GLOBAL MININGINVESTMENT CONFERENCE 2010

STATIONERS’ HALL ● CITY OF LONDON ● TUESDAY-WEDNESDAY, 28-29 SEP 2010

www.ObjectiveCapitalConferences.com

Investment Conferences

Investing in Physical DiamondSaul Singer – Chief Investment Officer, Fusion Alternatives

DAY 1 - SESSION 3: PRECIOUS METALS SECTOR

Other sponsors & participating organisations:

GLOBAL MININGINVESTMENT CONFERENCE 2010

Lead sponsors:

Media partners:

Fusion AlternativesInvestment Diamond Specialist

Legal Disclaimer This presentation contains certain forward-looking

information. This information is based on current expectations and assumptions that are subject to a variety of risks and uncertainties that are difficult to predict. Actual results could differ materially from those expressed in any forward-looking statements. Fusion Alternatives assumes no obligation to update these forward-looking statements as a result of new information or future events.

The information presented within this presentation is subject to change without notice. The information is presented as promotional material, Fusion Alternatives holds no responsibility to the accuracy of the information nor shall be held liable for any use, distribution or implementation of this information.

Fusion Alternatives does not intend to provide investment advice through this presentation. The information in this presentation is not to be construed as an offer to buy or sell, or the solicitation for an offer to buy or sell any security or asset. The presentation is for information purposes only and does not constitute a complete service or performance.

ContentExecutive SummaryIndustry overviewDiamonds as an alternative investment

asset classBarriers to entryFusion Alternative productsAbout UsContact information

Executive Summary1. Prices of investment diamonds set to

remain strong into near future – 14%-17% absolute annual returns.

2. Diamond industry far ahead of other commodity or alternative investment markets in terms of pricing and liquidity.

3. Fusion Alternatives offers clients a suite of products facilitating a professional, discrete and efficient exposure to investment diamonds.

INDUSTRY IN TRANSITIONThe diamond industry has

undergone tremendous change and development over the last decade.

Shift from being a supply controlled to a demand driven industry

Transition creates unique opportunities for new ideas/ paradigms to emerge.

Diamond Pipeline

Mining Costs

$6b

Rough Diamond

Production

$12b

Sales to Manuf.Sector

$14b

Polished Exports

From manuf.Sector

$20b

Finished DJ in Wholesale

Market

$35b

DJRetailSales

$70b

Significant value addition

Sources: FA & Idex

Supply Side: Rough Diamond productionHeavily Concentrated

80% of global production controlled by 5 major players.

No world class discovery made this decade.High concentration levels will continueNo significant rise in production in the

near-term.Demand > supply for larger, better

quality diamonds.Diamond production growth

low-to-mid digit range in terms of carats

10%-12% in terms of value

Rough Diamond Production Outlook

00 01 02 03 04 05 06 07 08 09(e)

10(e)

11(e)

12(e)

13(e)

14(e)

15(e)

16(e)

0

5

10

15

20

25

30

0

20

40

60

80

100

120

140

160

180

200

Production by value - $ billion Production by quantity - carats million

($b

)

(Ct

Mil)

Demand sideGlobal demand has trended

upwards for the last 7 years.Demand growth > production

growth.Trend somewhat mitigated by inventory

stockpiles held by major producers Stockpiles now diminished to minimum

working levels Demand Drivers

Growing emerging market demand (Gulf, Chindia and Turkey,).

High-end jewellery marketInternet sales

Global Retail DJ Sales – Demand Side

99 00 01 02 03 04 05 06 07 08 0910

(e)

11(e

)12

(e)

$0

$20

$40

$60

$80

$100

$56 $58$54 $55 $57

$61$65

$68$73

$78

$66

$74$80

$85

($ B

illi

on

s)

Robust upward trend c. 6-8% p.a.

The whole picture: Supply vs. Demand

Source: RBC, Rio Tinto, De Beers, FA

00

01

02

03

04

05

06

07

08

09

10

(e)

11

(e)

12

(e)-35%

-25%

-15%

-5%

5%

15%

25%

35%

-10%

-5%

0%

5%

10%

Diamond Production Growth Diamond Demand Growth

Dia

mo

nd

Pro

du

cti

on

Gro

wth

Dia

mo

nd

De

ma

nd

Gro

wth

Diamonds as an investment asset class

Portable and liquid store of wealth

Stable and accepted monetary value

Traded on numerous physical and screen exchanges around the world

Increasingly standardized pricing & gemological characteristics

Obstacles to the emergence of investment diamonds - solutionsPrice Transparency

Standardized and globally accepted pricing mechanisms, indicators and benchmarks (e.g. Rapaport Price List)

Existence of large physical and virtual/online open secondary markets

LiquiditySophisticated global primary physical markets – NY,

Antwerp, Mumbai, Tel Aviv, Dubai.Online ‘screen trading’ marketsAnnual trade in dealer market $4b

Standardization of asset classesIndependent Gemological Laboratory Grading Reports

Investment DiamondsPolished diamonds with the highest

ranges of homogeneous gemological characteristics. (Round Shape, 1-4ct size, D-H colour, IF-VS2 clarity, +Very Good make, GIA/HRD/GCAL certified)

No strong correlation with other investment class.

