestandards must be set and there needs to be high level of regulation, auditable by athird party. Despite the challenges it looks almost certain that within the next two yearssome form of spot and futures trading will be seen on the pages of the financial press.When this occurs it could have a dramatic effect on diamond prices and markets. It


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would not be limited to suppliers selling future production and jewellers securingfuture deliveries. The market would suddenly open up to global investors which wouldbring a vast injection of liquidity and, with it, speculation. The protagonists argue thatderivatives are long overdue and the industry will become more transparent, larger andmore competitive.

GOVERNMENT CERTIFIED CANADIAN DIAMOND™

The Government of the Northwest Territories (GNWT) actively promotes theCertification process through the GOVERNMENT CERTIFIED CANADIAN DIAMONDmarketing strategy. The intent is to build confidence in the consumer market, withregards to ethical mining practices and processing procedures. This process aims to setapart diamonds that are mined, cut and polished in the Northwest Territories (NWT)from other diamonds sold in the marketplace.

The GOVERNMENT CERTIFIED CANADIAN DIAMOND marketing campaign is jointlyfunded, in part, through the Government and Industry

The aim of the GOVERNMENT CERTIFIED CANADIAN DIAMOND™ campaign is three fold:

• Promote Canada as one of the top diamond producers in the world and position theNorthwest Territories as North America’s diamond centre;

• Facilitate the development of the diamond industry in the NWT and providebusiness, investment, training and employment opportunities for NWT residents; and

• Increase the demand for and add value to diamonds that are mined, cut and polishedin the NWT.

Retailers Club

The GOVERNMENT CERTIFIED CANADIAN DIAMOND Retailers Club is providing keyNorth American retailers with exclusive tools, tips and techniques to promote their sales of GOVERNMENT CERTIFIED CANADIAN DIAMOND™

Equipping retailers with information about the Northwest Territories is a vital componentof the marketing process. Launched in August 2007 at the World Jewellery Expo in Toronto,The GOVERNMENT CERTIFIED CANADIAN DIAMOND™ Diamond Retailers Club is thesecond phase of the GOVERNMENT CERTIFIED CANADIAN DIAMOND™ campaignto raise consumer awareness and interest in GOVERNMENT CERTIFIED CANADIANDIAMOND™ and to support the growth of the NWT secondary diamond industry.

This new club allows retailers to respond to consumer needs with information that isaccurate, current and as complete as possible.

Features of the new Club include an interactive on-line news service covering eventsand developments in the NWT diamond industry; access to an exclusive gallery of northern images; and point of sale display materials.

Designation as club members is recognized with a certificate signed by the Premier of the Northwest Territories.


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Diamond TourismThe media focus on the discovery and mining of diamonds has created, not only adistinct increase in the global awareness of Canada’s Northwest Territories as aproducer of diamonds, but also further attention to the Territory as a premium tourismdestination.

Territorial and municipal governments are now working with partners and associationsin the NWT’s tourism industry to take advantage of the diamond-tourism relationshipand the national and international attention being focussed on the NWT.

The NWT’s capital city of Yellowknife is already capitalizing on its new designation asthe DIAMOND CAPITAL OF NORTH AMERICA™

Global demand for Diamond Jewellery growing slowlyoverall but high qualities remain very strongOver the past five years diamonds have gained a much higher visibility in mediaadvertising and in a wide variety of high profile events, ranging from the Oscars toFormula 1 motor racing. Much credit for the greatly increased visibility of diamondsand diamond jewellery must go to De Beers’ Diamond Trading Company’s (DTC)‘Supplier of Choice’ (SoC) policy, which was introduced in 2000. Under this, DTC hasrequired its customer distributors (called ‘sightholders’) to spend heavily on marketingprogrammes, as a condition of being supplied with rough diamonds.

However, despite the increase in advertising expenditure, global diamond jewellerysales results have been mixed and overall growth only moderate, but according toDTC, recent years have seen an improvement compared to the 90’s. In the six year period 1999-2005 the industry saw average annual retail growth of 3.6% (in US$),whereas in the five preceding years, from 1994-1998 sales were on a downward trendwith an average negative result of 0.2% per annum.

DTC believes that there is strong evidence from the US and Japanese markets thatdiamond jewellery sales, supported by their programmes, have moved forward,whereas sales of those lines unsupported by their branding and advertisingprogrammes have fallen.

Their critics argue that the return on all the increased advertising spending has beendisappointing when measured against the targets of increased global diamond

jewellery sales and higher prices, which were the key strategic objectives of SoC.

World retail sales of diamond jewellery for 2006 have been estimated atUS$68.5 billion, an increase of 5% over 2005, and representing just under half of thevalue of all jewellery sold globally.

The US, which is by far the world’s largest diamond jewellery market, grew by 6% toUS$34 billion, which accounted for just under 50% of all global sales. This outcome wassurprisingly robust considering that US consumer debt was at record levels, interestrates were higher, gas prices had risen sharply and inflation was up.


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Japan, the world’s second largest market, had a second successive comparatively flatyear growing by just under 4%. However the past two years have been positivecompared with the 10 previous years of flat or negative growth.

The regions showing the fastest growth rate in recent years have been India and China.The Chinese market grew by just under 20% in 2006 and the Indian market slightlyexceeded that level. These markets remain small compared to North America but bothIndia and China are expected to contribute significantly to diamond jewellery demandin the future. Acquisition is forecast to grow strongly over the next 10 years as Chinaheads towards rivalling the USA as the world’s largest economy, with Shanghai andGuangdong Province being the major markets. Similarly a booming economy and adiverse range of branding campaigns have been successful in making India the world’sfastest growing market for diamond jewellery. In both countries there is an increasingmiddle class and a well-established jewellery acquisition tradition.

It has become apparent over the past few years that a clear segmentation has takenplace in the global diamond jewellery market between the highest qualities and sizes,and the rest.

Jewellery with the best quality, larger, colourless (referred to as white) stones of over one carat, better than I in colour grade, and SI1 (diamonds with slight internalimpurities) in quality are performing very well and prices have been rising. The topluxury jewellers, such as Tiffany’s and Harry Winston, the 40%-owner of the Diavik mine,are thriving. They are opening new sales outlets and both have announced impressivesales growth. Positive results are also reflected in the sales of other high endindependent retailers.

In the mass market on the other hand, there continues to be tough price competitionand discounting, particularly in the US where shoppers are highly price point conscious.Here price points remain unmoved and the consumer is generally not paying more for


WORLD RETAIL SALES OF DIAMOND JEWELLERY – 2006TOTAL: US$68.5 BILLION

Source: Diamond Intelligence Briefs

America50%

Asia Pacific6%

Japan15%

Europe12%

Asia Arabia6%

Other

11%

AmericaAsia PacificJapanEuropeAsia ArabiaOther

34,0134,365

10,1398,2484,4517,292

Total 68,508

US$M

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his or her diamond jewellery. Selling prices for jewellery pieces set with smaller, lower colour/quality stones are hardly moving in price and not in line with the increases inrough diamond prices. In addition, because gold and other precious metals have risenstrongly, lower quality or smaller diamonds are being used to maintain price points.Largely it is the diamond cutters who are bearing the rough diamond price increases,while the margins of jewellery retailers are also being squeezed because of greater transparency of polished prices from internet-based price lists of certificated diamonds,and of online discount sales, which is one of the fastest growing diamond saleschannels.

The wholesale value content of diamonds in jewellery has been steadily increasing over the past 20 years and the customer is now getting more diamond in his or her jewellerypiece. Currently the diamond content is estimated to average 27% of full retail saleprice for all diamond jewellery sold worldwide but there are wide regional variations;whereas a Japanese buyer has 18% diamond value content one in the Gulf finds justunder 60% diamond content. This is due not only to the falling retail margins, but isalso dependent on the size and number of diamonds in the jewellery pieces

Looking forward over the next 5-10 years most commentators expect that demand for the best qualities will continue to exceed rough diamond mine supply, which is forecastto be static, this will continue to drive the prices of the better stones up.

As 2007 came to a close economic expectations for 2008 were being rapidlydowngraded as the economic outlook deteriorated following the sub-prime lendingcrisis in the USA, and a tightening of credit.


DIAMOND VALUE IN WORLD RETAIL SALES BY REGION IN 2006(AT POLISHED DIAMOND WHOLESALE PRICES)TOTAL VALUE: US$18.4BN

Source: Diamond Intelligence BriefsASIA PACIFIC

10%

NORTH AMERICA

45%

JAPAN

10%EUROPE (+ SA)

11%

ASIA ARABIA

14%

OTHERS

10%

ASIA PACIFICNORTH AMERICA

JAPANEUROPE (+ SA)

ASIA ARABIAOTHERS

US$ Million

1,8518,272

1,8491,965

2,6211,892

18,450Total

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Industry faces the challenge of synthetic gem diamondsThe prospect of synthetically-produced gem quality diamonds has worried the industryfor decades, since the first industrial quality synthetic diamonds were producedcommercially in the 1950’s.

