Diamond Fields receives Marshall Fork scoping study

Diamond Fields International has received positive results of an independent scoping study

undertaken by AGRA Simons, of Vancouver, B.C., for an initial sea

diamond mining operation on Diamond Fields’ 100-per-cent owned Marshall Fork feature

near Luderitz, Namibia. The Marshall Fork feature is one of four known

diamond-bearing features on Diamond Fields’ primary concessions totalling 660

square kilometres near Luderitz, Namibia.

Diamond Fields retained AGRA Simons to prepare a scoping study to develop

capital and operating costs parameters for the recovery of diamonds from the

Marshall Fork feature. AGRA Simons estimates that diamond mining at Marshall

Fork could commence within one year of Diamond Fields’ decision to proceed

with an operation as outlined in its study. Diamond Fields plans to proceed

to a full feasibility study. Diamond Fields’ management is very encouraged by

the findings of the study as they clearly support the company’s belief that

the Marshall Fork feature has the potential to host a highly profitable sea

diamond mining operation.

The scoping study is based on an independent resource estimate completed

by MRDI, a division of AGRA Simons. MRDI’s estimate showed that Diamond

Fields’ Marshall Fork main feature contains an indicated resource of 364,900

carats and an inferred resource of 549,700 carats totalling 914,600 carats over

an area of one million square metres.

Scoping study financial analysis

The AGRA Simons scoping study estimates capital and operating costs of

$39-million (U.S.) over a two-year period. Net revenue based on the indicated

resource estimate is $52.1-million (U.S.). Net revenue is

based on an average sales price of $150 (U.S.) per carat for the 95 per cent+ gem quality

diamonds typically found on the property, less a 10-per-cent royalty payable to the

Namibian government prior to export for sale. Over 10,000 carats of diamonds

recovered from bulk sampling operations were sold in 1999 for an average price

in excess of $160 (U.S.) per carat. Net revenues increase to $86.0-million (U.S.) for

the base case plus recovery of 50 per cent of the inferred resource and

to $119.8-million (U.S.) for the base case plus recovery of 100 per cent of the inferred

resource. There would be no change to the capital and operating

costs in recovering any or all of the inferred resources. The pretax project

rate of return exceeds 100 per cent on the base case.

Financial Analysis Summary

(millions of U.S. dollars)

Net revenues and project cash flows

include 10% royalty payment.)

Capital Operating Net Pretax

Expen- Expen- Revenues Project

diture diture Cash

Flow

Base case

$10.8 $27.7 $52.1 $13.7

Case 1 (50% of inferred)

10.8 27.7 86.0 45.5

Case 2 (100% of inferred)

10.8 27.7 119.8 81.4

Considering the indicated resource only, the scoping study base case

projects that the mine would produce at an initial rate of over 250,000 carats

per year. With the estimated productivity of the mining method, an average

sediment thickness of only 1.3 metres and depending upon the recovery of all

or a portion of the inferred resources, the initial production rates could be

significantly higher. Namibian Minerals successfully

mines diamonds from its concession that adjoins Marshall Fork on the south

with an average sediment thickness in excess of 3.0 metres. Namco’s production

for 1999 was projected to be approximately 260,000 carats on the adjoining

feature.

Mining technology

The scoping study estimates (with an accuracy of +/- 30 per cent to 35 per cent) are based

on proposed mining technology developed by Seacore Ltd. of Gweek, Cornwall,

U.K., an established marine drilling and civil engineering company, and 50 per cent

owned by AGRA Simons. The technology proposed in the scoping study is a

horizontal mining system using an articulated, slewing mining arm and pump

assembly attached at the base of a rigid, heave compensated slurry pipe. This

system, capable of excavation at a rate of over 4,000 cubic metres per day,

would deliver diamondiferous gravels to a nominal 100 tonne-per-hour DMS plant

aboard a support vessel. Deployment and recovery of the mining system via a

through-the-hull moon pool would be performed by standard marine drill

recovery equipment. The proposed mining system is based on proven technology

components and would also be suitable to conduct premining development of

Diamond Fields’ other diamondiferous features off Luderitz. Further analysis

of the suitability of the proposed system would be undertaken as part of a

full feasibility study.

The company’s 100-per-cent-owned Marshall Fork feature is currently held under an

exclusive prospecting licence. Commencement of mining at Marshall Fork is

subject to the conversion of the relevant portion of this licence to a mining licence.

With total resource estimates of over two million carats, there is strong

growth potential beyond Marshall Fork. Phase 3 reconnaissance sampling work

has just been completed with a primary focus on the Boat Bay gravel feature.

New resource estimates from this work will be released upon receipt of the

final data from DeBeers Marine and review by Diamond Fields.

DFI Resource Estimates

(February of 2000)

Area Indicated Inferred Total

Marshall

Fork 364,900 549,700 914,600

Diaz Reef

features 524,200 81,100 605,300

Staple

Basin area

(Boat Bay) 150,700 73,800 224,500

Shallow

waters – 276,000 276,000

Totals 1,039,800 980,600 2,020,400