NORTH AUSTRALIAN DIAMONDS LTD. Annual General Meeting The Sebel Albert Park, Melbourne - 25 November 2010

Transcription

1 NORTH AUSTRALIAN DIAMONDS LTD Annual General Meeting The Sebel Albert Park, Melbourne - 25 November

2 DISCLAIMER Forward Looking Statement This presentation contains forward looking statements. Such forward looking statements may include without limitation (1) estimates of future earnings, the sensitivity of such earnings to diamond values and foreign exchange rate movements (2) estimates of future diamond production (3) estimates of future cash costs (4) estimates of future cash flow, the sensitivity of such flows to diamond values and foreign exchange rate movements (5) statements regarding, future debt payments (6) estimates of future capital expenditure (7) estimates of reserves, resources and statements regarding future exploration results. Where the Company expresses or implies an expectation or belief as to future events or results such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward looking statements. Such risks include but are not limited to diamond values, currency fluctuations, increased production costs and variances in grades or recovery rates from those assumed in mining plans, as well as political and operational risks in the countries and states in which the Company operates or sells product and governmental regulation and judicial outcomes. The Company does not undertake any obligation to release publicly any revisions to any forward looking statement to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, expect as may be required under applicable securities laws. Competent Persons Statement The information in the presentation that relates to exploration results is based on information complied by Mr Tom Reddicliffe who is a full time employee of the company and a Fellow of the AUSIMM. Mr Reddicliffe 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 Australian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Tom Reddicliffe consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 2

3 CORPORATE STRUCTURE Incorporated in ,334,241,368 ordinary fully paid shares Share Price $0.038 (as of November 24, 2010) ASX-Listed (NAD) with a market capital of $88million On market takeover bid commenced May 2009 (offer 1.2c). Completed August 2009 (offer 1.5c) A significant restructure of the NADL board with mining entrepreneur Joseph Gutnick becoming Executive Chairman in 2008 Legend International Holdings majority shareholder with over 50% $13.66M raised via a share placement in December 2009 with the majority of the shares placed to a large US fund Manager Following the completion of the SPP in March 2010 the company issued 56,680,086 fully paid ordinary shares raising $2,607,284 NADL is on track to become a long term, high quality diamond production company 3

4 SHARE INFORMATION Quality Shareholder Base 24 November 2010 Legend International Holdings Inc 50.4% Pan Australian Nominees Pty Ltd 5.43% CS Fourth Nominees Pty Ltd 2.93% HSBC Custody Nominees Ltd 2.49% 4

5 BOARD OF DIRECTORS Mr. Joseph Gutnick Executive Chairman Mr. Thomas Reddicliffe Chief Executive Officer Mr. Craig Michael Executive Director Mr. Henry Herzog Non-Executive Director Mr Gutnick, a leading mining entrepreneur, is the President and CEO of numerous listed public companies in Australia and North America. Mr Gutnick oversaw the discovery of the Plutonic gold deposit, and the discovery, development and operation of the world class Bronzewing and Jundee gold mines in Australia. He received the Diggers award at the 1997 Diggers and Dealers Industry Awards and is a former Director of the World Gold Council. Formerly Australian Exploration Manager of Ashton Mining Ltd. Mr Reddicliffe discovered the Merlin Diamond Mine in He has worked at both the Ellendale and Argyle discoveries and has some 30 years of experience in the industry. Mr. Michael has over 10 years experience as a geology professional in the mining and resources industry. He is currently a Director of NADL, Top End Uranium, Aurum, Inc, Quantum Resources, ProIndia International, Inc. and Executive General Manager of Legend International Holdings, Inc. His previous work was with Oxiana Ltd, in South East Asia and Australia. Mr. Herzog has over 40 years of corporate experience and has served in various positions as President, Vice President, and Director of a number of listed public companies in the mining and exploration sector, both in Australia and the United States. 5

