musings, page-14

My 20 cents worth:

It is sometimes better to thing of the marginal contribution from processing a tonne of ore. The marginal contribution represent the revenue per tonne of ore less the processing costs. We know that Processing costs in June, 2007 were A$12.50. We also know that KIM have a target cost of A$11.00 to A$12.50 per tonne.

Therefore, KIM's contribution from processing ore represents the excess of reveue per tonne of ore above these costs multiplied by the volume processed. There is significant difference in profit contributions coming from E9 East Lobe, E9 West Lobe and E4.

Slide 10 - KIM's 06/02/07 Presentation:

- Target Processing - 8.8 Mtons

- Target Costs - 11.00 to 12.50 $A/ton

June 07 Report:

- Actual Operating Costs now A$12.50 per tonne

- June production 544,000 tonnes = 6,528,000 pa

Resource Grades:

- 2007 Actual = 7.9 carats per hundred tonnes. Received A$171 per carat = A$13.50 per tonne

Marginal Contribution:

2007 Actual = A$13.50 less A$12.50 = A$1.00 per tonne

Resource Grades Marginal Contribution:

E9 - West Lobe - .061 x US$200/ct / 0.85 = A$14.35 per tonne

E9 - east Lobe - .046 x US$370/ct / 0.85 = A$20.02 per tonne

Marginal Contribution - take target of between A$11.00 and A$12.50 to obtain marginal contribution"
E9WL - MC = A$1.85 to A$3.35 per tonne;
E9EL - MC = A$9.02 to A$7.52 per tonne;

E4- Resource Grade

Currently recovering 9.7 carats per hundred tonne;
Value of Diamonds - I have US$132 per carat

Value of E4 Resource = .097 x 132 / 0.85 = A$15.06 per tonne;

Marginal Contribution = A$2.56 to A$4.06 per tonne

Therefore, KIM makes :
E9EL - A$7.52 to A$9.02 per tonne
E9WL - A$1.85 to $3.85 per tonne
E4 - A$2.56 to A$4.06 per tonne

The higher figure relies on KIM achieving an operating cost of $11.00 per tonne;

To me, the above figures highlight the importance of exploration. If KIM find any pipes with a higher value per tonne than the existing pipes then they could replace the processing of lower value ore with this higher value ore.

Similairly, higlights the importance of marketing. If they can increase the $ they receive for their diamonds.

Also highlights the leverage KIM has to any increase in world diamond prices.

Regards

SP