North Australian Diamonds
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October 2013 Forward Looking Statement This presentation contains “forward looking statements”. Such “forward looking statements” may include without limitation (1) estimates of future earnings, the sensitivity of such earnings to diamond values and foreign exchange rate movements (2) estimates of future diamond production (3) estimates of future cash costs (4) estimates of future cash flow, the sensitivity of such flows to diamond values and foreign exchange rate movements (5) statements regarding future debt payments (6) estimates of future capital expenditure (7) estimates of reserves, resources and statements regarding future exploration results. Where the Company expresses or implies an expectation or belief as to future events or results such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, “forward looking statements” are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such “forward looking statements”. Such risks include but are not limited to diamond values, currency fluctuations, increased production costs and variances in grades or recovery rates from those assumed in mining plans, as well as political and operational risks in the countries and states in which the Company operates or sells product and governmental regulation and judicial outcomes. The Company does not undertake any obligation to release publicly any revisions to any “forward looking statement” to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, expect as may be required under applicable securities laws.
Competent Persons Statement The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Dr DS Tyrwhitt who is a member of the Australasian Institute of Mining and Metallurgy. Dr DS Tyrwhitt is an independent consultant to the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr DS Tyrwhitt consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
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Only 1% of discovered kimberlites are economically viable For personal use only use personal For
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4 Over the past 24 months Merlin Diamonds has focused on pre-feasibility production trials and feasibility studies aimed at re-establishing operation at the Merlin Mine in the Northern Territory, Australia. Merlin Diamonds is also active in its other tenement holdings in the North Kimberley, and Arnhem Land, holding approximately 22,000km² in total under title.
BORROLOOLA Arnhem Land North Kimberley MERLIN OTHER PROJECT AREAS 1.5Mcts* Borroloola Southern Cluster: Merlin PalSac, Launfal, North Kimberley 7.2Mcts* Excalibur, Tristram Seppelt 1 & 2 Ashmore Central Cluster: Gawain, Ywain Arnhem Land Ellendale (Gem Diamonds) Argyle Northern Cluster: (Rio Tinto) Gareth, Kaye, Ector, Bedevere Perth Melbourne MERLIN ORBIT Exploration
For personal use only use personal For Head Office Office Tintagel
Lancelot North Australian Craton
*Includes material classified as reserves and resources 5 Ywain is open at depth PALSAC PIPE
Ore Reserve 0m Open pits 47 metres 50,000 carats 80m
Resource 120 metres JORC 100,000 carats Probable Ore Reserve 8.1Mt 2,410,000 Gawain is open carats at depth
438m
Ore Reserve JORC 69 metres Inferred 210,000 Resource carats 6.59Mt 1,960,000
carats For personal use only use personal For
Resource 868m 240 metres 450,000 carats 14.69Mt 4.,370,000 Carats 6 . Merlin Diamonds Limited ( “Merlin Diamonds" or “the Company") is focused on developing its flagship Merlin Diamond Mine Project in the Northern Territory, Australia and is engaged in extensive exploration for additional sources of diamonds in and around Merlin
. Merlin Diamonds has previously undertaken resource definition drilling resulting in the identification of sufficient resources to potentially underpin a 15 year plus mining project
. Merlin is renowned for producing large, high clarity, super white, high value stones . Successful pre-feasibility production trials recovered 10,600cts of diamonds , which were valued at USD$351 per carat in June 2011 by Independent Diamond Valuers Pty Ltd , highlighting the viability of proceeding to a commercial mining operation
. Merlin has commissioned the diamond recovery plant and processing of historic ROM stockpiles has begun. Borehole mining rig setup on the Ywain pit is complete and production from the first borehole will commence in October 2013.
. Merlin is the only diamond mine in the Northern Territory and will be the third producer in Australia. For personal use only use personal For
The largest diamond found in Australia Some of the diamonds produced from Merlin production assortment the Merlin 104.73ct stone 7 . Refurbishment and commissioning of the diamond recovery plant is now complete.
