Namibian year-end results

Financial results for the fourth quarter and full year 199 results from the company’s Namibian ocean diamond mining operations, were as follows:

Twelve-month highlights

earnings of $17.1-million (U.S.), 43 U.S. cents per share, on revenues of

$42.8-million;

diamond production of 273 700 carats;

average diamond price of $151 (U.S.) per carat;

acquisition of Ocean Diamond Mining Holdings Ltd. (ODM), Africa’s third

largest ocean diamond producer;

expansion of diamond resources to 3.67 million carats, including 1.04

million carats from the ODM acquisition; and

a $25-million (U.S.) project loan for the development of the next-generation diamond mining system, Nam II.

Earnings in 1999 increased to $17.1-million (U.S.), 43 U.S. cents per share,

compared with $3.1-million (U.S.), eight U.S. cents per share, for the seven months ended Dec. 31, 1998. Revenues from the sale of 283,000 carats

(1998: 92,100 carats) rose to $42.8-million (U.S.) against $13-million (U.S.) a year

earlier. This included 12,000 carats held by ODM at the date of the

acquisition. The company’s average realized diamond price for the year

increased by 7 per cent to $151 (U.S.) per carat, against $141 (U.S.) in 1998. Operating cash

flow for the year was $22.7-million (U.S.) (1998: $282,000 (U.S.)). At year-end the

company’s cash position was $20-million (U.S.) (1998: $3.9-million (U.S.)) and

shareholders’ equity was $91.7-million (U.S.) (1998: $46.2-million (U.S.)).

Diamond production for the year was 273,700 carats (1998: 100,100

carats), comprising 256,500 carats from Namco’s operations and 17,200 carats

from two months of ODM’s operations. Diamond stocks at year-end were 33,200

carats (1998: 30,500 carats).

For the fourth quarter of 1999, diamond sales of 53,700 carats generated

revenues of $8.4-million (U.S.), for an average carat value of $156 (U.S.). Earnings

were $1.1-million (U.S.), three U.S. cents per share. Fourth quarter earnings reflect lower

diamond sales, due to reduced diamond production in the third quarter when MV

Kovambo had a two months port call. Operating cash flow was $2.1-million (U.S.).

Diamond production for the fourth quarter, including the ODM contribution, was

65,900 carats.

“Nineteen ninety-nine was a year of outstanding growth,” said Namco’s chairman and chief

executive officer, Alastair Holberton. “Our NamSSol produced more than any

other single diamond mining system operating off the African coast. Our

acquisition of ODM significantly increased our concessions, diamond resources

and future production capability.”

During the quarter the company closed its general offer for ODM with

ownership of 92.5 per cent of ODM shares. The $60-million (U.S.) acquisition was financed through a mix of loan finance, the issue of new equity and the company’s

cash flow. A $25-million (U.S.) loan was secured from Investec Bank (Mauritius) Ltd.

In addition, approximately five million shares totalling $18.8-million (U.S.) were

issued. The company financed the remaining $16-million (U.S.) from its own cash

resources. A further 2.7 million shares were issued to raise $11-million (U.S.) for

working capital purposes in an international private placement.

Namco’s management team has already improved operating performance of the

ODM vessels. Diamond production increased by more than 30 per cent as a result of the

introduction of effective spares management, thereby reducing operational

downtime, and by dedicating all three vessels to mining operations. The

company plans to invest $4-million (U.S.) on a number of technical improvements in

2000 to further boost production levels.

Financing for the company’s second generation marine mining system, Nam II,

was secured during the quarter. The $25-million (U.S.) project loan facility from

HSBC Equator Bank plc (HSBC) and Nedbank Africa, a division of Nedcor Bank

Ltd., (Nedcor), covers the cost of Nam II, a 100 tons per hour DMS processing

plant, additional vessel equipment, commissioning costs and financing fees. At

year-end $6.1-million (U.S.) had been drawn down.

Construction of Nam II started in Cape Town, South Africa. A total of 95 per cent of all

components has been delivered. Assembly of the mainframe, tracks and suction

boom are well advanced and land testing of the machine is scheduled for May,

2000. Construction of the processing plant is 20 per cent complete. Modifications on

the 8,000-ton former British Royal Navy vessel renamed MV Ya Toivo, chartered

for five years, commenced in Gdansk, Poland, in the fourth quarter. Sponsons

are currently being installed on the vessel to increase its width by six

metres. The project is on target to start commissioning in the third quarter

of 2000.

The company plans to progressively increase its diamond production by 45 per cent

to 400,000 carats in 2000. This should be achieved through the contribution

from Nam II in the second half of the year, and the phased upgrade of ODM’s

mining vessels. The company also plans to increase its diamond resources

through a major exploration programme using a new exploration tool developed

with German engineering group Wirth on-board chartered vessel MV Zacharias.

“Our strategy in 2000 is to focus on continued technological innovation,

on improving the productivity of our operations and on expanding our current

diamond resources,” said Mr. Holberton.

CONSOLIDATED STATEMENT OF OPERATIONS

(U.S. dollars)

12mo ended 7mo ended

12/31/99 12/31/98

Income

Revenue from

diamond sales $ 42,808 $ 12,984

Interest received 632 111

Gain on

marketable

securities 354 128

——— ———

43,794 13,223

——— ———

Expenses

Direct production

costs 13,717 4,351

Royalty payment 3,732 1,264

Marketing costs 866 324

General office

costs, including

salaries 3,762 1,980

Writedown of

marketable

securities – 350

Amortization

— capital assets 3,665 1,807

Good will 256 7

Deferred costs 60 –

Interest payable 598 32

——— ———

(26,656) (10,115)

——— ———

Earnings (loss)

for the period $ 17,138 $ 3,108

========= =========

Dividend (two

cents per share) (758) –

Earnings (loss)

per share for

the period 43 cents 8 cents

WARNING: The company relies upon litigation protection for “forward-looking” statements.