de beers farms into caspians congo diamond leases , page-2

de beers farms into caspians congo diamond leases 10 November 2005 Australian Stock Exchange Release DE BEERS FARMS INTO CASPIAN’S CONGO DIAMOND LEASES Caspian Oil & Gas Limited is pleased to announce that De Beers has farmed into Caspian’s ten diamond exploration licences in the Democratic Republic of Congo (“DRC”). The farmout by Caspian is in line with its announced intention of concentrating on its oil activities and farming out or selling non-core assets. It provides Caspian with a carried equity until a decision to mine based on a feasibility study, at which time Caspian can elect to contribute to a development or dilute its interest. The diamond exploration expertise of De Beers will be invaluable in assessing these highly prospective projects. Caspian’s licences cover approximately 1,040sq km and are located in the Tshikapa Diamond Field in south western DRC, near the Angola border. The Tshikapa field is one of the largest alluvial diamond provinces in the world, but the licences were selected by Caspian for their potential to host hard rock diamond occurrences. An overview on the field is attached. The main commercial terms of the agreement with De Beers are summarised below. • De Beers can earn a 70% interest in the projects by completing a pre-feasibility study on at least one of the licence areas. Caspian would then be left with an effective equity of 28.5% after allowing for the 5% non-contributing interest reserved for the DRC government in a project company at the mining stage. • De Beers will manage the project during the exploration, development and production stages and its associated companies will market any diamonds produced. • De Beers will carry all expenditure until a decision to commence a mining operation is made, based on a feasibility study. • A phased exploration and development program will be adopted: 1. Soil and stream sampling, geophysics and drilling, taking up to three years to complete; 2. Bulk sampling of kimberlites (if discovered), taking up to a further year; 3. Pre-feasibility studies, taking up to a further two years; and 4. A full feasibility study.
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• If a decision to establish a mining operation is made after completion of a feasibility study, Caspian can participate in funding the development (to the extent external project funding is not available) to retain its 28.5% equity or elect not to fund, in which case: o if the projected mine turnover is less than US$40 million per annum, De Beers will be entitled to an additional 50% of the profits from mining in consideration for funding the entire project; or o if the projected mine turnover is more than US$40 million per annum, Caspian can elect to dilute to a 5% non-contributing interest. • De Beers can at any stage require the establishment of a company to acquire the licences and can take equity in that company. • De Beers may withdraw from the farmin arrangement at any stage prior to a decision to mine and if so, it shall return its equity to Caspian. De Beers can also exclude specific licences from the joint venture. • De Beers will be entitled to recover its exploration and production costs from revenue from a mining operation. The Company is currently arranging for the name on the licences to be altered from Afminex Ltd to Caspian Oil & Gas Ltd to reflect the name change made at the 2004 annual general meeting. De Beers has the right to withdraw from the farmin if De Beers cannot commence work on the licence areas within 120 days pending registration of the name change. Colin Carson Director
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Background on the Tshikapa Diamond Field The Tshikapa diamond field forms a part of the Congo-Angola diamond province, and to 1961 had produced 23.8Mcts of gem and near-gem quality alluvial diamonds. Caspian has a 100% interest in ten granted licences covering approximately 1,040sq km, over areas where diamonds or kimberlitic indicator minerals have been recovered. The geology of the region comprises Archaean granites, gneiss and gabbro and Proterozoic-Pan African metasediments of the Congo Craton, unconformably blanketed by the late Cretaceous conglomerates. Kimberlite pipes, emplaced during the early Cretaceous, were eroded during the late Cretaceous and diamonds deposited in fluvial and lake sediments. Rejuvenation has seen the diamonds reconcentrated in the current river systems and associated terraces. Forminière, which controlled the entire Tshikapa field until 1961, noted that in some areas diamond morphology and associated kimberlite indicator minerals highlighted the possibility that some diamonds were derived from local kimberlites. Caspian has targeted these locations and others where diamonds have been recovered from conglomerates in the Cretaceous sediments. The prospectivity of the region for diamonds is extremely high and has been emphasised by the rush by foreign companies to acquire concessions following the introduction of a new mining code in 2003. Tshikapa diamond field Location of the Tshikapa diamond field in DRC The Tshikapa Diamond Field forms a part of the Congo–Angola diamond province, which extends some 1,100 km from the Bakwanga fields in northeast DRC to the Cuiene fields in south west Angola. Along this trend are four major and three smaller diamond fields each containing numerous clusters of diamondiferous kimberlites and extensive alluvial diamond fields.
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Over 638 kimberlites have been identified in the Angola section of this belt and over 50% are estimated to contain diamonds (New Millennium, 2004). Annual production from the province is estimated to be about 25.8M carats of gem and industrial diamonds valued at US$1.5B, ranking it as one of the top three provinces in the world for both production and value. The province contains five of the ten largest known economic kimberlites, but remains one of the least explored. The geology of the Kasai region comprises Archaean granites, gneiss and gabbro and Proterozoic-Pan African metasediments of the Congo Craton, unconformably blanketed by the Early Cretaceous Laulaba Formation, Late Cretaceous Kwango Conglomerates and Pleistocene Kalahari sands. There have been two, possibly three, phases of Recent uplift, which have produced laterally extensive river terraces, flood plains and incised river channels. Kimberlite pipes in the Congo-Angolan diamond province were emplaced during the Early Cretaceous along a major northeast-trending corridor extending across Angola into DRC and are found on or close to major structures visible on Landsat images. The diamond pipes were eroded during the Late Cretaceous and the diamonds concentrated in the basal conglomeratic units of the Kwango Conglomerate. This formation acts as an intermediate source of diamonds further concentrated in Recent drainages and associated river flats and terraces. Production from the Tshikapa Diamond Field has been from active river channels, alluvium and terraces along rivers, with some production from the base of the Kwango Conglomerate. Prior to 1961, Forminière held the entire Tshikapa field and extremely good production records were kept. After Independence artisanal production dominated and records became unreliable. Production from the field commenced in 1912 and to 1961 approximately 23.8Mcts of diamonds comprising 65% gem quality had been produced (Bardet, 1974). Official production for the period 1961 to 1972 is 3.1Mcts. Systematic testing of the conglomerates at the base of the flood plains and terraces was undertaken by Forminière on lines 100–160m apart by manual trenching or shaft sinking to bedrock where 0.5 to 1.0m3 of wash was collected. About 60% of samples contained diamonds (Bardet, 1974). Some samples returned spectacular results, particularly when potholes were intersected. Grades of 0.5-1.5ct/m3 were relatively common, with higher grade deposits to 5ct/m3. During exploration and mining Forminière geologists noted the localized presence of diamond indicator minerals in heavy mineral concentrates. The indicator minerals-mainly pyrope garnet and magnesian-rich ilmenite-and the morphology of associated diamonds, suggest the possibility that some diamonds were derived from kimberlites in the immediate vicinity. It is not clear if kimberlites have been found at these locations or just the indicator minerals. However, a report by Basilica (2001), an unlisted exploration company, indicated their geologists visited a site where artisans were recovering diamonds from kimberlite. The information in this report that relates to exploration results is based on information compiled by Mr Mark Calderwood, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Calderwood is a consultant to the Company. Mr Calderwood 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 a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Calderwood consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.