Since 2005 that threat has become a reality. Two companies, both based in the USA,are producing diamonds synthetically and polishing them.

Gemesis™, based in Florida, use technology originally developed by Russian scientiststo grow synthetic diamonds from a carbon source, using metal catalysts and a tinydiamond seed, and subjecting them to extremely high pressure and temperature(HPHT). Mostly the stones are fancy yellow in colour.

Apollo Diamond of Boston grow type IIA diamonds by a process called chemicalvapour deposition (CVD). They started making gem diamonds for jewellery as a spin-off from previously growing diamonds for industrial uses, such as nanotechnology and highperformance biotech applications. Most of their polished stones are pure, white and inthe size range from 0.05-1.00 carats. Some fancy colours can also be made.

The industry was slow to react to their arrival. The issues which have had to beconfronted concern their detection, disclosure, and description, in order that theconsumer is neither confused nor misled.

Leading players, including De Beers, the Gemological Institute of America and theDiamond High Council of Antwerp, have been aware of the processes for many yearsand have developed instruments to detect synthetically-produced diamonds and

stones artificially enhanced by heat treatment.Most in the industry believe the threat to natural diamonds does not lie with clearlyidentified synthetic or “cultured” diamonds as the synthetics producers like to callthem. The concern is that synthetic rough diamonds are sold without adequateidentification and tracking through the manufacturing process to be polished in lessstrictly regulated jurisdictions, and are mixed with natural polished stones. This is mostlikely to occur with smaller-sized stones which are not graded by the gem testinglaboratories.

The issue of gem laboratory certificates for synthetic diamonds has been acontroversial one. Some laboratories have refused but the Gemological Institute of America (GIA) decided to issue them. GIA say they decided it is right to provide the

public with the critical information to make an informed decision. Their certificateshave a different colour than those for natural diamonds. The certificate, and also a laser engraving on the stone, states that the diamond is synthetic. Other laboratories givingcertificates for synthetic diamonds are International Gemological Institute (IGI) andEuropean Gemological Laboratory (EGL).

Industry commentators believe that of the two technologies CVD represents thegreatest threat to the natural diamond market. The leaders in this are De Beers, whohave, since the 1950’s, been active in synthetics . Through a subsidiary, Element 6, theyhave facilities in the UK, Ireland, South Africa and China producing synthetic diamonds.Although De Beers currently only produce synthetic diamonds for industrial uses, it is


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open to the company to enter the gem synthetics field. De Beers have currently givenno indication they would do this, and with such a huge vested interest in the naturaldiamond market it is certain the company would approach the market with extremecaution ensuring clear differentiation from natural diamonds.

Some argue that synthetics can fill the forecast shortfall over the next 5-10 years innatural production but the demand for synthetic gem diamonds remains unproven andultimately it is the consumer, not the industry, that will decide the success of syntheticor “cultured” diamonds. The industry remains confident that, given the information andthe choice, most women will want a natural diamond formed millions of years agounder the earth’s crust, not one grown in a laboratory, and that they will consider thenatural formation of a diamond to be an intrinsic part of the emotion symbolized in thegiving and receiving of diamonds.

To support this, there is likely to be advertising which emphasises the natural source of diamonds and there will be increased tracking by major producers of the cutting andpolishing process with marks placed on polished diamonds to prove they are natural,untreated and conflict-free. Examples are the Diamond Trading Company’sForeverMark™, an icon placed on the table of the diamond, which is only visiblethrough a special viewer, and BHP Billiton’s CanadaMark™ which is a laser-inscriptionon the girdle (circumference) of their polished stones to guarantee their Canadian mineorigin.

Increasingly jewellers will have to use these tools to prove to the customer whichproduct they are selling.


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D IAMONDTHE CANADIAN DIAMOND INDUSTRY

Exploration in Canada:Searching for the next Diavik or EkatiThe excess of demand over supply for the better colours and qualities of diamonds,which most commentators forecast is set to continue for at least the next 5-10 years,has driven a surge in global exploration for new deposits.

However, although there are a number of projects in advanced exploration (andtesting), there have been no major new discoveries recently on the scale of the Ekatiand Diavik mines in the Northwest Territories of Canada.

In Canada there has been a trend towards consolidation among diamond explorationcompanies with Stornoway Diamond Corporation (after its takeover in 2007 of Ashton

Mining), Diamondex Resouces and Shore Gold emerging as the major players.These companies are all aiming at bringing the next Ekati or Diavik-sized projectonstream, but two recent events – the suspension of mining at the Jericho minefollowing Tahera Diamond Corporation being granted protection from creditors andthe US$965 million impairment write-down by De Beers of its investment in the Victor and Snap Lake mines it is building in Canada - are a reminder that project economics interms of size of deposit, grade and cost must be right. Not many of the diamondiferousbodies discovered will be feasible to mine. As a result of these recent events there isnow likely to be an even greater focus on proving the financial feasibility of the moreimportant new discoveries, before bringing them into production.

Globally, expenditure on diamond expenditure has been increasing steadily for the

past five years. It is estimated that almost US$800M was spent in 2006 on worldwideexploration for diamonds, and feasibility testing.

Expenditure in Canada in 2006 was estimated at US$275 million, just slightly less thanthe US$300 million invested in the whole of Africa.


ESTIMATED GLOBAL DIAMOND EXPLORATION EXPENDITURES(US$ MILLION)

Source:Diamond Consultants Canada

0

200

400

600

800

1000

2000 2001 2002 2003 2004 2005 2006

Other 68 60 50 50 75 130 200

Africa 50 55 60 100 200 240 300

Canada 92 140 162 169 275 240 275

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FACTS THE CANADIAN DIAMOND INDUSTRY

CanadaDiamond exploration has been taking place in about 60 prospecting areas across allbut three of Canada’s 13 provinces and territories. Discoveries of new diamondiferousdeposits have occurred in the Northwest Territories, Nunavut, Saskatchewan, Ontarioand Quebec but it is increasingly towards sampling and testing of the most importantfinds to prove feasibility that the spending is directed, rather than grassrootsexploration.

Northwest TerritoriesWithin the Northwest Territories over 250 kimberlites have been found in the areareferred to as the Corridor of Hope. This is a central part of the geological SlaveProvince, the oldest stable Precambrian craton in Canada (formed 2.5-2.7 billion yearsago). The areas of most exploration are the claim areas of the two mines, Ekati andDiavik, around Lac de Gras.

To date 68 kimberlites have been discovered within the Diavik joint venture 's licencearea, of which about half are diamondiferous. Diavik Diamond Mines Inc. has beeninvesting heavily to test promising targets and add to the four pipes in the current mineplan.

BHP Billiton, the operator of Ekati as well as owner of 80% of the core zone and 58.8%of the buffer zone, are involved in ongoing testing to increase the number of commercially-mineable kimberlites, to extend the mine life. 156 kimberlite bodies havebeen discovered, eight of which have been permitted, and are part of the current mineplan. Two new pipes, Kia and Redwing , were discovered in 2007. From earlier discoveries, the Pigeon pipe in the core zone and the Jay and Cardinal pipes in thebuffer zone are being tested. BHP Billiton presently assess both the Jay and Lynx pipesas having development potential while Fox underground, Point Lake , Wombat andKokanee pipes among others have exploration potential.

The 51% De Beers Canada/49% Mountain Province Diamonds Inc Gahcho Kué Project,located about 90 kms southeast of the Snap Lake Project, is currently in the permittingand advanced exploration stage of development. Terms of reference for theEnvironmental Impact Statement (EIS) were published by the Mackenzie ValleyEnvironmental Impact Review Board in October 2007. It is expected the EIS will be filedduring 2008, and that permitting can be completed in 2010.

Three of the four kimberlite pipes discovered, 5034, Tuzo and Hearne , are likely to beeconomic to mine. The updated geology and resource models for these pipes areexpected to be completed at the end of the first quarter of 2008 and final results of thetechnical study announced in the second quarter.

The 5034 North Lobe bulk sampling programme was concluded at the end of October 2007. An extensive core drilling programme at the Tuzo Kimberlite being undertakenwith the objective of recovering a diamond parcel of approximately 1,500 carats wastargeted for completion in the second quarter of 2008. Finalization of the Tuzodiamond revenue model will depend on this programme but is expected to becompleted by the end of the first quarter of 2009. In December 2007, a C$38M budget


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for 2008 was approved in support of the 2008 bulk sampling programme and theupdate of the Gahcho Kué technical study.

Based on the current resource estimate, the project is expected to have a life of 20 years from start of construction to closure, and will produce an average of 3 millioncarats annually over 15 years.