6 PROJECT AREAS We are developing our flagship Merlin Diamond Mine Project in the Northern Territory and are engaged in extensive exploration for additional sources of diamonds in and around Merlin. We are also active in our other tenement holdings associated with our North Kimberley, Yambarra and Arnhem Land projects. A long term commitment to diamonds and Northern Australia Perth Exploration Office North Australian Craton North Kimberley 1.5Mcts Ellendale Argyle Yambarra Melbourne Head Office Arnhem Land Merlin 7.2Mcts Approx. 40,000km² held under title 6

7 PROJECT TENEMENTS ARAFURA SEA Borroloola Darwin Arnhem Land Cape Scott Yambarra Tintagel Prospect Lancelot Prospect McArthur South Granted Tenements Tenement Applications MLN1154 Granted Tenements Tenement Applications 7

8 PROJECT HIGHLIGHTS A total of 10,600 carats have been recovered during the pre-feasibility production trials The rough, uncut, unpolished value of the diamonds recovered during the trials is likely to be well in excess of $US200 a carat A ct gem quality diamond, the largest recovered by NADL since acquiring the Merlin project, was recovered from Kaye pipe in March this year Largest rough diamond ever found in Australia, a carat white gem quality stone, was recovered from Merlin during Rio Tinto s ownership and valued at approximately US$525,000 in Current market conditions dictate that a stone of similar size and quality would achieve 2 to 3 times that value. From the diamonds recovered in the trial production; 24% were greater than 1 carat and 80% were high quality, high value rough gems Resource definition drilling has increased the total Merlin JORC compliant combined indicated and inferred diamond resource to 7.2 million carats Merlin total resources has been increased to 30Mt, which is sufficient to potentially underpin a long term mining operation Jungiila Bunajina carats 7.63ct diamond recovered in current pre-production trials 8

9 PAST PRODUCTION HISTORY ASHTON MINING 1991 Merlin field discovery Evaluation testing programmes Feasibility study Late 1998 Open pit trial mining commences (Excalibur, Palomides-Sacramore) RIO TINTO 2000 Rio Tinto acquire the mine through the acquisition of Ashton Mining 507,000 carats recovered 2.4 million tonnes ore and 507,000 carats recovered 5 year operation (100,000cts/annum) Issues: no JORC mining reserve, limited resource drilling, shallow open-pit resources almost exhausted Closed 2003 due to the scale of Merlin s operation being inconsistent with Rio s focus on large scale mining operations NADL 2004 North Australian Diamonds acquire Merlin Mining Lease The Company recognises the significant potential in operating the mine profitably in a lower capacity and operating cost environment 9

10 PRE-FEASIBILITY PRODUCTION TRIALS Pre-feasibility Production Trials Completed Diamond parcel of 10,600cts produced 1,391 +1ct diamonds (2,590cts) recovered Largest diamond 24.12cts, gem quality, recovered from Kaye pipe HPGR and optical sorter trials successful Grade for Gawain pipe confirmed at 41cpht Diamonds recovered from the pre-production trials have been prepared for independent valuation and value adding studies Pre-production trials highlight the potential to proceed to a commercial mining operation 7.41ct and 2.97ct diamonds recovered from Kaye in ct Yellow diamond recovered from Kaye 2010 Super Whites Diamonds from recent Pre-production Trials 10

11 UPDATED JORC RESOURCE The combined resource for all diamond pipes at Merlin is 30Mt for an average grade of 24cpht representing a total contained 7.2Mcts Total PalSac combined indicated and inferred JORC compliant resource is million tonnes for a contained 4.37Mcts Resource definition drilling was focused on PalSac, Launfal and Bedevere pipes, with a total of 8 diamond core holes completed for a total 3,320 metres PALSAC IS A KEY RESOURCE FOR A LONG TERM MINING PROJECT Southern Cluster Pits: Launfal, Palomides, Sacramore Excavation of Kaye Pit Processing Plant 11

