+ and what will be the returns? +

NDC--Namakwa Diamond Co.

1. Capital: about 85 mill shares and about 54.5 mill options, of which about 53 mill. are unlisted Sept. 30, 2006 options at 20 cents.

These options could have taken part in a cash issue, provided they were converted into shares first. See Announcement of 17 Dec. 2003. THe current cash issue could raise up to 17 mill additional shares.

2. The Black empowerment arrangement. Current cash value of project is estimated at $A18.4 mill. The entity NDCM was 100% owned by NDC. This changes to 64%, NAMF (A resource fund) will hold 10% and ZAICO ( Blacks) will hold 26%.

That arrangement will water down NDC's profits. There was a clause where the first R88 mill spare cash flow will be paid to NDC and NAMF but in the final version, I didn't see it.

This came about as Zaico was to originally pay $A6.2 mill to get their 26% stake; however, they didn't have the money and NAMF had to step in.

3. Data, Sept 30 quarter: Spent $1.198 mill and says it could spent $350,000 in the Dec. quarter. Not likely, I think. Cash was only 76,000 but the infusion of NAMF 's funds could see the start of stage 1 mining.

Comment: They did say previously that they needed 10 cpht (carats per 100 tonnes) to be economic. Stage 1 envisages the better strata and this embodies some 2.2 mill. tonnes with 18.7 cpht.

"Financial studies have shown that the initial Stage 1 operations are capable of producing 80,000 carats
per annum over a 5-year mine life, generating A$60 million in revenue and A$30 million in surplus pretax free cash flow".

Comment: I believe this to be at the top end of estimates.

4. Financial. It will be some time before divs are paid out. They have $4 mill. tax losses and that will possibly grow to say $6 mill on 30 June, not a large amount and they could pay some tax in the year to June 2005, depending on when they start.

$A 30 mill in surplus cash flow pre-tax, sounds a lot but it is over 5 years. If one paid tax then perhaps $4.5 mill. profit will be left and NDC would get 67% or $A3 mill . By then the number of shares wil have grown to say 115 mill or more and in Sept 2006, some 55 mill + options will convert to shares.

I believe that stage 1 needs to be upgraded to twice the amount before investment becomes attractive. They are talking about stage 2 but this also requires further investment and thus will lock out dividends.

Ideally, one could look at the new Sept. 30, 2006 options, but these remain unlisted till NDC says they can be listed.

Gerry
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