Relatively non-volatile price movements

Inelastic downward price sensitivity.

Diversification

Diamonds

DJ-Gold Russell Global

Wine

Diamonds 1

DJ-Gold 0.91 1

Russell Global 0.52 0.47 1

Wine 0.94 0.97 -0.35 1

Based on 10 years of monthly data

Price Movements

Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10

0

50

100

150

200

250

300

350

400

450

Diamond Price DJ Precious MetalsRussell Global DJAIG

Inde

x Ja

n '9

1=10

0

Investment Diamond Price Expectations

Investment diamonds increased by 20% and 38% in 2007 and 2008 respectively.

Down 12% in 2009 and up 18 percent YTD.

Demand set to outstrip supply into medium-term.

Expected natural price growth rate of investment diamonds into medium-term is 14%-18%.

How To Invest In DiamondsInvestors looking for an exposure

to investment diamonds currently have two choices:

1. Purchase shares of diamond miners

2. Directly purchase and hold diamonds

Purchase Diamond Mining Equities - DisadvantagesMost of the major diamond mines are small

parts of the global mining conglomerates so no significant gearing to diamond price.

Buying shares of small independent producers as a point of entry exposes investors to significant political, topographical and operational risk.

Equities are an imperfect substitute for exposure to the underlying commodity. Diversification benefits are reduced as the equities are correlated with broader share markets.

Direct Purchase of Diamonds - DisadvantagesInvestor is not an expert, very technical

industry so investor might purchase diamonds with inferior investment grade characteristics

Investor has to directly arrange for insurance and storage, which can be quite expensive

Limited portfolio effect as most investor will not be able to purchase large quantities of stones with diverse characteristics

Relatively illiquid for non-industry participants -hard for individual investor to sell at a good price

Emergence of Professional Investment Diamond MarketOver the last 2 years there has

been a number of diamond funds launched.

Predominantly European based ETF funds.

Respective investment managers have erred in product development.

Key to successful diamond investment product is PRICE TRANSPARENCY & LIQUIDITY

Pricing and Valuation of Polished DiamondsThere are thousands of categories of gem-

quality polished diamonds.The Investment Managers will invest in

investment grade diamonds which are grouped into homogeneous categories based on gemological features of the diamond.

Most investment grade diamonds have traditionally been valued in the dealer market by an extrapolation off a generally accepted Price List – i.e. the Rapaport Price List.

The emergence of deep and liquid B2B trading platforms has introduced real-time pricing and valuation data for polished diamonds.

Pricing transparency for polished diamonds is far more advanced than other alternative asset classes which are actively traded for investment purposes (e.g. Art, Wine, Rare Coins, Uranium)

Fusion Alternatives – Breaking the Barriers to Entry

Fusion Alternatives is the only investment manager specializing in diamonds as an alternative investment asset class.

Fusion Alternatives has created a number of different products giving clients a professional, discrete and efficient exposure to investment diamonds.

Products & Services

Managed accountsPrivate viewings and sale of special

investment diamondsFundOnline investment diamond buying

platformInvestment diamond trading deskResearch

About UsNo other investment management team

specializes in diamonds.

Management team fuses experience garnered from professional and investment services together with unprecedented experience within the diamond industry.

Fusion Alternatives’ Advisory Committee consists of leading figures from financial, commodity and diamond industries.

Sound Bites1. Prices of investment diamonds set to

remain strong into near future – demand to continue to outstrip supply.

2. Diamond industry far ahead of other commodity or AI industries in terms of pricing and liquidity. All the pieces of the puzzle exist.

3. Diamonds are set to emerge as a true alternative investment asset class in near future.

4. FA is positioning itself to capitalize on these developments.

Fusion AlternativesTelephone #1: +44-(0)207-183-0244 (UK)

Telephone #2: +1-954-762-7639 (USA)

Email: saul@fusionalternatives.cominfo@fusionalternatives.com

Website: www.fusionalternatives.com

Other sponsors & participating organisations:

GLOBAL MININGINVESTMENT CONFERENCE 2010

Lead sponsors:

Media partners: