Sanatana Diamonds Inc. - Sanatana Resources Inc.

Transcription

Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
Typesetter ID: DESIGN:
ID Number: 1176
TCP No. 7
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt
about the contents of this document or the action you should take it is recommended that you immediately seek your own
financial advice from your stockbroker, solicitor, accountant or other independent financial adviser duly authorised
under the Financial Services and Markets Act 2000, who specialises in advising on the acquisition of shares and other
securities.
This document does not constitute a prospectus but has been drawn up in accordance with the AIM Rules and the Public
Offers of Securities Regulations 1995, as amended (“POS Regulations”). A copy of this document has not been and will
not be delivered to the Registrar of Companies in England and Wales for registration.
The Directors of Sanatana Diamonds Inc. (the “Company”), whose names appear on page 3 of this document, accept
responsibility for the information contained in this document. To the best of the knowledge of the Directors (who have
taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with
the facts and does not omit anything likely to affect the import of such information. Under no circumstances should the
information contained in this document be relied upon as being accurate or complete at any time after Admission.
Application has been made for the whole of the common share capital of the Company in issue and to be issued pursuant
to the Placing, to be admitted to trading on the AIM Market of the London Stock Exchange plc (“AIM”). AIM is a market
designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to
larger or more established companies. In addition, the AIM Rules are less demanding than those of the Official List of the
UK Listing Authority (the “Official List”). AIM securities are not admitted to the Official List. A prospective investor
should be aware of the risks of investing in such companies and should make the decision to invest only after careful
consideration and, if appropriate, consultation with an independent financial adviser. It is emphasised that no application
is being made for admission of the Common Shares to the Official List. No application has been made for the Common
Shares to be listed on any other recognised investment exchange. London Stock Exchange plc has not itself examined or
approved the contents of this document. It is expected that Admission will become effective and dealings in the Common
Shares will commence on AIM on 28 July 2005. The whole text of this document should be read. The attention of persons
receiving this document is drawn to the section headed “Risk Factors” contained in Part III of this document.
Sanatana Diamonds Inc.
(Incorporated in the Province of British Columbia, Canada with incorporation number BC0698458)
Admission to trading on AIM
Placing of 2,890,398 Common Shares at 82p per share
Nominated Adviser and Broker
Insinger de Beaufort
Share capital immediately following the Placing and Admission to AIM
Number of issued and fully paid Common Shares without par value
33,606,794
Upon Admission, all of the Common Shares will rank pari passu in all respects and will rank in full for all dividends or
other distributions declared, made or paid in respect of Common Shares after Admission. Insinger de Beaufort, which is
regulated by the Financial Services Authority, is acting as Nominated Adviser and Broker to the Company in relation to
the Placing and Admission and will not be responsible to any other person other than the Company for providing the
protections afforded to clients of Insinger de Beaufort or providing advice in connection with the Placing and Admission.
Insinger de Beaufort has not authorised the contents of any part of this document for the purposes of Regulation 13(1)(g)
of the POS Regulations. In particular, the information contained in this document has been prepared solely for the
purposes of the Placing and Admission and is not intended to inform or be relied upon by any subsequent purchasers of
Common Shares (whether on or off exchange) and accordingly no duty of care is accepted in relation to them.
The responsibilities of Insinger de Beaufort as the Company’s Nominated Adviser and Broker under the AIM Rules are
owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person in
respect of his decision to acquire Common Shares in reliance on any part of this document. No representation or
warranty, express or implied, is made by Insinger de Beaufort as to any of the contents or completeness of this document.
The Common Shares have not been and will not be registered under the United States Securities Act of 1933, as amended,
or any of the relevant securities law of any state or district or the United States, Australia, Canada, Japan, the Republic of
South Africa or the Republic of Ireland. Accordingly, unless an exemption under such act or law is available the Common
Shares may not be offered, sold, transferred or delivered, directly or indirectly, into or from the United States, Australia,
Canada, Japan, the Republic of South Africa or the Republic of Ireland or to or for the benefit of any national, resident or
citizen of the United States, Australia, Canada, Japan, the Republic of South Africa or the Republic of Ireland.
This document must not be copied or distributed by recipients and, in particular must not be distributed by any means,
including electronic transmission, to persons with addresses in the United States, Australia, Canada, Japan, the Republic
of South Africa or the Republic of Ireland, their respective possessions and territories or to any citizen of any of them or to
any corporation, partnership or other entity created or organised under the laws of any of them. Any such distribution
could result in a violation of the laws of those countries.
Time: 18:04
Rev: 6
Gal: 0001
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1177
TCP No. 7
CONTENTS
Page
3
Directors, Secretary and Advisers
Definitions
4
Glossary of Selected Geological Terms
6
Placing Statistics
8
Expected Timetable of Principal Events
8
Exchange Rates
8
Key Information
9
PART I
Information on the Company
10
1.
Introduction
10
2.
History and background
10
3.
Strategy
11
4.
Kennecott Agreement
11
5.
The Northwest Territories
12
6.
Location of the Mackenzie Diamond Project
13
7.
Background to diamond exploration
13
8.
Exploration completed by Sanatana Diamonds
14
9.
Current and future exploration programs
15
10.
Mining regulation in Canada
16
11.
Directors, officers and management
17
12.
Share Option Plan
18
13.
Reasons for Admission and use of proceeds
18
14.
Details of the Placing
19
15.
Summary financial information
19
16.
Lock-in and orderly market arrangements
19
17.
Corporate governance and share dealing code
19
18.
Dividend policy
20
19.
Canadian takeover law
20
20.
Reporting issuer status
20
21.
Taxation
20
22.
Admission, settlement and CREST
20
23.
Additional information
21
PART II
Diamonds and the Diamond Industry
22
PART III
Risk Factors
29
PART IV
Competent Person’s Report
34
PART V
Accountants’ Report on the Company
42
PART VI
Additional Information
53
2
Time: 18:17
Rev: 3
Gal: 0002
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1178
TCP No. 7
DIRECTORS, SECRETARY AND ADVISERS
Directors:
Richard Öther Prickett (Non-executive Chairman)
Glenn John Stuart Laing (Chief Executive Officer)
Peter Leighton Miles (Executive Vice President)
Edward Hammond Rivers Marlow (Non-executive Director)
John Merfyn Roberts (Non-executive Director)
Harley Norman Hotchkiss (Non-executive Director)
All of whose business address is:
1910 Cathedral Place
925 West Georgia Street
Vancouver
British Columbia
Canada V6C 3L2
Company Secretary Graham H. Scott
and Registered
Suite 1040
Office
999 West Hastings Street
Vancouver,
British Columbia,
Canada V6C 2W2
Nominated Adviser Insinger de Beaufort
and Broker
131 Finsbury Pavement
London EC2A 1NT
Solicitors to the
Company
As to Canadian law:
Lang Michener LLP
BCE Place, P.O. Box 747
Suite 2500, 181 Bay Street
Toronto, Ontario
Canada M5J 2T7
Solicitors to the
Placing
Charles Russell LLP
8-10 New Fetter Lane
London EC4A 1RS
Reporting
Accountants
BDO Stoy Hayward LLP
8 Baker Street
London W1U 3LL
Auditors
BDO Dunwoody LLP
600 Cathedral Place
Vancouver
British Columbia
Canada V6C 3L2
Competent Person
Steffen Robertson and Kirsten (UK) Limited
Windsor Court
1 – 3 Windsor Place
Cardiff CF10 3BX
Registrar
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgewater Road
Bristol BS99 7NH
As to English law:
Memery Crystal
44 Southampton Buildings
London WC2A 1AP
3
Computershare Investor Services Inc.
510 Burrard Street, 2nd Floor
Vancouver
British Columbia
Canada V6C 3B9
Time: 22:04
Rev: 1
Gal: 0003
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1179
TCP No. 7
DEFINITIONS
The following definitions apply throughout this document unless the context otherwise requires:
“Act”
Business Corporations Act (British Columbia), Canada
“Admission”
admission of the Common Shares to trading on AIM becoming
effective in accordance with the AIM Rules
“AIM”
the AIM Market of the London Stock Exchange
“AIM Rules”
the rules for AIM companies and their nominated advisers as
issued by the London Stock Exchange from time to time, as they
were in force prior to 1 July 2005
“Articles” or “Notice of
Articles”
the notice of articles and articles of the Company
“Board” or “Directors”
the directors of the Company as set out on page 3 of this
document
“Business Day”
a day (other than a Saturday or Sunday) on which banks are
generally open in London for the transaction of normal business
“CAN$” or “C$”
Canadian dollars
“Combined Code”
the combined code on corporate governance, as annexed to the
Listing Rules of the UK Listing Authority
“Common Shares”
fully paid common shares without par value in the capital of the
Company (including depository interests representing Common
Shares and issued through the Company’s UK Registrar)
“Company” or “Sanatana
Diamonds”
“Competent Person’s Report”
the report prepared by SRK, a copy of which is reproduced in Part
IV of this document
“CREST”
the system of paperless settlement of trades and holdings of
uncertificated shares administered by CRESTCo Limited
“CREST Regulations”
the Uncertificated Securities Regulations 2001 (SI 2001/3755)
“Enlarged Share Capital”
the Common Shares in issue (including the Placing Shares)
immediately following Admission
“Existing Common Shares”
the Common Shares in issue at the date of this document
“Exploration Management
Agreement”
the agreement dated 13 June 2005 between Geoinformatics and
the Company, further details of which can be found at paragraph
10(k) of Part VI of this document
“Field Exploration Program”
the field exploration project carried out by Geoinformatics on
behalf of the Company in 2004 over the Mackenzie Diamond
Project, further details of which can be found in Parts I and IV of
this document
“FSA”
the UK Financial Services Authority
“Geoinformatics”
Geoinformatics Exploration Inc.
“Geoinformatics Intervention
Project”
the data collection, validation, compilation, modelling and target
generation project carried out over the Mackenzie Diamond
Project by Geoinformatics from July 2004 to February 2005 on
behalf of the Company, further details of which can be found in
Parts I and IV of this document
“Jaeger Joint Venture”
the unincorporated joint venture among James Mackie,
Matthew J Mason and Peter Miles entered into on 3 November
2003
4
Time: 22:06
Rev: 1
Gal: 0004
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1180
TCP No. 7
Definitions
“Kennecott”
Kennecott Canada Exploration Inc., a subsidiary of Rio Tinto plc
“Kennecott Agreement”
the project agreement dated 19 July 2005 between the Company
and Kennecott, further details of which can be found in
paragraph 10(o) of Part VI of this document
“London Stock Exchange”
London Stock Exchange plc
“Mackenzie Diamond Project” the diamond exploration portfolio of the Company, comprising
the Permits
“Nunavut”
the Territory of Nunavut, Canada
“NWT”
the Northwest Territories, Canada
“Permits”
the 462 prospecting permits held by Matthew Mason on bare
trust and as nominee for the Company as to rights to diamonds
and all other minerals except uranium over 19,766,689 acres in
NWT and Nunavut
“Placees”
subscribers of Placing Shares and Subscription Shares
“Placing Shares”
the 1,790,592 new Common Shares to be placed by Insinger de
Beaufort pursuant to the Placing Agreement
“Placing”
the conditional placing by Insinger de Beaufort on behalf of the
Company of the Placing Shares at the Placing Price pursuant to
the Placing Agreement and the subscription by certain Canadian
investors of the Subscription Shares at the Placing Price
“Placing Agreement”
the conditional agreement dated 22 July 2005 between Insinger
de Beaufort, the Company and the Directors, as described in
paragraph 10(a) of Part VI of this document
“Placing Price”
82 pence per Placing Share
“POS Regulations”
the Public Offers of Securities Regulations 1995
“Shareholder(s)”
holder(s) of Common Shares
“Share Option Plan”
the Sanatana Diamonds Inc. Share Option Plan 2005, a summary
of the rules of which is set out in paragraph 9 of Part VI of this
document
“SRK”
Steffen Robertson and Kirsten (UK) Limited
“Subscription Shares”
the 1,099,806 new Common Shares to be subscribed for by
certain Canadian investors
“UK” or “United Kingdom”
the United Kingdom of Great Britain and Northern Ireland
“UK Listing Authority”
the FSA, acting in its capacity as the competent authority for the
purposes of Part VI of the Financial Services and Markets Act
2000 of the United Kingdom
“uncertificated” or “in
uncertificated form”
a share or security recorded on the relevant register being held in
uncertificated form in CREST and entitlement to which, by virtue
of the Regulations, may be transferred by means of CREST
“US”
the United States of America, its territories and possessions, any
State of the United States of America and the District of
Columbia
Notes
In this document, the symbols “£” and “p” refer to pounds and pence sterling respectively and the
symbols “$” refer to Canadian dollars.
Any reference to any provision of any legislation in any jurisdiction shall include any amendment,
modification, re-enactment or extension thereof.
5
Time: 18:05
Rev: 8
Gal: 0005
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1181
TCP No. 7
GLOSSARY OF SELECTED GEOLOGICAL TERMS
(For more detailed descriptions or for geological, mining and mineral related terms not covered in
this glossary, one should consult a reputable dictionary or source of related technical definitions)
“anomalous”
a geological feature, distinguished by geological, geophysical or
geochemical means, which is different from the general
surroundings
“Archaean”
the period of geological time before 2,500 million years before
present
“basalt”
a dark, fine-grained rock composed primarily of plagioclase and
pyroxene. Basalt is a commonly found volcanic rock making up
part of the upper layer of the Earth’s crust
“basement”
the igneous, granitised or metamorphic crust of the Earth, below
which sedimentary rocks do not occur
“breccia”
angular fragments of rock
“carat” or “ct”
the unit weight for diamonds (1 carat = 0.2 grams)
“chromite”
a brownish to iron-black mineral of the spinel group, commonly
found in basic to ultrabasic rocks and kimberlite
“craton”
a part of the Earth’s crust which has attained stability and which
has been little deformed for a prolonged period, generally found
in the central regions of continents
“diamondiferous”
means containing diamonds
“dyke”
a tabular intrusive body that cuts across the planar structure of
the surrounding rock
“EM”
electromagnetic geophysical survey method
“eskers”
a long narrow ridge of coarse gravel deposited by a stream
flowing in or under a decaying ice sheet
“garnet”
a group of silicate minerals occurring in igneous or metamorphic
rock types
“grade”
the number of ore-mineral content in a physical unit of ore; for
diamonds the grade is usually expressed in carats per tonne
“Gross Overriding Royalty” or a royalty amount of the gross sales derived from any mineral,
“GORR”
metals, diamonds, precious stones, ore minerals, concentrates or
other mineral source
“indicator minerals”
minerals formed at great depths (150-200km) in the Earth’s crust
and brought to surface by kimberlites, either with diamonds or
without diamonds. Common indicator minerals include pyropes,
ilmenite, chrome-diopside and chromite
“kimberlite”
deep mantle ultrabasic rock which may contain diamonds
“km”
kilometre
“km2”
square kilometre
“macro-diamond”
a diamond that has a dimension in excess of 0.5mm in one
direction
“magnetite”
a black, strongly magnetic mineral of the spinel group
“mantle”
the zone of the Earth’s crust beneath the crust and above the core
6
Time: 22:12
Rev: 1
Gal: 0006
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1182
TCP No. 7
Time: 22:12
Glossary of Selected Geological Terms
“Mesozoic”
the geological era comprising the Triassic, Jurassic and
Cretaceous period (225-65 million years before present)
“micro-diamond”
a diamond, no dimension of which exceeds 0.5mm
“mm”
millimetre
“Net Smelter Royalty” or
“NSR”
a royalty payment made by a producer of metals, normally to a
previous property owner, based on gross mineral production
from the property, less deductions of certain costs
“Palaeozoic”
the geological era covering the period from 600-225 million
years before present. It includes the Cambrian, Ordovician,
Silurian, Devonian, Carboniferous and Permian periods
“pipe”
an intrusive body that has a three-dimensional vertical shape of a
cylinder or cone
“Precambrian”
all geological time before the beginning of the Palaeozoic, it is
equivalent to 90 per cent. of geologic time
“Proterozoic”
means the most recent of the two main divisions of the
Precambrian
“Quaternary”
a geologic time period thought to cover the last two to three
million years and extending into the present
“Slave Province”
an Archaean age continental crust which makes up part of the
Canadian Shield, located in the Northwest Territories and
Nunavut
“till”
sediment derived from glaciers
7
Rev: 1
Gal: 0007
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: KW
ID Number: 1183
TCP No. 7
PLACING STATISTICS
Placing Price per Common Share
82p
Number of Common Shares being issued by the Company†
2,926,984
Number of Common Shares in issue immediately following Admission
Percentage of Enlarged Share Capital being placed pursuant to the Placing
Market capitalisation at the Placing Price
33,606,794
8.6%
£27.6 million
Estimated net proceeds of the Placing receivable by the Company
£2.1 million
† Assuming 2,890,398 Common Shares being issued in the Placing and fees totalling £30,000 are settled by the issuance of new Common
Shares at the Placing Price
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Admission and commencement of dealings in Common Shares on AIM
8.00 a.m. on 28 July 2005
CREST accounts credited
on 28 July 2005
Despatch of definitive share certificates in respect of the Placing Shares
by 4 August 2005
EXCHANGE RATES
The rate of exchange used for the purpose of this document
is, unless otherwise stated:
£1.00: C$ 2.134
8
Time: 20:21
Rev: 7
Gal: 0008
Job: 13340I--
Santan Prosp
Date: 19-07-05
Area: A1
Operator: MC
ID Number: 1184
TCP No. 7
KEY INFORMATION
This summary highlights information contained elsewhere in this document. This summary does
not contain all of the information investors should consider before investing in the Common
Shares. The following information is extracted from, and should be read in conjunction with, the
full text of this document. Investors should read the whole document and not rely solely on the
information in the “Key Information” section or any other summarised information in this
document.
Introduction
The Company was established to engage in primary diamond exploration and development in the
Northwest Territories and Nunavut, Canada. The current exploration portfolio of the Company
consists of the Mackenzie Diamond Project which covers approximately 20 million acres and
which contains a number of prospective diamond bearing areas based on a combination of the
results of analysis generated by Geoinformatics and by the recovery of diamond indicator minerals
in the Field Exploration Program conducted in 2004.
The Company is managed by a group of professionals with extensive experience in the exploration,
development and financing of exploration and mining projects. The Directors believe that
management’s understanding and expertise in the Canadian diamond exploration environment
provide the Company with the requisite skills for the longer term exploration and subsequent
definition of any kimberlite discoveries and therefore provide the Company with the best possible
chance of discovering diamondiferous kimberlites.
In July 2005, the Company signed the Kennecott Agreement with Kennecott, a subsidiary of the
major international mining and resource company Rio Tinto plc, under which Kennecott will
participate in the Placing, contribute to the exploration funding of the Mackenzie Diamond Project
and may earn an interest in any kimberlite and other mineral deposit discovery. Pursuant to the
Kennecott Agreement, Kennecott will invest an initial C$2.5 million in Sanatana Diamonds under
the Placing, will be required to contribute C$2.5 million towards the 2005 exploration program
and may contribute C$2.5 million towads the 2006 exploration program.
Strategy
NWT and Nunavut. The Company’s strategy to achieve this is:
앫
to apply a focussed “value-add” exploration program using an integrated, science and
technology driven approach;
앫
to identify and rank kimberlite targets from the results of this exploration on a timely and
efficient basis; and
앫
to negotiate JVs for drilling and development of these targets with diamond majors.
The overall objective of the Sanatana Diamonds is to assist in the exploration of the Mackenzie
Diamond Project and discover a new world class diamond deposit.
The Placing
The Company is proposing to raise approximately £2.4 million (before expenses) through a
conditional placing by Insinger de Beaufort and a subscription by certain Canadian investors of a
total of 2,890,398 new Common Shares representing 8.6 per cent. of the Enlarged Share Capital at
82p per share.
The Company intends to apply the net proceeds of the Placing to fund the exploration program
planned for the 2005 field season which will include airborne geophysical surveys, till sampling and
ground geophysics and to provide working capital for the Group.
Risk Factors
The exploration and development of natural resources is a highly speculative activity that involves
a high degree of financial risk. Investors should consider, together with the other information
contained in this document, the risks and other factors attaching to an investment in the Company,
including in particular, the risk factors set out in Parts III of this document.
9
Time: 17:19
Rev: 4
Gal: 0009
Job: 13340I--
Santan Prosp
Date: 15-07-05
Area: A1
Operator: MC
ID Number: 1185
TCP No. 7
PART I
Information on the Company
1.
Introduction
Northwest Territories and Nunavut, Canada. The current exploration portfolio of the Company
consists of the Mackenzie Diamond Project which covers approximately 20 million acres and
which contains a number of prospective diamond bearing areas based on a combination of the
results of analysis generated by Geoinformatics and by the recovery of diamond indicator minerals
in the Field Exploration Program conducted in 2004.
The Company is managed by a group of professionals with extensive experience in the exploration,
development and financing of exploration and mining projects. The Directors believe that
management’s understanding and expertise in the Canadian diamond exploration environment
provide the Company with the requisite skills for the longer term exploration and subsequent
definition of any kimberlite discoveries and therefore provide the Company with the best possible
chance of discovering diamondiferous kimberlites.
In July 2005, the Company signed the Kennecott Agreement with Kennecott, a subsidiary of the
major international mining and resource company Rio Tinto plc, under which Kennecott will
participate in the Placing, contribute to the exploration funding of the Mackenzie Diamond Project
and may earn an interest in any kimberlite and other mineral deposit discovery. Pursuant to the
Kennecott Agreement, Kennecott will invest an initial C$2.5 million in Sanatana Diamonds under
the Placing, will be required to contribute C$2.5 million towards the 2005 exploration program
and may contribute C$2.5 million towards the 2006 exploration program.
2.
History and background
The Company was formed in June 2004 as a private British Columbia company to engage in the
primary diamond exploration and development of the Mackenzie Diamond Project in the NWT
and Nunavut.
The Company entered into an agreement with the Jaeger Joint Venture, effective from July 2004,
whereby the Company acquired, in exchange for 16 million Common Shares and other
consideration, a 100 per cent. participating interest in diamond rights to 420 prospecting permits
with a total acreage of 18,220,103 acres granted to Matthew Mason in February 2004 and located
north of Great Bear Lake in the NWT, subject to the Jaeger Joint Venture retaining a 10 per cent.
production carried interest and a 10 per cent. performance carried interest in such diamond rights
and subject to Matthew Mason retaining a 2 per cent. gross overriding royalty.
Pursuant to the terms of its agreement with the Jaeger Joint Venture, the Company subsequently
acquired a 100 per cent. participating interest in diamond rights to 42 additional prospecting
permits with a total acreage of 1,546,586 acres granted to Matthew Mason in February 2005 and
located in the NWT and Nunavut, subject to the Jaeger Joint Venture retaining a 10 per cent.
production carried interest and a 10 per cent. performance carried interest in such diamond rights
and subject to Matthew Mason retaining a 2 per cent. gross overriding royalty.
Effective from March 2005, the Company exchanged 3,000,000 Common Shares for the 10 per
cent. performance carried interest held by the Jaeger Joint Venture. The Jaeger Joint Venture retains
a 10 per cent. production carried interest in the Company’s diamond rights.
In June 2005, the Company acquired from Jaeger Joint Venture all other mineral rights, excluding
any rights in respect of uranium, to the prospecting permits to which it owns diamond rights,
subject to the Jaeger Joint Venture retaining a 10 per cent. production carried interest and subject to
Matthew Mason retaining a 2 per cent. net smelter royalty.
In June 2005, Matthew Mason executed an amended and restated declaration of trust in which he
acknowledges that he holds recorded title to a total of 462 prospecting permits with a total acreage
of 19,766,689 acres as bare trustee and nominee for and on behalf of the Company to the extent of
10
Time: 19:34
Rev: 2
Gal: 0010
Job: 13340I--
Santan Prosp
Date: 19-07-05
Area: A1
Operator: MC
ID Number: 1186
TCP No. 7
Part I – Information on the Company
any diamonds or other minerals, excluding uranium, located on, in or under such permits,
including the right to explore for and exploit any and all such diamonds or other minerals. The
Company has no rights in respect of uranium.
Between July 2004 and February 2005, Geoinformatics carried out the Geoinformatics
Intervention Project which consisted of collecting and validating all available geological data over
the Mackenzie Diamond Project, compiling this data into 3D databases and generating 3D models
and target areas that are prospective for kimberlite exploration. As part of the remuneration
package for the Geoinformatics Intervention Project, Geoinformatics have retained a one per cent.
Gross Overriding Royalty on the Company’s interests in all diamonds mined from within the area
of the Permits.
Geoinformatics also managed, on behalf of the Company, the Field Exploration Program,
consisting of an extensive till sampling program during summer 2004 that collected over 1,400
samples of glacial tills totalling nearly 60 tonnes. This program is discussed in further detail in
paragraph 8 below. Geoinformatics is also operating and managing the 2005 exploration program
on behalf of the Company pursuant to the Exploration Management Agreement. The 2005
exploration program is discussed in further detail in paragraph 9 below.
3.
Strategy
NWT and Nunavut. The Company’s strategy to achieve this is:
앫
to apply a focussed “value-add” exploration program using an integrated, science and
technology driven approach;
앫
to identify and rank kimberlite targets from the results of this exploration on a timely and
efficient basis; and
앫
to negotiate JVs for drilling and development of these targets with diamond majors.
The overall objective of the Sanatana Diamonds is to focus on the exploration of the Mackenzie
Diamond Project and discover a new world class diamond deposit.
4.
Kennecott Agreement
On 19 July 2005, the Company signed the Kennecott Agreement with Kennecott, a subsidiary of
the major international mining and resource company Rio Tinto plc, under which:
앫
Kennecott will invest C$2.5 million in the Placing and has the right to participate in further
private placements in the Company to take its holding up to a maximum of 9.9 per cent. of the
then enlarged issued share capital of the Company;
앫
Kennecott will contribute C$2.5 million in July 2005 towards the Company’s 2005
exploration program and, at Kennecott’s election, a further C$2.5 million in July 2006
towards the Company’s 2006 exploration program;
앫
The Company will manage and operate the exploration programs; and
앫
If it makes these investments and contributions, Kennecott will earn a 15 per cent. interest in
the Mackenzie Diamond Project and an exploration joint venture will be formed, pursuant to
which Kennecott will be required to contribute 15 per cent. of ongoing exploration costs.
Kennecott has the right to earn up to a 60 per cent. interest in any individual kimberlite or mineral
deposit identified by the Company on the following basis:
앫
Kennecott will earn a 49 per cent. interest in each individual project by completing, at its sole
expense, a bulk sample and a positive feasibility study within 4 years; and
앫
Kennecott will earn a further 11 per cent. interest in each individual project by solely funding
and managing all future evaluation through to such time as a decision to mine is made.
11
Time: 19:26
Rev: 5
Gal: 0011
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MR
ID Number: 1187
TCP No. 7
Upon Kennecott earning this further interest, a development joint venture will be created in respect
of that particular kimberlite or mineral deposit and each party will be obliged to fund the
development of that kimberlite or mineral deposit in proportion to the interest it owns.
From 2008, Kennecott will be required to make a C$1 million investment in the Company each year
to retain the earn in right.
Further details of the Kennecott Agreement can be found in paragraph 10(o) of Part VI of this
document.
5.
The Northwest Territories
The NWT cover approximately 1.17 million square kilometres encompassing 33 communities.
Mining and petroleum development are the primary source of economic wealth for the NWT.
As of December 2002, there were over 42,000 people living in the NWT, approximately half of
whom are aboriginal. Yellowknife is home to 44 per cent. of the population, 29 per cent. live in five
other larger centres and the remainder in small communities with average populations of 400.
Infrastructure
The economy of the NWT is inextricably linked to natural resources, with the exploration and
development of these resources playing a significant role in the history and building of the
infrastructure of the NWT. Mineral and petroleum development continue to be the foundation of
the NWT’s economic development, with two diamond mines in production, a further two in the
pipeline and the possibility of a Mackenzie kimberlite province in the future.
There is a daily air service to the NWT, with connections from major cities in Canada and an
extensive network of regional airlines provide scheduled services to almost all the smaller
communities within the NWT. Road access is limited, with the primary route into the NWT being
the Mackenzie Highway from Edmonton, Alberta (1,508 kilometres south of Yellowknife). Within
the NWT, paved roads exist between Yellowknife and Hay River.
Government regulation and legislation
In the NWT, the Minister of the Department of Indian and Northern Affairs Canada (“DIAND”) is
the head federal minister within the NWT.
The Canada Mining Regulations cover mineral tenure activity and are summarised in more detail in
paragraph 10 below.
Land situation
Aboriginal and Territorial Relations (“ATR”) co-ordinates the work necessary to meet the regions
obligations under the settled land claims. The ATR provide regional representation, support and
advice toward the successful conclusion of land claim and self government agreements, liaising and
providing advice in support of political development in the NWT and supporting the
Intergovernmental Forum. The duty to consult with aboriginal governments is satisfied through the
land management regimes set up under each land claim agreement.
As a result of the land claim agreements, the holder of the fee simple title to the land which is
covered by the Permits will either be Her Majesty the Queen in right of Canada, or the applicable
aboriginal land claim organisation for those parcels for which title has been transferred to the
applicable aboriginal land organisation, in settlement of land claims. As such, access by the
Company to such land, and the granting of rights of way, permits and leases, is negotiated with the
applicable land owner, and is subject to the policies and procedures of each applicable land owner.
The report on Mineral Potential of Indian Reserves Lands for the NWT was completed in 1989.
The NWT has seven claims areas, of which four claims covering 67 per cent. of the NWT have been
settled.
12
Time: 22:22
Rev: 1
Gal: 0012
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DD
ID Number: 1188
TCP No. 7
Native land claim settlements are more advanced in the NWT than they are in most other areas of
Canada. The Permits are located entirely within the Gwich’in, Sahtu and Inuvialuit settlement
regions. With the exception of the Gwich’in Comprehensive Land Claim Agreement, Sahtu Dene
and Metis Comprehensive Land Claim Agreement and the Inuvialuit Final Agreement pertaining to
certain areas in the NWT and which apply to the land covered by the Permits, the Company is not
aware of any other aboriginal land claims having been asserted or any legal actions relating to
native issues having been instituted with respect to any of the land which is covered by the Permits.
6.
Location of the Mackenzie Diamond Project
The Mackenzie Diamond Project consists of an extensive land position covering approximately
20 million acres positioned to the north of Great Bear Lake in the NWT and Nunavut and lies
approximately 700 kilometres northwest of the town of Yellowknife, Canada.
The location of the Mackenzie Diamond Project benefits from the infrastructure that has been built
as a result of the extensive oil and gas exploration and development that has taken place in the
region over the last 40 years. Access into the Mackenzie Diamond Project area is by ice road in
winter and by air throughout the year. The entire Mackenzie Diamond Project area is covered by ice
and snow from October to June and temperatures range from a maximum of 20쎷C in summer to a
minimum of 앏45쎷C in winter.
The bulk of the Mackenzie Diamond Project area is covered by extensive thick glacial deposits that
reflect a complex and variable glacial history. Palaeozoic and Mesozoic sediments have been
identified along the Western Inland Seaway, east of the Mackenzie Mountains, and have attracted
great interest from oil and gas exploration companies. Large formations of Palaeozoic shales,
organic-rich shales, reef and platform carbonates are present.
The existence of an underlying Archaean craton in the Mackenzie Diamond Project area has been
theorised by geologists for years though no exposures have yet been identified. The discovery of
kimberlite indicator minerals (pyrope, chromite and ilmenite) with fragile surface textures such as
leucoxene alteration on ilmenite and kelyphite coronas on pyrope garnet, suggests that
undiscovered kimberlites may occur in the area and supports the existence of the Mackenzie Craton
beneath the glacial cover and Palaeozoic and Mesozoic sediments.
7.
Background to diamond exploration
Diamond exploration follows a reasonably consistent sequential program. The initial aim is to
confirm whether or not rocks exist which have been formed at the correct pressures and
temperatures (which is normally achieved through surface sampling and the identification of so
called indicator minerals) and also the presence of deep seated structural features that could have
allowed this material to be transported to surface (which is normally achieved through regional
mapping and interpretation of geophysical data). Once a tectonically favourable area has been
outlined, exploration moves onto locating individual kimberlite intrusives, pipes or dykes
themselves and, once located, onto assessing whether or not these are diamondiferous and, if
diamondiferous, whether or not they contain sufficient diamonds of adequate size and quality to be
exploited commercially.
Diamondiferous kimberlites tend to form in clusters. Once diamondiferous kimberlites have been
reported in an area, this tends to spark an increase in exploration activity which often results in the
location of further diamondiferous kimberlites in relatively quick succession. This process has been
underway now for several years in the Slave Province of Canada which is to the southeast of the
Mackenzie Diamond Project. Almost 300 diamondiferous kimberlites have now been discovered in
this province, all in the past 12 years, and several diamond mines, including most notably Diavik
and Ekati (which came into production in 2003 and 1998 respectively), are now being mined and
others are in the advanced stages of evaluation and/or construction.
In the case of the Mackenzie Diamond Project, exploration is still at a relatively early stage and no
kimberlites have yet been located or diamonds discovered. Notwithstanding this, indicator
minerals have been identified in the till sampling, which confirms that the host rocks from which
13
Time: 22:19
Rev: 0
Gal: 0013
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MR
ID Number: 1189
TCP No. 7
these were derived were formed at the appropriate temperatures and pressures for diamond
formation and diamonds have already been discovered to the north and west of the Mackenzie
Diamond Project area by a Darnley Bay Resources Ltd/De Beers joint venture and Diamondex
Resources Ltd, respectively. Further details of these discoveries are set out in paragraph 4 of Part IV
of this document entitled “Historical Diamond Exploration”.