GGL Diamond Corp. has been evaluating their 100%-owned Doyle Lake Project in theSouth Slave Craton , 4 kms south of Gahcho Kué, from which a 45 tonne sample returneda low grade of diamonds but a higher than normal proportion of these were of gemquality. The company also recovered diamonds from the Bishop Kimberlite on their Courageous Property located about 40km south of the Ekati Diamond Mine within theCH Project . The company believes there may be potential of diamond bearing

kimberlites on the Mackay, G-claims, Seahorse/Shoe, Starfish, ZIP, Winter Lake North, BPand Winter Lake South properties. In 2006, GGL found kimberlite indicator minerals onthe Fishback Property at Awry Lake which appears to be part of a kimberlite target areaover 60ha in size possibly containing a closely-spaced cluster of kimberlites.

Diamondiferous kimberlite pipes discovered to date on the Monument Diamond Project (New Nadina Explorations/Chris and Jeanne Jennings/Archon Minerals) on thesouth shore of Lac de Gras include DD17, DD17-11, DD39, DD42, RIP, Nic and Sonja. In2007, a sample of 640.5kg of kimberlite taken from DD17 yielded 272 diamonds of which 7 were greater than 0.85mm. Drilling has been carried out near knownkimberlites and on magnetic anomalies. Another kimberlite, Genie, was found whichmay extend a magnetic anomaly. Drilling of DO-39 has revealed close proximity of bothvolcaniclastic and hypabyssal kimberlite.

The WO Block Project , (Peregrine Diamonds/New Nadina Explorations/ArchonMinerals) located 23 km southeast of Diavik, contains 9 known kimberlite pipes themost tested of which is DO-27 which covers an area in excess of 9ha. In December 2007 results were announced of the bulk sample collected during 2005, 2006 and2007. The 2,075 carats in the sample were given a modelled valuation in the rangeUS$43 to US$70 per carat with a “base case” of US$51 per carat.

The 2007 bulk sample average modelled grade for the Main Lobe pyroclastic kimberlitewhich represents at least 80% of the DO-27 kimberlite complex is 0.89 carats per tonneconfirming previous bulk sample estimates of 0.90cpt in 2005 and 0.88ctp in 2006.These valuations, along with updated grade and geological information, will be used tocomplete the Preliminary Technical Assessment (PTA) report, which will evaluate thecurrent economic potential of DO-27. This is expected to be completed in the secondquarter of 2008. Other kimberlites on the WO Block include DO-18 and DO-29.

SouthernEra’s 60.4% owned Back Lake Diamond Project has produced one diamond-bearing kimberlite and on their 60% owned Lac de Gras XClaims they have found 5diamondiferous kimberlites to date. The claims are within 5 km of the Diavik Diamond Mine.

Diamonds North Resources has identified several high priority targets including one 12to 14 hectare geophysical anomaly at its project on the northeast side of Banks Island .These are being evaluated in preparation for a drill programme. Less than half of the1.1 million acres of the property have so far been surveyed by airborne geophysics.


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After four years of exploration of its MacKenzie Diamond Project , a joint venture withKennecott Canada Exploration, Sanatana Diamonds Inc. found a t least six regions withan anomalous geochemical indicator mineral concentration. The project area coversapproximately 5.9 million acres of ground under claims and permits about 700 kmnorthwest of Yellowknife. These regions are the Greenhorn, Simpson, Yeltea, Colville,Horton and Estabrook Projects . In 2007, the company discovered the Dharmakimberlite within the Greenhorn project area on the Dease arm of the Great Bear Lake. The company has reported that 180 diamonds greater than 0.106mm wererecovered from the first 339kg batch of samples, with results awaited from the other other two samples.

Further targets on the Greenhorn property will be drilled in 2008 as well as, during2008 and 2009, other identified targets outside of Greenhorn.

Peregrine Diamonds (with joint venture partners Dentonia Resources and DHKDiamonds) have done ground magnetic surveys, core drilling and till sampling at their Pellatt Lake property which is immediately North of the Hardy Lake areas where DeBeers have previously discovered 25 kimberlites.

Peregrine Diamonds (with joint venture partner Thelon Ventures) have also beendrilling at their Lac De Gras East and Lac de West properties but so far have notintersected kimberlite.

Diamonds North have also completed airborne geophysics of the Hepburn property which covers 1.5M acres in the Hornby Basin identifying over 200 targets. These areevaluated and some are being drilled.

A 500 tonne kimberlite bulk sample was extracted by Snowfield DevelopmentCorporation from Mud Lake on the Ticho Diamond project which is located 50kmsoutheast of Yellowknife. The company say that indicator mineral sampling to thenortheast of Mud Lake has discovered a strong indicator mineral train, that reaches atleast as far as Sipper Lake .

Stornoway Diamond Corporation undertook airborne geophysical surveys over each of the Blackstone, Eetsee and Shegonla properties in 2006 in southern NorthwestTerritories, west of Great Slave Lake, and followed up in 2007 with property-wide tillsampling.

Diamond exploration is also occurring at the west of Coronation Gulf between Great Bear Lake and the Lower Mackenzie River . Companies holding land in the area areDe Beers Canada, Diamonds North, Majescor, and Diadem Resources

NunavutAt the Aviat Property (BHP Billiton/Hunter Exploration Group) on the MelvillePeninsula in eastern Nunavut, a total of eleven distinct, but likely related, kimberlitebodies have been identified on Aviat since 2002 (AV1, AV1 West, AV267, AV2 Upper,

AV3, AV4, AV5, AV8 Upper, AV8 Middle, and AV8 Lower) . The bodies range fromsmall pipe-like intrusions at AV1, AV4, and AV9 to layered sheet or dyke like intrusionswhich characterize bodies AV1 West , and AV2 through AV8 , including AV267 , andreach widths of up to 7m. All have proven significantly diamondiferous.


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In 2007, the exploration programme helped to further delineate and extend a series of stacked, flat lying kimberlite sheets up to approximately 7m thick, enhancing thetonnage potential at Aviat.

In early 2008, the results from DMS Processing of one of these sheets, the AV267 kimberlite recovered 33.36 carats of diamonds with a content of 1.63 carats per tonneincluding a 3.64 carat stone. Stornoway intend to move forward with a conceptualresource study and a large bulk sample will be taken in 2008.

In August 2007, the AV9 kimberlite pipe was discovered. Tests established that thebody is diamondiferous and has a macro diamond content comparable to the other Aviat bodies. It lies 4km to the southeast of the AV1 pipe which has returned adiamond content of 0.93 carats per tonne.

At Wales Island (Stornoway/Strongway Exploration/BHPB), also located on theMelville Peninsula , eight new kimberlites were discovered from drilling in 2006, two of which were diamondiferous, bringing the total number of kimberlites to 10.

Stornoway has discovered 6 new kimberlites at the 1.4 million acres Qilalugaq project located North of Repulse Bay after optioning the property from BHP Billiton in July2006. The new discoveries which are kimberlite dykes referred to as Naujaat 1-6 arebeing tested. Previously 10 kimberlites had been discovered, all of themdiamondiferous. The largest of these is a complex of the Qilalugaq 1, 2, 3, and 4 pipes,which coalesce to form a body of 64ha now referred to as the A28 kimberlite . Thisreturned a mini-bulk sample of 61.37 carats with an indicated sample grade of 0.27carats per tonne.

Exploration has been ongoing at the Churchill Diamond Project (Shear Minerals/Stornoway) located between the Rankin Inlet and Chesterfield Inlet in theKivalliq Region of Nunavut. The partners discovered 31 new kimberlites in 2007bringing the total to 75 kimberlites including 8 kimberlite dykes that host significantdiamonds. Those drilled to date are under very little overburden and are mostly landbased. In 2007, the joint venture recovered diamonds from the PST003, Kahuna,Notch and Jigsaw Kimberlites on the project and discovered a new Kimberlite pipe,called KD308 . The Kahuna kimberlite has returned an encouraging sample grade of 1.09 carats per tonne and appears to contain the highest tonnage potential of 4diamond bearing kimberlites discovered in 2006. The diamond populations aredominated by clear white (colourless) stones with high diamond value characteristics. InJuly, Stornoway and Shear Minerals acquired BHP Billiton’s share in the property,bringing their stakes to 41.86% and 58.14% respectively.

17 new kimberlites were discovered at the Amaruk Project (Diamonds North/BHPB)located in the Pelly Bay Diamond District in 2007, adding to the three found in 2006,Walrus, Char and Beluga , which have been added to the existing Qavvik and Umingmak kimberlites. 5 (Qavvik-2 through Qavvik 6) were located near the Qavvik-1kimberlites, 9 (Tuktu-1 through Tuktu-9) were discovered 15km west of Qavvik-1. ThePtarmigan kimberlite is located 20km south of Qavvik-1, Umingmak-2 is situated near the Umingmak-1 kimberlite, and Beluga-2 is located near Beluga-1. The total number of kimberlites discovered on the property is now 22. In January 2008, diamonds wererecovered from Qavvik-3 and Qavvik-4 and from the Tuktu-1 kimberlite.


