Company Information for Resource & Investment NL

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Company Statement

Resource & Investment NL is an Australian-listed diamond exploration company with a strong growth focus in the international diamond industry with diamond exploration projects spanning three continents.

With project acquisition and development initiatives set in motion during 2005, Resource & Investment NL now has diamond exploration projects spanning three continents with a clear focus on building world-class mining operations in established diamond-producing regions.

Current Operations

Camutue Project
Angola
The Camutue Project is located some 10 kms east of the town of Lucapa in the Lunda Norte Province of Angola and comprises, amongst others, the Camutue East, Camutue West and Caixepa Kimberlite Pipes.

In December 2005, R&I signed a Memorandum of Understanding with Angolan-based Tecmad - Mining Services Sarl (Tecmad) relating to the Camutue Associated Diamond Deposits located in north-eastern Angola's Lunda Norte Province. Following several months of negotiations, R&I finalised and executed an operating agreement with Tecmad in May 2006 for its immediate appointment as an independent contractor and operator to manage the planned recommissioning of the Camutue Associated Diamond Deposits.

The operating agreement is expected to lead to the re-establishment of mining operations at the Camutue Project under R&I's operation management, crystallising a significant international opportunity for R&I with the potential to generate cash flow in the short term and, in the longer term, position R&I to secure additional attractive opportunities in this well-established diamond mining district.

The agreement has the potential to deliver significant strategic benefits to both parties, drawing together R&I's technical expertise in the diamond industry, and access to international capital markets with Tecmad's prominent position with the Angolan diamond industry and promising access to additional attractive project opportunities in the region.

It is envisaged it will take approximately six months to re-establish the mine, refurbish the plant and infrastructure and commission the plant, which will all be done at Tecmad's expense - upon which (subject to certain conditions) R&I will, in consideration for its services as independent contractor and manager, commence earning a management fee of either 20 per cent of net monthly cash flow from the recommissioned Camutue operations or a monthly fee of US$100,000 (whichever is greatest).

The operating agreement incorporates an initial production plan which envisages the extraction of in excess of 100,000 carats of diamonds over a 16-month period, with processing to be carried out using the existing Dense Media Separation (DMS) diamond production plant located on site. The estimated value of the diamonds is US$250 per carat.

Angola is one of the world's most resource-rich countries, offering major opportunities to international mining and resource companies, particularly in the oil industry and for diamond production. Since the conclusion of the long-running civil war in 2002, Angola has stabilised and experienced strong economic growth driven by its burgeoning oil and mining sectors, helping to support reconstruction of its war-damaged infrastructure. Angola is currently attracting very high levels of foreign investment in its resource sector. It is sub-Saharan Africa's second largest oil producer after Nigeria and one of the world's largest diamond producers.

Ellendale East and South Projects
Western Australia
In June 2006, R&I reached agreement with TSX-listed diamond explorer, Caldera Resources Inc. (Caldera) (TSX:CDR), to enter into farm-in joint ventures to earn up to a 51 per cent interest in Caldera's Ellendale East and Ellendale South Projects in Western Australia.

The farm-in joint venture represents a significant new exploration and development opportunity for R&I in the Ellendale Diamond Field in Australia, one of the world's most prolific diamond fields which hosts the operating Ellendale Diamond Mine. Under the joint venture agreement, R&I can earn up to a 51 per cent interest in the tenements containing significant new lamproite discoveries in close proximity to the Ellendale Mine (currently being expanded to a production level of approximately 600,000 carats per annum).

Joint Venture Agreements
Under the agreement with Caldera, the existing ownership of the Ellendale East and Ellendale South Projects has been restructured and new Joint Venture Agreements have been entered into between R&I and Caldera.

The Ellendale East Project was previously subject to a farm-in joint venture between Caldera and Mr Ron Winston, Chairman of long-established New York-based international diamond house Harry Winston, under which Mr Winston could earn a 60 per cent interest in the project by funding ongoing exploration expenditure. Mr Winston and Caldera were previously joint 50:50 contributing partners in the Ellendale South Project.

Under the new Joint Venture Agreements, R&I has the right to earn a 51 per cent interest in each project under different commercial terms and conditions.

R&I will manage and be responsible for the development of all work programs on behalf of each joint venture and for the funding of all joint venture expenditure until it has earned its 51 per cent interest. Mr Ron Winston will have the right to buy, at fair market value, 30 per cent of all run-of-mine production of diamonds produced by both joint ventures from the Ellendale East and Ellendale South tenements.