. Construction of the gabion wharf for loading of the drill rig onto the floating platform (barge) and construction and emplacement of the barge is also complete. The borehole rig has mobilised onto the barge and drilling of the pilot hole has commenced. First production from the borehole is expected in October 2013.
. Previously unprocessed kimberlite material that was stockpiled from previous mining (and was too large to process) is now weathered enough to reprocess after being exposed for over 15 years. Between 180,000 – 200,000 tonnes of this material is estimated to be available and has been used for commissioning of the plant and can be used as supplementary feed to the borehole mining ore. . The ROM stockpiles, apart from being bonus ore material that can be processed at a low cost, also have the potential to host large diamonds due to the fact that the previous plant could only process stones up to
For personal use only use personal For 20mm in diameter (approx. 100 cts). These larger stones, being more dense than the host rock, will likely be at the base of the stockpiles and if present, represent a significant windfall opportunity.
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10 . Total Merlin JORC compliant combined Indicated and Inferred Mineral Resource is 19.02 million tonnes for a contained 4.31 million carats . Total Merlin JORC compliant Probable Ore Reserve is estimated at 11.1 million tonnes for a contained 2.9 million carats . Total Merlin Diamond Mineral Resource and Ore Reserve is now the second largest in Australia . 10,600 carats of diamonds recovered in the pre-feasibility production trials, with the largest diamond recovered being a 24.12 carat gem quality diamond . 2,590 carats were greater than 1ct, representing 24% of production . Of the +1ct diamonds, in excess of 75% were assessed as ‘gem’ or ‘near gem’ quality . Diamonds recovered in the 2010 production trial which were valued at USD$351 per carat in June 2011 by Independent Diamond Valuers Pty Ltd . Merlin Diamonds has delineated further drill ready kimberlite targets on the Merlin Mine Lease.
Ore Average Grade Carats Ore Classification (tonnes) (ct per tonne) (Million carats)
Probable Ore Reserves 11.07 0.26 2.89
Indicatedonly use personal For & Inferred 19.02 0.23 4.31 Mineral Resources TOTAL 30.09 0.24 7.20 Merlin cut & polished diamonds, 2011 *Modifying factors for borehole mining have not been applied to this Ore Reserve estimate 11 Probable Indicated Inferred Total (Mt) Grade Carats Carats Ore Reserve Grade (c/t) Mineral Mineral (c/t) (Mcts) (Mcts) (Mt) Resource Resource (Mt) (Mt) Southern Cluster Southern Cluster PalSac2 8.1 0.30 2.41 PalSac2 6.59 6.59 0.30 1.96 Launfal2 1.58 1.70 3.28 0.25 0.82 Central Cluster Excalibur1 0.46 0.31 0.77 0.34 0.26 Gawain2 0.5 0.39 0.21 Tristram2 0.74 0.74 0.06 0.04 Ywain2 0.1 0.81 0.05
Central Cluster Northern Cluster Gawain2 0.53 0.61 1.14 0.39 0.45 Kaye2 0.9 0.12 0.10 Ywain2 0.02 0.10 0.12 0.81 0.09 Ector1 1.5 0.07 0.11 Northern Cluster TOTAL 11.1 0.26 2.89 Gareth1 0.13 0.14 0.27 0.22 0.06 2 The above Ore Reserves are additional to the Mineral Resources and are estimated on Kaye 2.14 2.14 0.12 0.26 open pit and underground mining assumptions. A Reserve for alternative mining For personal use only use personal For methods has not yet been estimated. Ector1 3.47 3.47 0.07 0.26
Bedevere2 0.37 0.14 0.50 0.21 0.11 1Resource grade based on previous mining operation recovery using a +0.95 mm slotted bottom screen and a +0.95mm cut-off.
2Resource grade based on bulk sample test work using a +0.8 TOTAL 3.09 15.93 19.02 0.24 4.31 mm slotted bottom screen and a +0.95mm cut-off. 12 Depth of Kimberlite Pipes and Total carats for each Reserve classification shown on Indicated Known Mineralisation chart (Mct) at Merlin Inferred
Pipe Total Carats (Mct) 0.21 0.21 0.24 Gawain 0.66Mct 0.05 0.01 0.08 Ywain 0.14Mct 2.41 1.96 PalSac 4.37Mct 0.11 0.26 Ector 0.37Mct 0.1 0.26 Kaye 0.36Mct 0.16 0.10 Excalibur 0.26Mct 0.40 0.43 Launfal 0.82Mct 0.03 0.03 Gareth 0.06Mct 0.08 0.03 Bedevere 0.11Mct 0.04
Tristram 0.04Mct For personal use only use personal For 0 100 200 300 400 500 600 700 800 900 1000 Depth Below Each Pit Base (metres)
2.20Mct 2.36Mct 2.64Mct 13 . Merlin Diamonds Limited is using borehole mining as a means to optimise the economics of ore extraction at Merlin.
. Borehole mining involves the use of high pressure water jets to cut and break rock formations in a drill hole with the resultant slurry being pumped to the surface.
. Borehole mining can be undertaken to a depth of at least 500 metres.
• Merlin Diamonds Limited is working with Kinley Exploration, a US Company with an established operating history in relation to borehole mining including undertaking work at Diavik (Rio Tinto)
and Ekati (BHP) Diamond Mines (where Kinley were getting good lift at 600metres depth). For personal use only use personal For
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. The first pilot borehole is currently being drilled at Ywain pit with production from this hole commencing at the start of October. The drill rig is set up on a floating pontoon on the water surface of the submerged Ywain pit.
. A borehole mining operation incorporating Gwain, Ywain, Excalibur and Palsac to 200 meters could have a potential carat population of 3.13 million carats. The opportunity exists to expand the borehole mining operation by incorporating other pipes at Merlin, or
extensions to Gawain, Ywain, Excalibur and/or Palsac. For personal use only use personal For
15 . Borehole mining is a proven technique for diamond extraction from Kimberlite pipes to depth, and has being successfully used by major diamond mines including Ekati (BHP) and Diavik (Rio Tinto)
. Borehole mining removes the need for pit cut back and associated waste removal
. No requirement for significant mining fleet, comprising excavators, haul trucks, loaders and other associated capital equipment
. No requirement for drill and blast
. Reduction in labour and capital equipment, results in reduced infrastructure requirements, related support staff, and working capital required for consumables such as diesel fuel, spare parts etc.
. The above factors result in making borehole mining an economically attractive alternative to conventional open pit mining with lower capital risk.
. As bore-hole mining does not require significant waste removal, development of ROM pads, large diesel fuel farms and explosives; there is a reduced environmental footprint compared to conventional mining, thus reducing rehabilitation costs and mine closure planning
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Merlin Accommodation Camp; Kitchen and Administration Facilities For personal use only use personal For
Merlin Mine Private Airstrip 18 Rio Tinto’s 1997 feasibility study on the Merlin Diamond Project made the following comments in regard to: › Discovering more small pipes: “Small pipes, such as Ywain, may be fairly common in the field,…..” Merlin has commenced onsite exploration of the Mine Lease using a ground EM34 geophysical exploration tool. New targets already identified, previous data too widely spaced to discover all potenial Ywain/Gwain size pipes. Next stage to use ground gravity geophysical tool.
EM34 target
Gravity target For personal use only use personal For
19 Rio Tinto’s 1997 feasibility study on the Merlin Diamond Project also made the following comments in regard to:
› Discovering more large pipes: “There is some potential for significantly larger pipes,….”
› Discovering new kimberlite fields: “Within 100km radius of Merlin, there are seven areas in which both indicators, microdiamonds and in some instances commercial sized diamonds, have been recorded. A small kimberlite pipe was found at one location, in a structural position similar to the pipes at Merlin. This evidence indicates that the Merlin field is part of a broader kimberlite province.” and.. “ These factors (cretaceous cover, poor preservation of indicator minerals) while inhibiting the exploration effort, generally increase the possibility of other kimberlite fields and larger pipes to be present in the province.” Evidence of a new kimberlite field is highlighted in Legend International’s ground such as
the Abner Range Project located 50km to the west of Merlin. For personal use only use personal For
20 Lancelot / Tintagel – High priority target area . Evidence of commercially sized diamonds, microdiamonds and indicator minerals strongly suggest presence of a second diamond field . Trench mapping and heavy mineral sampling has led to the identification of indicator mineral bearing eluvial material, further trenching and sampling has been completed with samples being processed
Arnhem Land – Under explored but highly prospective for diamond bearing Kimberlites . Merlin Diamonds has a contractual right to obtain an 80% interest in 2 tenements in the prospective western region of Arnhem Land. These tenements are at the application stage
Seppelt Pipes, North Kimberly – Mining lease
For personal use only use personal For continues to retain commercial potential . Merlin Diamonds has identified an Inferred Resource of 1.57Mcts within the Ashmore, Seppelt 1 and 2 Kimberlite pipes, with Seppelt 2 having an exceptional grade of over 180cpht 21
. Represents a significant and unique opportunity to explore for a large volume, high value, alluvial diamond deposit . Two granted tenements cover an area of approx. 1,150km², approx. 100km north of Merlin . Only major alluvial concentration at a low point, in this catchment, known to host significant diamond deposits . Alluvial gravels drain through the MacArthur River, deriving material from the catchment that contains the Merlin kimberlite field and the Abner Range . The work program began in Sep 2011, following approval of a Mine Management Plan . By the Dec 2011 quarter, Merlin Diamonds had extracted 5000 tonnes of alluvial material from 5 different work areas . 3000 tonnes of material from 3 pits have been processed at the Merlin Mine . 22 diamonds weighing a total of 1.09cts were recovered and
diamond quality to be assessed upon completion of processing For personal use only use personal For . Results to date confirm that the Borroloola Alluvial Gravels host a macro-diamond population
22 22 Mr. Joseph Gutnick Mr. Craig Michael Mr. Henry Herzog Dr. David Tyrwhitt Executive Chairman and Chief Executive Director Non-Executive Director Non-Executive Director Executive Officer
A leading mining industry Mr. Michael has extensive Mr. Herzog has over 40 years Dr Tyrwhitt has been involved in entrepreneur, Mr Gutnick is the experience as a geology of corporate experience and the diamond exploration industry President/ Chairman and CEO of the professional in the mining and has served in various since 1959 when he was first resources industry. He is employed by De Beers in Tanzania Gutnick Network of Companies. He positions as President, Vice was responsible for overseeing the currently Executive Director of as a diamond exploration President, and Director of a discovery of the Plutonic 11 million the Gutnick Network of geologist. He was the CEO and ounce gold deposit and the Companies including Executive number of listed public Managing Director of Ashton discovery, development and Director of Merlin Diamonds Ltd, companies in the mining and Mining Ltd from 1988 to 1991 operation of the world class Aurum, Inc. and Chief Executive exploration sector, both in where he was involved in the Bronzewing and Jundee gold mines Officer of Paradise Phosphate Australia and the United exploration and feasibility of in Australia. Mr Gutnick is a Fellow Limited. His previous work was States. diamond deposits in Australia of the Australian Institute of Mining with Oxiana Ltd in South East (including Merlin and Argyle), and Metallurgy, a Fellow of the AIM, Asia and Sons of Gwalia in the Scandinavia and South East
For personal use only use personal For a Member of the Institute of goldfields of Western Australia. Kalimantan Indonesia. Since Company Directors in Australia, and Mr Michael is a member of the leaving Ashton, he has been a former Director of the World Gold Australian Institute of Mining involved in diamond exploration Council. He was awarded the and Metallurgy and a Member of in Canada, China and Australia. Dr prestigious Diggers award at the the Institute of Company Tyrwhitt was chairman of JORC 1997 Diggers and Dealers Industry Directors in Australia. and whilst there introduced the Awards. diamond reporting code. 23