<h3>Overview</h3><P>
Kimberley Diamond Company is an independent diamond producer listed on the Australian Stock Exchange with its corporate headquarters based in Perth, Western Australia.<BR><BR>Kimberley's focus is mining and marketing high-value rough diamonds from its 100%-owned Ellendale Mining Operations, located some 2,000 km north of Perth in Western Australia's Kimberley region.<BR><BR>Having commenced commercial diamond mining and marketing operations in mid-2002, Kimberley is one of only two diamond producers in Australia and is rapidly expanding its production base at the Ellendale Lamproite Field - where it controls resources containing more than 5.6 million carats.<BR><BR>After producing over 1000,000 carats during its first two years of operations (to 30 June 2004), Kimberley is increasing output to a forecast level of almost 200,000 carats in 2004/05 following the expansion of diamond production facilities at Ellendale Pipe 9.<BR><BR>A Feasibility Study is also underway on the planned development of Ellendale Pipe 4 resources, 15 km south of Pipe 9, which would increase production significantly to over 500,000 carats per annum within the next 2-3 years - establishing Kimberley as a leading independent producer on the world stage.<BR><BR>Kimberley is actively exploring the 124 km<SUP>2</SUP> Ellendale Mining Lease, which contains some 27 diamondiferous lamproite pipes with the potential to deliver future production and cash flow opportunities in addition to currently identified resources.<BR><BR>Kimberley also holds a 55% interest in the ASX-listed diamond explorer Blina Diamonds NL, which controls a high-quality 1,800 km<SUP>2</SUP> tenement package covering and surrounding the central core of the Ellendale Field, including 50 identified lamproite pipes and a number of diamondiferous alluvial channels.
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<h3>History</h3><P>
<P>Kimberley Diamond Company has a unique history in the international diamond industry. It is one of a select group of growing producers and one of the few companies to have successfully completed the transition from diamond explorer to operating mining company.<BR><BR>Kimberley was founded in 1993 and listed on the Australian Stock Exchange in January 1994 after raising A$5.6 million. Its public share offer was underwritten by NM Rothschild & Sons - making it only the second diamond company to be backed by the merchant bank since De Beers Consolidated Mines Ltd in the 1880s.<BR><BR>Kimberley's key asset on the listing was an 80% interest in the Blina Diamonds Project, located in the lamproitic-rich Ellendale region of the West Kimberley, some 100 km east of the coastal town Derby (2,000 km north of Perth).<BR><BR>In 1994, Kimberley discovered a buried palaeo-drainage system in the northern section of the Blina tenements and commenced a major exploration program. The paleao-channels are part of an ancient river system which, in the geological past, is thought to have transported diamonds eroded from the tops of their primary source - lamproite pipes.<BR><BR>Thus began and epic exploration campaign as Kimberley painstakingly tracked the buried river gravels system upstream - trenching, drilling and sampling to pursue its elusive quarry.<BR><BR>Originally believing that the paleao-channels on the Blina ground had drained the known diamondiferous pipes of the nearby Ellendale Field, over time Kimberley gathered more and more evidence that the Blina diamonds may in fact have come from another, nearer source.<BR><BR>As it pursued the Blina alluvials, Kimberley was also engaged behind the scenes in an acquisition program targeting the Ellendale Field itself, which had lain undeveloped since its discovery in the early 1970s.<BR><BR>Kimberley reached agreement to purchase the Ellendale Project during 2001 for a total of A$23.25 million in a series of staged payments and subsequently completed a feasibility study on the Stage 1 development of the Field.<BR><BR>After final funding was secured, along with all government and regulatory approvals, Kimberley commenced mining at Ellendale in May 2002 and by mid-year had officially launched Australia's second kimberlite diamond mine.<BR><BR>Up to May 2004, some $95 million had been invested in the exploration, development and infrastructure at the Ellendale Project - with Kimberley now well established as a profitable, debt-free and growing mid-tier diamond producer.<BR><BR>Over 100,000 carats of gem quality diamonds were produced at Ellendale from start-up in mid-2002 through until 30 June 2004 from Ellendale Pipe 9, with production expanding to a forecast level of close to 200,000 carats for 2004/05 with the commissioning of expanded diamond production facilities in mid-2004.<BR><BR>The new 2.2 million tonne per annum diamond production plant at Ellendale 9 is expected to be the precursor to an even more significant expansion of the Ellendale operations with a Feasibility Study underway on the development of Ellendale Pipe 4, 15 km to the south.<BR><BR>The establishment of a second mining and production centre at Pipe 4 will underpin a further increase in production to well over 500,000 carats per annum in the next 2-3 years, cementing Kimberley's position as a leading independent diamond producer.</P>
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<h3>Mining</h3><P>