In return for relinquishing all his rights and interests under the previous Joint Venture, R&I received shareholder approval to issue 5 million fully-paid R&I shares to Mr Winston or his nominee. In addition, Blina Diamonds NL (Blina) issued 500,000 fully-paid Blina shares to Mr Winston.

As a result of this transaction, Mr Winston, who is a highly regarded and influential figure in the international diamond industry, will become a strategic shareholder in both R&I and Blina.

On-the-ground exploration activities will be conducted by Blina on commercial terms - leveraging off Blina's extensive exploration infrastructure in the region.

Blina has intensive ongoing exploration and mine development programs underway within its 1,500 sq kms tenement package surrounding the Ellendale Mining Lease, including a proposed mine development at the Ellendale 9 North area and extensive exploration within the Terrace 5 palaeo-channel. Blina also has an existing DMS diamond processing facility which is currently being upgraded to 500,000 tpa capacity.

Ellendale East Project
In February 2006, Caldera announced the discovery of up to six new lamproite pipes within the Ellendale East Project, which is located some 25 kms along strike from the Ellendale 4 mine. One large target, of in excess of 200 hectares, has similar dimensions to those of the Ellendale 4 and 9 pipes currently being mined by Kimberley Diamond Company ( Kimberley ). Geophysical modelling of this target indicates a body with large depth extent.

Volcanoclastic quartz tuff, which is one of the predominant diamond bearing rocks in the Ellendale Lamproite Field, has been identified at six of the targets drilled to date by Caldera within the Ellendale East tenement. Caldera's work has established a significant southern extension of the Ellendale Field as a potential diamond bearing entity in its own right.

Micro-diamonds have been identified in drill chip thin sections from the large Caldera target. One 170 micron diamond fragment from a larger stone was recovered from a 19.8 kilogram c au stic fusion sample in the +100 -300 sieve fraction. Chrome spinel chemistry indicates potential for an additional two pipes to be diamondiferous.

There is also excellent potential for the discovery of additional pipes in the southern part of the same Exploration Licence. Further drilling with large diameter holes is required to determine the area and depth extent of the bodies and to undertake a bulk sampling program. This work has now commenced.

Goat Paddock Project
Western Australia
In January 2005, R&I announced that it had acquired an interest in the Goat Paddock Project, a conceptual diamond exploration play located in the Kimberley region of Western Australia - the same region that hosts Australia 's two existing commercial diamond mines, the Ellendale and Argyle operations.

Following first-phase exploration carried out during the year within the original Kimberley Projects portfolio, R&I determined that its exploration focus would be on the large Goat Paddock (EL 80/3153 & ELA 80/3266) circular physiographic anomaly which represents a high priority target area.

The Goat Paddock Project comprises a crater-form topographic depression some 5 kms in diameter. Previous drilling (carried out in 1972) demonstrated a crypto-explosion crater structure in-filled with some 200 metres of carbonaceous lacustrine sediments overlying brecciated sandstone. The lacustrine sediments (lake-fill) have been dated at approximately 50 million years, compared with the surrounding host rocks which have been dated at an estimated 500 million plus years.

Detailed ground magnetic and gravimetric surveys carried out during the year have demonstrated an internal magnetic anomaly (1.5 kms in diameter) disposed within the much larger topographic anomaly or crater structure (5 kms in diameter). This anomaly is interpreted to reflect a 'melt pool' related to a meteorite impact or a sub-volcanic intrusive possibly related to a kimberlitic diatreme.

Planning has been completed for a proposed drilling program at this target which, subject to site clearances, is expected to commence during the first half of 2007.

Jequitinhonha Project
Brazil
The Jequitinhonha Diamond Project is located near the historic diamond mining centre of Diamantina in the Brazilian State of Minas Gerais, where the first diamond production was recorded some 235 years ago. The Project is located some 400 kms north of the city of Belo Horizonte, and has excellent access and good infrastructure.

In December 2005, R&I exercised its option to acquire a 75 per cent interest in the Jequitinhonha Project, following a completion of a technical site visit and successful due diligence program. As a result, R&I acquired a 75 per cent interest in the alluvial deposits for a cash payment of US$25,000. R&I has an option to increase its interest to 100 per cent in the Jequitinhonha Project in the event of a decision to commence mining, for a total consideration of US$1 million in cash and shares.