12 MERLIN RESOURCE Indicated Mineral Resource Inferred Mineral Resource Total Carats 0m PALSAC PIPE Open pits Southern Cluster 80m PalSac 1 8,090,000 6,590,000 14,680,000 4,370,000 Launfal 3 1,580,000 1,700,000 3,280, ,000 Exclaibur 3 464, , , ,000 Tristram2 740, ,000 44,000 19,473,000 5,497,000 Central Cluster Gawain 2 1,100, ,000 1,680, ,000 Ywain 2 80,000 95, , ,000 1,855, ,000 Northern Cluster Gareth 3 125, , ,000 59,000 Kaye 2 873,000 2,135,000 3,008, ,000 Ector 3 1,510,000 3,470,000 4,980, , m 868m JORC Indicated Resource 8.09Mt 2.47 million Carats JORC Inferred Resource 6.59Mt 1.9 million Carats 12 Bedevere 4 365, , , ,000 8,759, ,000 Total 30,087,000 7,195, Mt 4.37 million Carats 1 Resource grade estimated using a +1DTC bottom screen cut-off (approx 0.85mm). 2 Resource grade estimated using a +1mm slotted bottom screen size. 3 Resource grade based on previous mining operation recovery. 4 Resource grade based on bulk sample test work.

13 US$ MERLIN PRICES & MARKET TREND MERLIN SALES/VALUATIONS - $US? 2011? ROUGH PRICE INDEX Past Production Evaluation Trials Year / Operation Source: De Beers Group Historic Merlin sales and recent valuations reflect general movement in rough diamond market 13

14 ,700,000 4,800,000 3,221,000 3,349, , ,250 1,099, , , ,645 98,432-20,193 55,000-19,920 17,746 Total Production Carats / Year 8,900,000 24,600,000 14,026,000 20,816,000 34,000,000 48,132,000 MERLIN POTENTIAL 60,000,000 50,000, Production 2008 Production 40,000,000 30,000,000 Merlin potentially a significant producer of top quality high value gem diamonds 20,000,000 10,000,000-14

15 Value US$/ct DIAMOND VALUE BY DEPOSIT 800 Letseng 500 Victor 400 Key Deposits with Large Diamonds or Specials High Value Deposits Low to Median Value Deposits MERLIN Ellendale AK6 Star Ekati Jwaneng Diavik Petra Fissures Koffefontein Lerala Oropa Venetia Catoca Argyle Grade CPHT

16 DIAMOND MARKET 2010 Rough Diamond Market Rough diamond prices are close to the highs of August 2008 Prospect for 2010 is that global rough diamond sales should comfortably exceed $4 billion Demand is primarily driven by China (world's second largest diamond consumer, behind the USA) and India RBC Capital Markets estimate that China will double its share of global diamond jewellery demand by 2015 to 16% Prices of polished gems are expected to remain steady or even continue to improve as demand for diamond jewellery recovers in line with a recovering global economy Sources: RBC Capital Markets, March 2010 & BMO Capital Markets, March 2010 Compounding such demand factors are waning discovery rates, with mine reserves slumping to 15 years of global supply compared to 80 years in the 1980 s and no new mines planned in the next 10 years. John Phaceas W.A Business News September 2010 Source: WWW International Diamond Consultants Ltd, Nov

17 OUTLOOK & STRATEGY FOR MERLIN NADL s core business is to maximise the value of its rough diamonds By capitalising on the quality and exclusivity of the diamonds recovered, NADL is investigating downstream value-adding strategies in addition to other branding and marketing opportunities Diamonds to be marketed as Australian under Merlin brand Highlight the unique characteristics of Merlin diamonds whiteness and clarity Value add activities should enable the Company to achieve prices well in excess of US$200 per carat With a specific focus towards higher value diamonds, NADL aims to become a prominent high quality, high value, white gem diamond producer in Australia 2.73 carat Merlin diamond, cut and polished 17

18 WAY FORWARD FOR MERLIN 2004/05 Evaluation Work 2006 Trial Production 2007/08 Resource Drilling 2009/10 Prefeasibility Production Trials 2011/12 Feasibility Study / Development 18