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Exploration of diamondiferous properties within the claim areas surrounding theJericho mine continued until Tahera Diamond Corporation filed for protection from itscreditors in January 2008. The properties include the Rockinghorse Property , whichhosts the Anuri kimberlite , and the Polar Property , where the Muskox kimberlite (Tahera/ De Beers Canada) was being evaluated.

In mid 2006, Stornoway’s wholly owned subsidiary Ashton Mining of Canada Inc.optioned the Kim, Ric, Vic, Eokuk and James River properti es in Coronation Gulf to

Vaaldiam Resources Limited who discovered diamonds in 2007 on the Artemisia Kimberlite and Perseus dyke located on the KIM property in the Coronation region.Despite this Vaaldiam informed Stornoway of their intention to terminate their participation in the Coronation Gulf properties.

In early 2006, Diamonds North and Teck Cominco mutually decided to end the Blue Ice Agreement on Victoria Island in Nunavut and the NWT. Although a total of 31kimberlites have been discovered on the property, including 4 new kimberlitesdiscovered during the option period, these kimberlites have not met Teck Cominco’ssize criteria.

Diamondex Resources has located three diamond-bearing kimberlite bodies, Tuwawi,Nanuk and Kuuriaq on the Brodeur Peninsula , and is currently conducting anexploration programme. Kennecott also has extensive land holdings in this area.

In 2007, Peregrine Diamonds recovered micro diamonds from the newly-discovered5ha Kayuu kimberlite located on the Nanuq property , situated about 300km north of Rankin Inlet. The other 2 kimberlite pipes on the property are named Naturalik and

Tudlik. The company is planning to make the Nanuq Project a major focus of thecompany’s exploration activity in 2008.

SaskatchweanFort à la Corne (FalC) , located 60 kms northeast of Prince Albert , hosts one of thelargest kimberlite clusters in the world. Potentially it could become not only Canada’slargest but also the largest diamond mine in the world in tonnage, depending on theresults of resource appraisal.

Having taken over the interests of Kensington Resources, De Beers Canada, ComecoCorp. and UEM, Shore Gold (60%) now own the property in a joint venture withNewmont Mining (40%).

Shore Gold already held a 100% interest in the Star Kimberlite to the south of theFalC claim block and had sunk a shaft to extract a bulk sample.

They have prepared a geological model of the Star Diamond Project which identifies atotal resource of 276 million tonnes of ore within the Star kimberlite. The largest of 6potentially economic lithologies is Early Joli Fou (EJF) with a conceptual resource of 163 million tonnes. The others are Pense, Cantuar, Mid Joli Fou (MJF), Late Joli Fou (LJF) and Kimberlite Debris Flows (KDF) . These are overlapping mushroom-shapedbodies which lie beneath 100 metres of overburden.

The company recovered 10,829 carats from a 70,641 tonne underground bulk sample.The diamonds recovered were reported as commercially very at tractive, characterised


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by well-formed models with relatively few broken pieces and very little low quality, darkyellows or dark brown diamonds. Modelled prices from the different kimberlite sourcesranged from US$97 to US$300 per carat. The actual average parcel for sale in Antwerpin October 2007 was US$105 per carat. The modelled prices were arrived at usingstatistical methods to allow for the under representation in the sample of high valuesstones of over 5 carats, which are expected to make up a greater proportion in mining.The largest stone was 49.5 carats. The highest value stone in the sample was a6.61 carat stone valued at US$10,040 per carat.

The grades discovered in mini-bulk sampling vary but are low with EJF returning18 carats per hundred tonnes.

In the first quarter of 2008 Shore Gold expect to announce a resource definition

followed by a reserve definition in mid 2008 and a bankable feasibility study at the endof 2008. Pre-stripping and mine construction is planned for 2009-2010 with firstproduction occurring in 2011.

At the FalC joint venture, Shore Gold as operator are focussing on the (re-named)Orion kimberlite cluster , 7 km of contiguous kimberlite running to the northwest andproximal to Star and totalling 1.37 billion tonnes of kimberlite according to thecompany’s conceptual geological model. A shaft is being sunk to extract a bulk sampleat Orion South which alone hosts 5 kimberlite phases totalling 360 to 400 milliontonnes of ore.

The conceptual geological model defines Orion Centre as 150-167 million tonnes of kimberlite dominated by the EJF phase. Previous drilling programmes have recovered

diamond populations similar to Star at Orion South and Orion North .Beyond Orion within the FalC joint venture property there are more than 60kimberlites, most of which have been proven diamondiferous.

OntarioAll of Ontario and much of Quebec lie over the Superior Craton , and the LakeTimiskaming structural zone which extends northwest through Ontario to the JamesBay Lowlands area at the Attawapiskat River and has several areas of exploration for kimberlites.

De Beers are completing construction of the Victor Project in Attawapiskat with atarget of commissioning the mine in the first half of 2008. Victor is one of 18 pipes

found on the property, 16 of which are diamondiferous.Recent caustic fusion kimberlite from the late 2006 Baby discovery drill hole onStornoway Diamonds Corporation’s (previously Contact Diamond Mining) TimiskamingProperty returned no diamonds, although concurrent mineral chemistry studiessuggest that a second undiscovered phase of kimberlite may be present at the BabyKimberlite. Eight Kimberlite pipes have been discovered so far on the project, six of which are diamondiferous. They include the 95-2 pipe which in mini-bulk sampling in2003 and 2004 was shown to possess a commercial population of high qualitydiamonds at marginally sub-economic grades.


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Arctic Star Diamond Corp. (8.5%) and joint venture partner Metalex Ventures (91.5%)have recovered diamonds from the T1 , and the U1 and U2 kimberlite pipes on the T1project located on the Kyle Property .

At Wawa several deposits have been found and tested but none have yet beenassessed as economically viable .

In 2007, Pele Mountain Resources sold its Attawapiskat River Diamond Project in theJames Bay Lowlands in northern Ontario to KWG Resources, extending their holdingsin the Attawapiskat area by more than 25,000 acres.

QuebecExploration on the Renard Project , located within the Foxtrot Property , has resulted

in the discovery of a field of kimberlitic intrusions, the Renard Cluster, three of which,Renard 2, 3 and 4 have been undergoing bulk sampling over the past year. It is a 50/50 joint venture between Stornoway Diamond Corporation and Soquem Inc. The project isat the pre-feasibility stage with a 43-101 compliant resource model due late in the firstquarter of 2008. A bulk sample of 6,432 carats of diamonds has been recovered from a6,036 dry tonnes sample of the Renard 2, 3 and 4 kimberlite pipes. In 2007, samplesfrom Renard 2 and 3 were valuated at US$109 per carat, with a ‘high’ modelled priceestimate of US$122 per carat and a ‘low’ modelled price estimate of US$105 per carat.A sample from Renard 4 received a modelled ‘base case’ diamond price estimate of US$69 per carat.

Commercial sized diamonds have also been recovered in mini-bulk samples at the Lynxand Hibou kimberlite dykes, located nearby to the west and northwest respectively of Renard’s 2, 3 and 4. Stornoway is looking into the suitability of these dykes to formhighgrade resources amenable to extraction by shallow stripping or trenching duringthe early commissioning and ramp-up period of a potential Renard diamond mine.

Majescor Resources holds many of the areas surrounding these properties, either on itsown account or in joint ventures with various different partners, and has recoveredkimberlite from the Portage Property .

In 2007, Superior Diamonds and joint venture partners Matamex Explorations andIamGold Corporation discovered several kimberlite boulders along the south easternshore of Lac Wachigabau on the L’Esperance Property located about 15km east of Desmaraisville , which consists of 312 claims and comprises an area of 13,399.68ha.

A yellow transparent micro diamond was recovered by Superior Diamonds from 6.92kgof material taken from the Morin Kimberlite in the Ville Marie area. However, KIMgeochemistry and petrographic analysis suggest that an economic deposit of diamondsis not likely associated with this pipe.

AlbertaThe Buffalo Hills Project is the third largest known district of diamond bearingkimberlite in Canada after Lac De Gras in the Northwest Territories and Fort à la Cornein Saskatchewan. Diamonds were originally found in the Buffalo Head Hills area in 1996by Alberta Energy while drilling for oil and gas. Since then, Ashton Mining hasdiscovered 38 pipes, 26 of which are diamondiferous. In July 2007 Ashton’s new owner,


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Stornoway Diamond Corporation, sold its stake in the property for $17.5M toDiamondex Resources and partner ShoreGold Inc. Pursuant to the acquisition, Shoreand Diamondex each have a 22.5% interest in the Buffalo Hills Joint Venture, andEncana Corporation holds a 43% interest with Pure Diamonds Exploration Inc. holdingthe remaining 12% interest. Diamondex, the new operator of the project, and ShoreGold can increase their combined interest to 72.5% by spending $15 million prior toApril 30, 2010. In December 2007 Diamondex and Shore Gold announced a $7 millionexploration programme under which a 14,000m delineation drill programme will focuson the on the central corridor of the Buffalo Hills property. This program will commencein the north at K91 and work progressively south to BH225, K14, K252, K6 andultimately K5. The drilling was expected to begin in late January 2008, and takeapproximately 3 months to complete.