Total recorded production over the past two decades from this region has been in the order of 1 million carats per annum, exclusively from alluvials. Brazil has a total recorded diamond production of some 60 million carats, all from alluvial sources, making it one of the world's largest diamond producers.

The exploration and development potential of the Jequitinhonha Project is supported by the strong history of mining in the region and the relative proximity of the alluvial concessions to the Domingas Mine, Brazil's largest single diamond producer, which is located some 100 kms upstream (to the south) of the alluvial concessions.

The Jequitinhonha Project comprises large-scale alluvial deposits which are located within two groups of concessions, the first group straddling some 12 kms of the Jequitinhonha River, one of Brazil's largest rivers, and the second group straddling some 20 kms of the Macaubas River, which flows into the Jequitinhonha River. Limited work has been conducted on these areas indicating the presence of diamondiferous gravels.

Significantly, Brazil's single largest diamond producer, the Domingas Mine operated by Mineracao Rio Novo, the mining subsidiary of Andrade Gutierrez, one of Brazil's largest civil engineering companies, is located some 100 kms south of the Project area. The Domingas Mine is a major dredging operation which has produced on average 70-100,000 carats per annum over a period of more than ten years. Diamond grades from the mine have averaged 4 carats/100m 3 with an average value of US$200/carat.

No modern exploration has been carried out within the Macaubas River concessions, located to the west of the first group of concessions. However, historic production is recorded in these areas and the Macaubas has shed diamonds into the Jequitinhonha River which have different characteristics to the latter's stones, indicating a different primary source.

During the year, R&I established its operating base camp at the Jequitinhonha Project, close to the village of Terra Branca. First phase ground-based geological reconnaissance mapping of the initial targets, selected from the satellite imagery interpretation and from prior geological and geophysical reports, was completed with an initial drilling program scheduled to commence in the second quarter of 2007, following geophysical surveys in late 2006. This will be followed by bulk sampling, once interpretation of the drilling results is completed.

Namakwa Project
South Africa
The Namakwa Project is located 350 kms north of Cape Town on South Africa's West Coast. The Project comprises seven adjacent, onshore diamond Concessions, covering a total area of 90 kms2 with major operating mines both to the north (De Beers) and to the south (Trans Hex).

During the year, R&I finalised plans for a comprehensive exploration program covering the extensive tenement areas outside of the initial delineated resource blocks. Planned exploration activities had been developed in light of an independent report received from Mr Richard Hall (of Placer Solutions Pty Ltd), a specialist consulting geologist with extensive diamond exploration experience along South Africa 's West Coast.

In addition, electromagnetic (AEM) data obtained from the De Beers 2003 SPECTREM survey outlined the possible presence of five highly prospective fluvial channel systems to be tested during the first phase of the planned exploration program. These AEM signatures were interpreted to be major, buried fossil drainage systems, with structures very similar to the fluvial channel pattern at the De Beers (Namaqualand Division) Koingnaas mining operations, located approximately 200 kms north of R&I's project area.

A total of 3,064 metres of drilling was completed. Results were mixed with some interesting channel sediments encountered to the north east of the trial mining area LBM4. The drilling results were referred to the SPECTREM 2000 geophysical consultants for further interpretation. In light of the results, R&I is currently reviewing the status and future of the Namakwa Project within its portfolio.

Swartsand Project
South Africa
R&I secured the highly prospective Swartsand Project, located in the Namaqualand Region of South Africa, in January 2005. Located some 450 kms north of the Namakwa Project, the Swartsand Project covers an area of 1,645 hectares within the flood plain of the Buffels River - a major source of alluvial diamonds in the area. The Swartsand Project is located immediately downstream of the Buffelsbank Mine - one of the richest alluvial diamond operations in the region which produced 1.2 million carats over a 30-year period until its closure in 1998.

The Prospecting Permit (No. 114/2006) for the Swartsand Project was granted by the Department of Minerals and Energy in South Africa, on 20 March 2006, enabling R&I to commence its exploration program during the June 2006 Quarter.

Surface geological mapping and topographic modelling of the palaeo-gravels and basement rock was completed and planning finalised for the proposed drilling program. A recently completed drilling program has outlined a 900 m x 250 m palaeo channel which will be bulk sampled later this year.

R&I is able to utilise an existing treatment plant, located at the nearby Buffelsbank mine, to process samples extracted in exploration. This eliminates the requirement for R&I to construct its own processing plant.  

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