<P>Kimberley Diamond Company's mining operations are based at its 100%-owned Ellendale Diamond Project, 140km east of Derby in Western Australia's Kimberley Region.<BR><BR>Production is currently sourced from Ellendale Pipe 9, although a feasibility study is currently underway on the establishment of a second mining and production centre at Ellendale Pipe 4, 15 km to the south, which would significantly increase diamond production.<BR><BR>Total identified resources in Ellendale Pipe 9 and Ellendale Pipe 4 (to a depth of 120 metres), as well as Ellendale Pipe 4 Satellite (to a depth of 200 metres), stand at 90.4 million tonnes at an average grade of 6.2 carats per hundred tonnes for 5.61 millions contained carats.<BR><BR>Stage 1 mining operations commenced in May 2002 based on a 600,000 tonne per annum (100 tonne per hour) Dense Media Separation (DMS) diamond production plant located adjacent to Pipe 9 and initially treating near-surface resources in the Western Lobe of Pipe 9.<BR><BR>During its first full year of operations in 2002/03, the Stage 1 Ellendale Project produced 51,819 carats at an average carat value of A$264 per carat. This increased during 2003/04 to 62,551 carats at an average carat value of A$258 per carat.<BR><BR>Construction of a new 2.2 million tonne per annum diamond production plant adjacent to the current operations was completed during the second quarter of 2004 as part of a major expansion of the Ellendale Operations.<BR><BR>This will significantly increase annual diamond production to a forecast level of 200,000 carats per annum in 2004/05.<BR><BR>Kimberley currently employs approximately 172 people at the Ellendale Project who are accommodated in a camp on site. The work roster is 10 days on / 5 days off and is a fly-in/fly-out operation from Broome and Derby.</P>
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<h3>Exploration</h3><P>
<P>Underpinned by its growing production base, Kimberley Diamond Company is an active diamond explorer, with programs geared to maximising the cash flow generation from its mining operations within the 124 km<SUP>2</SUP> Ellendale Mining Lease.<BR><BR>In addition, Kimberley is continuing the search for lamproitic source of the Terrace 5 alluvial diamonds within the Ellendale Mining Lease.<BR><BR>With Ellendale Pipe 9 in production and a Feasibility Study underway on the development of a second mining and production centre at Ellendale Pipe 4, 15 km to the south, Kimberley is continuing exploration to enhance and upgrade its existing resource inventory.<BR><BR>Between Ellendale Pipe 9 and Ellendale Pipe 4 and Pipe 4 Satellite, total resources are estimated at 90.4 million tonnes grading 6.2 carats per hundred tonnes for 5.61 million contained carats.<BR><BR>Kimberley is working to establish mineable reserves from within the identified resources, focusing initially on reserves within the upper 50 metres of the various deposits drawing on the results of a large-diameter drilling programs carried out during 2003.<BR><BR>The program utilised a rig provided by Bauer Maschinen of Germany capable of drilling holes 2.5 metres in diameter to a depth of 60 metres and was highly successful, achieving grades of 30-50% above those achieved with previous exploration.<BR><BR>Resource estimates for the deeper parts of the Ellendale deposits will be undertaken once mining is further advanced given the depth limitations of the Bauer large-diameter drill rig.<BR><BR><EM>Regional Exploration<BR></EM>Kimberley controls 27 diamondiferous pipes within the Ellendale Mining Lease and is continuing exploration of these pipes to delineate additional ore sources for the Ellendale mining operations.<BR><BR>In May 2004, Kimberley announced that bulk sampling results from the newly discovered Kimberley 29 Pipe, located 150 metres west of the Ellendale 9 mining area, had returned economic diamond grades indicating that it can be mined as part of the current mining operations.<BR><BR>Kimberley 28 represents the first new economic pipe to be discovered in the Ellendale Field since the original discovery of Pipes 9 and 4 in the late 1970s, and highlights the significant exploration potential within the field.<BR><BR><EM>Blina Diamonds NL</EM><BR>Kimberley holds a 55% interest in Blina Diamonds NL, which listed on the Australian Stock Exchange in August 2004 and which has consolidated ownership of all Kimberley's exploration interests in the Kimberley region outside of the Ellendale mining operation.<BR><BR>Blina's focus is on locating, evaluating and mining diamond deposits within a high-quality 1,800 km<SUB><SUP><SUP><SUB><SUP>2</SUP></SUB></SUP></SUP></SUB> tenement package surrounding the central core of the Ellendale Field.<BR><BR>Blina's project areas include some 50 already identified lamproite pipes and a number of diamondiferous alluvial channels including the Terrace 5 Project, where it is targeting an alluvial resource potentially containing 400,000 carats and the J-Channel where it is targeting an alluvial resource potentially containing 420,000 carats.<BR><BR>Kimberley will benefit from its significant exposure to Blina's active exploration programs within the Ellendale Field.<BR><BR>For further information on Blina Diamonds, please refer to <A class="" href="www.blinadiamonds.com.au" target="">www.blinadiamonds.com.au</A>.<BR></P>