In 2007, Diamondex Resources and Loon River First Nation concluded an agreement toexplore for diamonds on Loon River First Nation Reserve Lands ( Loon River Property )which comprises about 17,000ha and occupies a significant area within the Buffalo HillsKimberlite field.

In February 2008, Grizzly Diamonds Ltd announced they had intersected kimberlite onthe Smoky the Bear Property in the Buffalo Head Hills. Drilling will continue on thekimberlite, named BE-01 , to obtain a larger sample for analysis.

Rest of the world

Diamond exploration is taking place in Australia, Angola, Brazil, Botswana, SouthAfrica, Namibia, Lesotho, Tanzania, the Democratic Republic of the Congo, CentralAfrican Republic, Gabon, Guinea, Liberia, Sierra Leone, Mauritania, Madagascar, India,China, Finland, Russia, Ukraine and Brazil.

De Beers consolidated its exploration efforts in 2006 and 2007 to focus on Southernand Central Africa, Canada and Russia. In Africa the company was active in Botswana,Angola, the Democratic Republic of the Congo and South Africa, but closed itsoperations in Guinea, the Central African Republic and Zimbabwe. While a limitedamount of exploration continued in India, operations in Brazil, China and Australia werealso closed. Following the announcement in September 2006 that De Beers and Alrosahad entered into a joint venture to explore for diamonds in Russia, and other parts of the world, De Beers have announced they will start exploring for diamonds in Russiabefore the end of 2008. De Beers spent a total of US$126 million on exploration in

2007.Alrosa is keen to extend its global reach and, as well as Russia, is involved in jointventures in Angola, the Democratic Republic of the Congo, South Africa and SierraLeone with the aim of adding to reserves.

Rio Tinto is active in Botswana, Mali, Mauritania, Brazil, India, and Russia while BHPBilliton is exploring in Angola and the Democratic Republic of the Congo.


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FACTS THE NWT DIAMOND INDUSTRY

Production

BHP Billiton Ekati Diamond Mine™

Production from the Ekati mine began in October, 1998. The project is expected tomine eight kimberlite pipes and will have approximately a 20-year mine life. As of June2007, Ekati had recovered approximately 36 million carats. Some large diamonds havebeen recovered, including a 186 carat boart stone. Ekati currently has 702 employeesand 927 contractors on its payroll. Seventy-one percent of its employees are northernand 35% Aboriginal. The mine is expected to yield four to five million carats annually,with an average value of over US$100 per carat. In 2005, Ekati produced roughly 3% of the world’s diamonds by volume and 3% by value. For more information, visit

http://ekati.bhpbilliton.comThe Diavik Diamond Mine

The Diavik Diamond Mine is located on a 20 sq.km island in Lac de Gras, 300 kmnortheast of Yellowknife. Ore at Diavik is contained within a number of kimberlite pipeslocated just offshore the island, under the waters of 60-km long Lac de Gras.Construction of the $1.3 billion Diavik Diamond Mine was completed in early 2003, andthrough that ramp up year Diavik produced 3.8 million carats from the A154 Southpipe. Annual diamond production peaks approximately 10 million carats. Proven andprobable reserves at the end of June 2007 were 24.5 million tonnes containing81.7 million carats for an average estimated reserve grade of 3.3 carats per tonne(diluted). Total mine life is expected to be from 16-22 years (currently in year 5).

Construction of the A418 dike (1.3 km long) including the dike’s central cut-off wall,grouting to anchor the dike to glacial till and bedrock, was completed in September 2006. Dewatering of the 2.5 million cubic metres A418 pool water was completed inOctober 2006. The next step is to ready the A418 pipe for open-pit mining whichincludes removing overburden and preparing the pit. In the fourth quarter, crewsreached and test mined the A418 ore body, collecting approximately 6,200 tonnes of ore. Open-pit mining of A418 is expected to begin near the end of 2007.

For the underground mining feasibility study, at the end of the first quarter, the face of the A154 tunnel had reached approximately 1.9 kilometres from the surface, with1.2 kilometres completed around the A418 pipe. The decline to bulk sample theA21 pipe had advanced approximately 900 metres from surface toward its eventual1.2-kilometer length. Crews are preparing a bulk sample for diamond evaluation to seeif the pipe is valuable enough to mine.

For 2007, Diavik’s workforce averaged just over 735 with northern employment at 497with approximately 247 of these Aboriginal. The Diavik Diamond Mine is anunincorporated joint venture between Diavik Diamond Mines Inc. (DDMI 60%) andHarry Winston Diamond Corp. (40%). DDMI is a wholly owned subsidiary of Rio Tintoplc of London, England; and Harry Winston Diamond Mines Ltd. is wholly owned byHarry Winston Diamond Corp. of Toronto, Canada. DDMI is the project manager. For more information, visit www.diavik.ca


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D IAMONDTHE NWT DIAMOND INDUSTRY

Snap Lake ProjectThe Snap Lake Project, located approximately 220 km northeast of Yellowknife, is 100%owned by De Beers and, once constructed, will be the first entirely undergrounddiamond mine in Canada. The project was granted permits to proceed in June 2004,and pre-development of the mine began the same month.

Construction on the mine commenced in February 2005 when the winter road opened.By June, 2007 construction began with the opening of the winter road in February2005. De Beers construction workforce averaged just over 700, with 500 during fullproduction. By June 15, 2007 a total of $804,679,464 had been spent on contracts andpurchase orders for the construction of the mine. $534,629,332 (66%) spent with NWTBusinesses. Of the NWT expenditure, $359,367,232 (67%) was with Aboriginal

Businesses or Joint Ventures.With CDN $890.9 million in contracts and purchase orders committed to the end of construction in the fall of 2007, the Snap Lake Project has made a significantcontribution to the NWT's strong and growing economy and to Aboriginal businesses.

Construction of the mine was completed in 2007, with full production anticipated bythe third quarter of 2008. The mine is expected to process 16 million tonnes of ore at arecoverable grade of 1.2 carats per tonne. Mine capacity will be at a projected averagerate of 3,150 tonnes per day The estimated diamond value is US$ 144 per carat. Minelife is estimated to be approximately 20 years. The project is expected to employ about500 fulltime workers during operations. For more information, visitwww.debeerscanada.com

Rough producers’ differing marketing strategies evolveUntil 2000 most of the world’s rough diamonds were marketed by De Beers’ CentralSelling Organisation (CSO) through a monopoly single channel system, whichcontrolled prices and regulated supply. At its peak, all the major mine productionscomprising up to 85% of the world’s diamonds passed through this channel. It startedto break up in the 1990’s as, first Russia, then Australia and the new Canadian minersdecided to market outside of the monopoly system.

Since then, the world’s leading diamond mining companies have been developing their own strategies to ensure a reliable market for their product. As well as trying to achieve

the maximum spot price for the product, they all look to sustain demand over themedium to long term.

All of them depend on a core of financially strong regular customers buying the rough,either for further onward distribution or for cutting. Until recently, this was as far asmarketing policy went but over the past five years, all have to varying degrees becomeinvolved in the promotion of their, or their customers’, downstream polished product.The level of participation varies from simply offering customers official corporateaccreditation to actually partnering in the cutting and polishing process, developingbrands of polished diamonds and jewellery, partnering in diamond jewellery lines andownership of jewellery stores.


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There is no standard approach but a diverse range of strategies among the mainplayers as is shown below:

De Beers

Recognizing the diminishing market share of the CSO, De Beers announced in 2000 itwas moving away from its old monopoly marketing model. In its place the companyintroduced a new marketing strategy entitled ‘Supplier of Choice’ which was designedto stimulate demand for diamonds and diamond jewellery, through the development of brands, and investment in advertising. Their customers, known as sightholders, receivevarying levels of supply of a variety of finely-assorted boxes of mixed origin diamonds,mined in Southern African and Russia, at the company’s five-weekly sales (known as‘sights’). Under the new policy, success in marketing became the key criteria for supplyfrom the company’s marketing arm, re-named the Diamond Trading Company (DTC).An objective computerised points scoring system was introduced. The new system waspresented to the European Union Competition Commissioner and given conditionalapproval. One condition imposed was the appointment of an EU Ombudsman to hear appeals.