19 EXPLORATION PORTFOLIO Outside of Merlin NAD has an impressive and highly prospective exploration portfolio totaling 14,101km 2 ; Borroloola Alluvials Could potentially contain a significant diamond resource Approx. 100km down drainage from Merlin and subject to testing, could potentially contain a significant diamond resource Lancelot / Tintagel High priority target area Evidence of commercially sized diamonds, microdiamonds and indicator minerals strongly suggest presence of a second diamond field Recent drilling and costeaning providing additional information with respect to the likely source area for the diamonds Arnhem Land / Yambarra Under explored but highly prospective Areas have land access restrictions controlled by the ALRA, which has resulted in limited exploration NAD is making considerable progress in getting tenements granted and regards these areas as under explored and highly prospective for diamond bearing kimberlites Seppelt Pipes, North Kimberly 1.5Mct Inferred Resource An inferred resource of 1.5 million carats has been identified in two pipe clusters, including Seppelt 2, which has an exceptional grade of 200 cpht 19

20 MERLIN ORBIT EXPLORATION BORROLOOLA Alluvial diamonds Access negotiations continuing MRM TINTAGEL Follow up sampling underway Merlin Mine EXPLORATION TENEMENTS Diamonds recovered in streams LANCELOT Significant indicator anomaly Follow up sampling underway 20

21 LANCELOT Alluvial Dispersion Source? Diamonds & indicator minerals recovered during drilling and trenching of detrital surficial sediments Follow-up focused on potential source area to the south Merlin Mine Legend Diamonds kilometers Scale: 1:126,800 21

22 TINTAGEL 75 Diamonds 1 21 Commercially sized Diamonds recovered in streams 6 3 Kimberlitic Zircon recovered Merlin Mine Indicator Minerals recovered from larger follow-up sample Further follow-up sample taken Chromite positive sample Legend Diamond positive sample showing result Follow-up stream sample Zircon positive sample 22

23 BORROLOOLA ALLUVIALS Access negotiations continuing A A - Gravels at surface 5km ELA24512 EL24082 Drill Line B B - Drilling 23

24 0,000 mn -5,200,000 mn -5,000,000 mn -4,800,000 mn -4,600,000 mn -4,400,000 mn -4-4,400,000 mn -4,600,000 mn -4,800,000 mn -5,000,000 mn -5,200,000 mn -5,400,000 m ARNHEM LAND 600,000 me 48,800,000 me 49,000,000 me 49,200,000 me 49,400,000 me 49,600, Maningrida Ramingining Milingimbi Limited previous diamond exploration due to access restrictions 179 reconnaissance samples taken (half processed to date) Microdiamonds report in 5 samples to date. Bulman Legend Diamond positive sample Granted EL Application EL EL proceed to Grant 24

25 8,325,000 mn 8,350,000 mn 8,375,000 mn 8,400,000 mn 8,425,000 mn 8,450,000 mn 8,475,000 mn 8,500,000 mn 8,525,000 mn 8,525,000 mn 8,500,000 mn 8,475,000 mn 8,450,000 mn 8,425,000 mn 8,400,000 mn 8,375,000 mn 8,350,000 mn 8,325,000 mn YAMBARRA 550,000 me 575,000 me 600,000 me 625,000 me 650,000 me 675,000 me Mag Target SEL26954 EL22348 Daly River Access meetings arranged for December 2010, last of tenements EL10433 Bullseye magnetic target interpreted as intrusive SEL26958 SEL26960 EL10434 SEL26956 SEL26959 EL103 Legend NADL 2009 sample location Granted EL EL10435 Application EL 25

26 SEPPELT 0m SEPPELT 2 Kimberlite Corridor WA NT Ashmore Seppelt NORTH KIMERLEY 35m Grade: 211cpht Pteropus 150m Legend Sand & Gravels Infill Gravels Kimberlite Drill Hole Depth of drilling 230m ASHMORE / SEPPELT Inferred Resource 1.5Mct 26

27 SUMMARY NADL remains on track to progress the Merlin Project through Feasibility to development in 2011/2012 With the Diamonds to be marketed as Australian under Merlin brand NADL aims to become a producer of high quality, high value, white gem diamonds NADL will continue to focus exploration on priority areas within the Merlin Orbit i.e. Borroloola alluvials, as well as the under explored areas within its Arnhem Land and Yambarra project areas Diamonds recovered from recent pre-production trials 27