Evidence of the policy’s success, according to DTC, is that by 2005 incrementalmarketing expenditure had grown to US$500 million from a base of close to zero in2000, which was in addition to the company’s own budget of US$180 million, and muchgreater prominence has been given to diamonds in all forms of promotional media.

DTC themselves provide full pro-active support to the development of specific jewellery ranges and their promotion, selectively partnering in some advertising. DTCalso advertise to promote diamonds generically in all the key markets and provide their customers with extensive research about retail markets and trends. For these services,referred to as Valued Added Services, the company started, from 2005, to charge their sightholders an additional 2% on their purchases.

However in 2004 De Beers found that their new plan had to be significantly adapted totake account of the political pressures in Southern African countries to generatedownstream benefits by polishing their productions locally. This had not beenanticipated in 2000 but in August 2006, after a radical re-think, De Beers announced itwas to end central marketing and each country would have its unique appropriatemarketing arrangements.

A new centre of operations has been built in Gaborone Botswana, where from 2009 DeBeers-mined Southern African productions will be sorted and aggregated. Sales will bemade in Botswana and Namibia through new local DTC offices to the many newsightholders who have or are building local factories (Refer to “More diamonds beingpolished where they are mined”). The balance of De Beers’ production will bedistributed to other sightholders, as currently, through the DTC in London. Theyinclude three new customers appointed in the Northwest Territories of Canada, whowill receive Snap Lake production boxes.

Further changes to the plan came in 2007 after it was recognized that ‘SoC1’ was tooinflexible. Not all customers had the same strengths and going downstream did not fitall their business models. The computerised marking system was also too inflexible,


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rewarding those who filled in the right answers to the company’s questionnaires. Theselection criteria were changed to allow a wider range of specializations, and anelement of human judgment was introduced. The contract period was extended fromtwo years to three. The duties of the Ombudsman were also extended under ‘SoC2’ toinclude his prior review of most of the information being provided by customers beforeit was submitted to DTC.

De Beers has for many years operated another channel for secondary distribution.Diamdel, with offices in Antwerp, Tel Aviv, Hong Kong, and an associate in Mumbai,distributes over US$500 million per year of rough, mostly supplied by the DTC, locallyto smaller manufacturers. Diamdel is currently being restructured, and has recentlyadopted an online E-auction system for selling large stones ending De Beers’ previousopposition to this method of sale.

The company has also entered directly into retail by setting up high end diamond jewellery stores in the UK, Japan, USA and the Gulf under the De Beers name in a jointventure with LVMH. However as a condition of approval by the European UnionCompetition Commissioner of their “Supplier of Choice” strategy, De Beers were notpermitted to source any polished diamonds for the stores from their own customers for rough diamonds.

Rio Tinto

In 1996 Rio Tinto Australia’s Argyle Mine broke away from the De Beers’ CSOmarketing channel and started to sell independently from their office in Antwerp, nownamed Rio Tinto Diamonds. With the addition, since then, of rough from the Diavikmine in the Northwest Territories of Canada in 2003 and Murowa in Zimbabwe in 2004,their share of world production had risen to 8% by value in 2006. They sell most of their productions in consistent product range assortments to about 26 regular customers in asystem similar to DTC’s sights, but they also run periodic tenders of large and specialstones. They operate a policy of “segregated supply”, and do not mix productions butkeep their three origins separate to allow customers the choice of using this todifferentiate the product.

In addition, Rio Tinto makes available a regular allocation of selected Diavik roughdiamonds to the polishing factories in the Northwest Territories.

In 2006, the company entered into three-year contracts with their Argyle customers for the sale of future production. The company thereby hoped to be able to plan for acontractually-assured income stream to cover the investment in building theunderground mine, but price fluctuations in the rough market have rapidly breachedthe robustness of the purchase commitments in this new form of diamond salesagreement, when in response to the serious fall in market prices in late 2006 RT had toallow deferrals of purchases because buyers refused to take goods at the contractprices, resulting in RT having to hold inventory.

Also in 2006, Rio Tinto introduced their Select Diamantaire Programme, a business-to-business customer recognition programme that provides a mark of formal recognitionfor their customers to use in their marketing. Rio Tinto licence their customers to usethe mark which recognises and promotes their status as exclusive providers of


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diamonds from the Rio Tinto mines. The purpose of the programme is to reassure thecustomer.

Rio Tinto have so far stopped short of introducing any specific tracking system or marking of stones or marketing of diamond jewellery, but they do sponsor marketingsupport through the Indo Argyle Diamond Council which facilitates sourcing of highquality diamond jewellery, from India to U.S. retail jewellers.

BHP BillitonBHP Billiton started marketing rough diamonds from their sales office in Antwerp in1999, when the Ekati mine in the Northwest Territories of Canada came on-stream.Initially they also contracted to sell 35% of the mine production for three years to the

CSO but the agreement was not renewed and from 2002 the company started selling100% through their own sales office.

Since then, they have developed a t ruly multi-channel marketing approach with the aimof optimising part of their revenues, while having a core of regular customers tounderwrite the balance. This small number of regular customers buys the majority of the full range of production in assorted parcels of the various category ranges.However the company employ a variety of other methods to spread risk and maximizerevenues.

Some specific regular assortments of high quality categories, referred to as premiumsales, are supplied to customers who have entered a fixed term contract at premiumprices.

In order to monitor market prices as well as achieve top premium spot prices, they runboth regular sales by tender of the full range of production as well as window sales.Under this system limited quantities of assorted production are offered at full marketprices to a large number of non-regular buyers.

In addition they polish part of the production on contract and sell them through their own channel under their CanadaMark™ certificate of Canadian origin and Aurias™diamond brands. Their customers may also use the CanadaMark™ under licence tosupport Canadian origin sa les of diamonds and jewellery. The company advertiseheavily in the Canadian trade press to support CanadaMark™.

BHP Billiton supply regular allocations of selected Ekati rough diamonds to thefactories in the NWT.

In November 2007 BHP Billiton made an offer to take over Rio Tinto. If this deal isconcluded the new company will control 12% of the world market for rough diamonds,placing it third behind De Beers and Alrosa.

Harry Winston Diamond CorporationThe company’s approach to diamond marketing has been original from the start. Theymade the strategic decision to confine themselves to what they see as the two mostprofitable parts of the pipeline: mining and diamond jewellery retail, without taking anypart in the polishing process.


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In 1999 in order to raise funds to pay their 40% share of the construction cost for theDiavik mine, the then Aber Resources entered into a ten-year contract with Tiffany’s tosell a selection of the better qualities in return for equity funding. As soon as there wascash flow from the newly operating mine in April 2004 they acquired a 51% interest inluxury diamond jeweller Harry Winston, and in 2006 raised this to 100%. In 2007 Aber changed its name to Harry Winston Diamond Corporation.

They have established their sorting office in Toronto and sales offices in Antwerp,Mumbai and Tel Aviv to sell the balance of the production to downstreammanufacturers. They also rely on a regular, but less consistent, customer base. Tendersare held about once a year to test prices. One criterion for supply from the company isthat the rough customer can also act as a supplier of top quality polished to the HarryWinston stores, irrespective of the source.

Alrosa

Throughout the communist era the Russian production was almost entirely sold throughDe Beers’ Central Selling Organization. Changes came after the end of communismwith increasing sales to a growing local cutting industry, but all exports were exclusivelychannelled through the CSO/DTC.

In 2004 the parties agreed to a progressive reduction to a minimum level of sales inorder to gain approval for their trade agreement from the European Union CompetitionCommissioner, but in early 2006, after appeals from the industry, the Commission

judged the contract anti-competitive and accepted a De Beers’ commitment not tomake any purchases after the end of 2008.

Alrosa entered an appeal against the decision to the European Court of Justice which,in July 2007, was upheld. This decision is currently under appeal by the EuropeanUnion Competition Commissioner, leaving the relationship between the parties in astate of uncertainty.


ROUGH DIAMOND MARKETING – DISTRIBUTORS’ MARKETSHARE 2006

50%

16%

8%

4%

3%

19%

De Beers (DTC)*Alrosa*Rio TintoBHP BillitonAberOther

*De Beers (DTC) includes US$606M of rough purchases from Alrosa

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Alrosa has been faced with the challenge of rapidly developing international marketsfor its Russian and Angolan diamonds, which represent about 20% of the worldproduction.

Apart from sales to DTC, which were US$606 million in 2006, the company has beenselling about 30% by tender in Moscow and about 50% to the local market, with thebalance offered to the open international market.

Following the EC ruling, Alrosa has been developing its new marketing strategy. Thecore of the new plan will be a category of 5-10 large regular customers who will havethree year contracts and be provided with US$100-250 million of rough diamondsannually. Alrosa say they will place less emphasis on tenders which they consider to bea short-term marketing position. The balance of their production is to be offered on the

open market. This will include all lower quality ”Indian goods” which can be freelyexported following the abolition of export quotas on rough diamonds in January 2007.The main sales office is in Moscow and there are two large sales offices outside of Russia, in Antwerp an Israel, as well as a small-scale operation in Hong Kong.

The company already has downstream interests in polishing, through 100% ownershipof Kristall of Smolensk. The two companies have agreed to promote Russian diamondson the world market, concentrating on high end large sizes, and to start a jewellerybrand. A polished sales office has been established in New York. About 5% of Alrosa’ssales are of polished diamonds.

Smaller Producers prefer tenders

Most smaller independent producers now sell by tender which has delivered, onaverage, higher prices than any other route in the under-supplied market of the last fiveyears. Although the auction system does not form long-term customer relationships, itbrings small producers an immediate cash return within a transparent system, and doesnot have the delays and uncertainties of polishing a production.


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Government in the Northwest TerritoriesRegulatory ResponsibilityThe Federal Department of Indian Affairs and Northern Development (DIAND) iscurrently responsible for the administration of mineral resources in the NWT, under theCanadian Mining Regulations (CMR) and the Territorial Lands Act.

Responsibility for Environmental Impact Assessment in the NWT lies with various Institutionsof Public Government established pursuant to the settlement of Aboriginal Land Claim.

Economic ScopeThe three operating NWT mines and the planned fourth mine are expected to generatean estimated $26 billion in GDP over their lifetimes. The three mines are expected togenerate $7.5 billion in total government revenues. The next share for the NWT fromthese revenues would be a mere $260 million under the existing fiscal arrangementswith the federal government, according to the Conference Board of Canada. This is arelatively small benefit considering the incremental cost for infrastructure, social andbusiness support programs.

Economic DevelopmentAlthough the GNWT currently has no control over the administration of its naturalresources, it is responsible for economic development.

Diamonds will have a significant impact on the economy of the NWT for the foreseeable

future as exploration and interest by major diamond producers continues. Residents of the NWT will receive employment and business opportunities from the exploration andmining of diamonds. Diamonds, however, represent an opportunity for the North to movebeyond dependence on the harvesting of its raw materials for the rest of the world, tobecoming a jurisdiction that benefits directly from adding value to its raw materials.

Value Added Opportunities Value added industr ies include sorting, marketing and selling rough; gem cutting andpolishing; jewellery making; tourism; and industrial applications. These all representsubstantial training, employment and business opportunities for Northerners.

The GNWT is committed to ensuring that benefits resulting from resource extraction

are maximized. Although we are at the beginning of a new industry, we must provideNortherners with the opportunity to explore and learn from this new industry.

In the short term, the GNWT will be actively involved in the industry, to ensure thatopportunities are there for Northerners to explore. In the medium and longer term, theGNWT will develop a framework that supports the industry, ensuring the sustainabilityof economically viable aspects.

Diamonds are a unique commodity that offer opportunities across economic sectors:mining, exploration, manufacturing, arts and crafts, jewellery manufacture, tourism, andretail. The GNWT recognizes this uniqueness and is committed to providing acoordinated approach across sectors, building on strengths and addressing weaknesses.


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Summary of Diamond Developments to DateThe potential training, employment and business opportunities associated with thediamond value added industry are great. The GNWT is committed to facilitating theindustry’s development in the NWT to ensure benefits to Northerners are maximized.Although the industry is still new, significant development has already occurred.

SortingIn April 1998, the GNWT and BHP Billiton came to an understanding through whichBHP Billiton agreed to build a sorting and valuation facility in a community in the NWT.

BHP Billiton is currently valuing its diamonds at this Yellowknife facility, which employsapproximately 13 staff. BHP Billiton has committed to working towards selling to NWTmanufacturers directly from the facility.

Diavik Diamond Mines Inc and Aber Diamond Mines Ltd have also completed aproduction splitting and valuation facility in Yellowknife, employing 15 workers.

Diamond ManufacturingSignificant interest continues to be expressed by Canadian and foreign diamondmanufacturers in establishing cutting and polishing operations in the NWT.

The key to developing diamond manufacturing opportunities is reliable access toquality rough diamonds at reasonable prices.

BHP Billiton and Diavik Diamond Mine have agreed to sell rough diamonds to

manufacturers in the Northwest Territories as part of an understanding between theproducers and the Government of the Northwest Territories to promote and supportvalue-added diamond activity in the NWT.

De Beers has announced that it will provide rough diamonds from the mine tomanufacturers in the NWT. It is anticipated that this and future projects will providefurther opportunities for Northerners.


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Three manufacturers have established cutting and polishing facilities in the NWT:

Arslanian Cutting Works NWT Ltd.Manufacturing since December 2000, Arslanian Cutting Works (ACW) brings the skillsand knowledge of some of the finest diamond cutters and polishers in the world to theCanadian Diamond industry. Arslanian Cutting Works is Canadian owned and operated,with an unparalleled global reputation for their diamond manufacturing capabilities,thanks to the expertise of their 50 cutters and polishers. Arslanian manufactures the allCanadian diamond brand, Polar Ice Canadian Diamonds™. All Polar Ice CanadianDiamonds™ come with the Government of the Northwest Territories Certificate of Authenticity. As a full participant of the GNWT Polished Diamond Certificate program,the all-Canadian pedigree of Polar Ice Diamonds™ is assured.

Polar Bear Diamond FactoryThe Polar Bear Diamond Factory commenced its original operations in June 1999. Itcarries the distinction of being the first large-scale cutting facility in Canada, and is fullyCanadian owned, employing 18 cutters and polishers. Polar Bear Diamonds™ fullyparticipates in the Government of the Northwest Territories Polished DiamondCertificate Program. The certificate ensures the authenticity of Polar Bear Diamonds™as being mined, cut and polished in Canada for a 100% Canadian diamond.

Laurelton DiamondsLaurelton Diamonds is 100% owned by Tiffany & Co. of New York, and employs

approximately 50 people in its Yellowknife factory. Laurelton does not participate in theGNWT Polished Diamond Certification Program. Its polished diamond production ismarketed through Tiffany’s retail outlets.

Northern Jewellery ManufacturingLaurelton Diamonds, a subsidiary of Tiffany & Co., has signed a Memorandum of Understanding with the Kitikmeot Inuit Corp. (KIC) and the Rae Development Corp.This agreement includes Aboriginal-designed jewellery being test marketed in NorthAmerica.

Developments in Northern diamond jewellery will utilize the wealth of a rtistic skills inNorthern communities, create employment opportunities and foster international

appreciation of the rich cultural traditions of the NWT.

Labour Force DevelopmentA critical prerequisite to developing a diamond value-added industry in the NWT is anavailable, skilled workforce. This will initially require the import of foreign skilledworkers to meet immediate demand. Successful development and growth of theindustry in the longer term, however, will require the efficient transfer of skills toNortherners. The NWT Department of Education, Culture and Employment hasdeveloped programs to aid this process.


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Occupational Standards and CertificationThe NWT Department of Education, Culture and Employment has developedOccupational Standards for various trades within the cutting and polishing industry.These standards set out the knowledge and skills necessary to be competent in a givenoccupation, and are a world first for the diamond industry. All trainees in factories inthe NWT work under these standards towards certification that recognizes their proficiency. The strict standards and rigorous certification testing will ensure thatNortherners trained in the NWT factories will have the knowledge, skills and attitudesnecessary to develop into competent professional cutters.

Diamond Cutting and Polishing Program

The NWT’s Aurora College has developed a Diamond Cutting and Polishing Program toprovide potential employees in the NWT with the theoretical and practical foundationnecessary for becoming skilled in cutting and polishing. The 22-week program has twofull time instructors. The College has also retained the services of the GemologicalInstitute of America to deliver a polished grading component of the program. To date,130 students have graduated from the cutting and polishing program.


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Marketing Canadian BrandsSoon after the Ekati mine came on stream, BHP Billiton agreed to sell rough diamondsto Northwest Territories manufacturers, and Canadian brands started to appear. Their success has inspired many others to follow their example of branding by Canadianorigin. Polar Bear* and Polar Ice brand diamonds, are symbols of Canada's DiamondIndustry.

All these stones are “mined, cut and polished in the Northwest Territories of Canada,”and are sold with a Certificate of Authenticity issued by the Government of theNorthwest Territories as GOVERNMENT CERTIFIED CANADIAN DIAMOND™. Thisstatement is important because there is no technology commercially available that cantest a polished diamond to prove where it was mined. The Government of theNorthwest Territories monitors the flow of diamonds through processing in the factoriesin order to verify the statement on the certificates.

Under the Canadian Competition Bureau’s guidelines, stones represented for sale as“Canadian” must have been mined in Canada. The industry has established a VoluntaryCode of Conduct for Authenticating Canadian Diamond Claims that provides for atracking procedure to validate the origin claim for Canadian stones, some of which are,because of lower labour costs, polished in other diamond manufacturing centres.

To date, BHP Billiton is the only diamond producer to have become directly involved inthe polishing and marketing of polished diamonds. They polish a part of the Ekatiproduction and have established Aurias, their own brand for Canadian polisheddiamonds, and the CanadaMark, a lasered hallmark to guarantee Canadian origin. BHPBilliton operates a program of identification and tracking to monitor the stones fromrough through to polished.

The popularity of Canadian-origin branded diamonds has proven that all diamondsmay appear to be equal, but some are (sometimes) more equal than others, anencouraging lesson for all those currently heading down the branding route.


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Value-added impactThe GNWT is committed to maximizing opportunities from the development of itsnatural resources by providing sustainable jobs for Northerners and contributing to thediversification of the NWT economy.

Benefits for NWT residents and the impact of diamond value-added developments onthe NWT economy are already being realized.

EmploymentThe total number of direct jobs in diamond mining is approximately 2,636. Thisincludes 1,201 at the Ekati Diamond Mine™ and 735 at the Diavik Diamond Mine, and700 at DeBeers Canada’s Snap Lake.

The total number of jobs in cutting and polishing in the NWT is approximately 110. Thisincludes employment created by the three current cutting and polishing facilities.

Additional spin-off jobs have also been created in the downstream industry in the NWT.These include 28 in sorting, an additional 15 in the security/courier services area and 2in diamond training. Employment increases in the jewellery retail or tourism sectorshave not been included.

Economic ImpactThe GDP at basic prices for the NWT in 2006 was $3.5 billion, growing 2.7% from 2005in chained 2002 dollars. The largest contributor to the territorial GDP continues to be

diamond mining, which represented $915 million of GDP or 26.5% of total GDP for 2006.(Source: Newstats – November, 2007 – NWT Bureau of Statistics)

While the diamond mining sector remained relatively stable between 2005 and 2006,the growth in GDP for the year is partly a result of growth in the construction industry.

The value of manufacturing shipments for the NWT in 2006 totaled $75.3 million.Although manufacturing remains a relatively small sector in the NWT economy, theimpact of diamond value added developments on the sector has been significant. Thetotal value of manufacturing shipments from the NWT has increased by $53.6 millionsince 1999, a more than 247% increase.(Statistics Quarterly – Volume 29, September 2007, NWT Bureau of Statistics)

It is expected that the NWT manufacturing industry's contribution to total NWT GDPwill continue to grow. More mines are being developed and further opportunities willarise, with substantial benefits for the future. Manufacturing remains a small sector inthe NWT economy, contributing only $7.0 million to overall GDP in the NWT in 2006,down from $10 million in 2005.


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The Future of the IndustryKey Features

Favourable fiscal and regulatory environments continue to attract newexploration and mining investment.

Industry/Government agreement on the benefits that result from production.

Increasing levels of sorting are taking place — including moredetailed sorting for market.

Government support for infrastructure, business, training and socialsupport programs.

Private sector investment in cutting and polishing operations.

Partnerships with established international industry organizations in supportof NWT diamond industry development.

A developing Northern jewellery-making capacity using locally producedgems and Northern creative and artistic skills.

A developing arts and crafts capacity using Northern diamonds andindicator minerals.

Diamonds as a focus for tourism-related activities.

DISCLAIMERThe statistics contained in this magazine have been taken from a variety of sources andpublications including Minerals, Oil and Gas Division (MOG) of Industry, Tourism andInvestment (ITI), Diamond, Intelligence Briefs, and David Elliot Consulting andInternational Diamond Advisory Services. This information is made available "as is" andwithout warranty of any kind, either expressed or implied.


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HE NORTHWEST TERRITORIES DIAMOND INDUSTRY

1991Charles Fipke and Stewart Blussondiscover diamonds in the NWT.

1993Aber Resources Ltd. and KennecottCanada Exploration establish a DiavikProject office in Yellowknife(rendering of the Diavik mine site atfull development).

1999The first one million caratsproduced by Ekati™Diamond Mine.

1991• (Fall) Charles Fipke and Stewart Blussondiscover diamonds in the NorthwestTerritories (NWT) at Point Lake. This discoveryresults in the largest staking rush in Canadianhistory.1993

• (Fall) BHP opens Koala Camp, north of Lacde Gras. It also opens an ofce in Yellowknife,NWT.• (Sept) Aber Resources Ltd. and KennecottCanada Exploration establish a Diavik Projectofce in Yellowknife.1996

• Winspear Resources Ltd. and Aber

Resources Ltd. discover the Snap Lakediamond deposit.• (Nov) The Minister of the Department ofIndian Affairs and Northern Developmentand the Premier of the NWT announce thatthe BHP project has received nal Cabinetapproval and now has the full support of thegovernment.• (Dec) Diavik Diamond Mines Inc. is createdwith its head ofce in Yellowknife, NWT.1998

• (Winter) Winspear Resources conductsa 200-tonne bulk sample at Snap Lake thatyields high grade, gem-quality diamonds.

• (Mar) Diavik Project Description is

submitted to federal government, triggeringformal environmental assessment review.• (April) BHP and the Government of theNorthwest Territories (GNWT) reach anagreement whereby a diamond sorting andvaluation facility would be built in Yellowknife,as well as an understanding that BHP willfacilitate the sale of rough diamonds toqualied Northern manufacturers for cuttingand polishing in the NWT.• (Aug) GNWT begins work on a program tocertify diamonds as being mined and cut inthe NWT.• (Oct 14) Ekati Diamond Mine(TM) opens.1999

• (Jan) Aurora College, in association with theGNWT’s Department of Education, Cultureand Employment, establishes the Introductionto Diamonds Program (pre-employment) andthe Introduction to Jewellery Program.• (Feb) BHP sorting and valuation facilityopens in Yellowknife, NWT.• (April) First one million carats produced byEkati Diamond Mine(TM).• (June) Sirius Diamonds Ltd. opens a cuttingand polishing facility in Yellowknife, NWT.• (Aug) The GNWT negotiates aMemorandum of Understanding with Diavikconcerning access to rough diamonds forNWT manufacturers.

• (Nov) The federal government completesthe environmental assessment review of

the Diavik Diamond Project and allows it toproceed to the next phases of permitting.2000

• Diavik Diamond Mine enters the constructionphase.• (Mar) Deton’Cho Diamonds Inc. opens acutting and polishing facility in Yellowknife,NWT.• The GNWT releases Diamond PolisherOccupational Standards under theApprenticeship, Trade and OccupationsCertication Act.• (June) Deton’Cho Diamonds Inc. signs amonitoring agreement with the GNWT.• (Aug) De Beers Canada acquires WinspearResources.• (Nov) GNWT certies the rst CANADIANARCTIC(TM) diamond and launches the www.canadianarcticdiamond.com website topromote CANADIAN ARCTIC(TM) diamondsand the secondary diamond industry.• (Dec) Arslanian Cutting Works NWT Ltd.opens a cutting and polishing facility in

Yellowknife, NWT.2001

• De Beers submits its project description forthe Snap Lake Project.• (June) BHP Billiton purchases Dia Met,bringing BHP Billiton’s ownership of the EkatiDiamond Mine(TM) to 80 percent.2002

• The GNWT launches a new logorepresenting CANADIAN ARCTIC(TM)diamonds and the government’s certicationprogram for diamonds mined, cut and polishedin Canada’s Northwest Territories.• Diavik Diamond Mines and Aber Diamondscomplete a production splitting facility in

Yellowknife.• Arslanian Cutting Works NWT Ltd. joinsforces with international diamond companyRosy Blue.• Tiffany and Co. begin construction of acutting and polishing facility in Yellowknife,NWT.

• (Dec) De Beers Canada Mining Inc. commitsto making rough available for local manufacturethrough a Socio-economic Agreement with theGNWT.2003

• (Feb) Diavik Diamond Mine startsproduction.• Deton’Cho Diamonds Inc. and Schachter &Namdar enter into partnership to form CanadaDene Diamonds.• (Mar) Aber Diamonds holds its rst sale ofdiamonds from the Diavik Mine.• (June) BHP launches its CANADAMARK.• (June) Rio Tinto Diamonds holds its rst saleof diamonds from the Diavik Mine.

Trademarks owned by the Government of the Northwest Territories.

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FACTS

Photo Credits:

Tim Atherton , RWED, GNWT, pages 2, 22;

BHP Billiton, cover foldout;

Diamonds Division , RWED, GNWT, inside frontcover, cover foldout, pages 3, 22;

Diavik Diamond Mines Inc. , pages 18, 25, 26, 46;

Greg Hancock , RWED, GNWT, cover foldout,page 3, 22;

Kangas Custom Jewellery , cover foldout, page 28;

Wayne Lynch , inside front cover;

Ray Tanami , Ursus Photography, page 45

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Documents

Diamond 07