8.
Exploration completed by Sanatana Diamonds
The Company has completed one field season of till sampling and a program of geophysical
exploration and has interpreted the results of both to target exploration in 2005.
Geoinformatics Intervention Project
Between July 2004 and February 2005 Geoinformatics carried out an intervention project over the
Mackenzie Diamonds Project Area with an objective to “value add” to the Company’s large land
position by determining prioritised areas for kimberlite exploration and to generate kimberlite
targets for testing. The first step in carrying out the Geoinformatics Intervention Project was the
compilation of a conceptual diamond model which incorporates the following salient features:
앫
diamonds are formed under pressure and temperature conditions found at depths of greater
than 150km;
앫
most diamonds are believed to have crystallised within eclogite or peridotite layers at the
lithosphere-asthenosphere boundary of the earth;
앫
fragments of these layers can be broken off during the rapid emplacement of a kimberlite
magma; and
앫
the kimberlite magma must originate below the diamond/graphite phase line if it is to bring
diamonds to surface.
Most kimberlites/diamond mines discovered since 1950 were located using scientific prospecting
methods and the Geoinformatics Intervention Project took this scientific approach to higher levels
through a number of specific stages. These included an extensive data search, data audit
(validation) and compilation into a 3D database using the leading edge FRACSIS technology
systems. This allowed a 3D modeling exercise to be undertaken, prioritising potential areas and
generating kimberlite targets by:
앫
the development of a conceptual model for deposit formation;
앫
the recognition of a prospective terrain;
앫
the structural interpretation of geophysical data; and
앫
the recognition of geochemical and geophysical signatures of individual kimberlites.
Geoinformatics applied the combination of science and technology to the 3D databases and looked
for analogies with existing known kimberlite bearing areas e.g. the Slave Craton, in the NWT.
Geoinformatics concluded that successful exploration in the Mackenzie Diamond Project area
depended on the recognition of potentially diamondiferous terrain features and the targeting of
kimberlite fields within these terrains using a combination of gravity, magnetic and seismic data.
Furthermore, they concluded that the recognition of a diamondiferous terrain within the
Mackenzie Diamond Project area would include those areas of the craton that are underlain by a
deep lithospheric keel. These keels appear to be a pre-requisite for the long term stability of
diamonds. In order to recognise diamondiferous terrains, Geoinformatics:
앫
proposed that kimberlites lie on the basement highs and that these basement highs could
indicate regions of deeper lithosphere;
앫
used seismic reflection data to interpret the Achaean basement surface beneath the overlying
sediments;
14
Time: 22:19
Rev: 0
Gal: 0014
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1190
TCP No. 7
Time: 22:19
앫
proposed that, on the basis that deeper parts of the lithosphere would be expected to show a
long wavelength gravity low, by the modelling of the gravity data in combination with the
seismic data, it is possible to identify areas where the craton extends to a depth where
temperatures and pressures should be sufficient to support the formation of diamonds; and
앫
proposed that additional interpretation of the gravity and topography data could suggest that
the presence of a rigid, thick block which could represent a deep keel.
Geoinformatics concluded that the detection of kimberlite fields within a recognised terrain could
be undertaken on the following basis:
Geophysical signatures
airborne geophysical surveys and processing provide a direct
detection tool for kimberlites;
Magnetic data
the interpretation of magnetic data has identified several possible
kimberlites; and
Structural analysis
trans-craton structures can be seen in the regional gravity data and
these have two dominant orientations, north-northwest and
west-northwest. Kimberlites within the Mackenzie Diamond
Project area are expected to occur near either single structures or the
intersection of these structures. Kimberlites in the Slave Craton (in
the NWT) often lie near these structures.
The main conclusions of the Geoinformatics Intervention Project were that:
앫
the modelling of the gravity data in combination with the seismic data has identified areas
where the craton extends to a depth where temperatures and pressures should be sufficient to
support the formation of diamonds;
앫
the interpretation of gravity, magnetic and seismic data has identified several deep seated
structures that could provide pathways for magma movement towards surface; and
앫
the interpretation of magnetic data has identified several possible kimberlites.
Field Exploration Program
The Field Exploration Program comprised an interpretation of the surficial geology, a regional
sampling program covering the Mackenzie Diamond Project area for diamond indicator minerals
and a multi-element ICP analysis of the fine fraction of the same samples. In total over 1,400
samples, with weights varying from 15 to 20kg and totalling approximately 60 tonnes, were taken
primarily in glacial till but also from beaches, eskers, glaciofluvial sands and streams.
In total some 1,981 grains of possibly kimberlitic origin were identified in the field samples
including 171 pyrope garnets, 4 eclogitic garnets, 342 chrome diopsides, 1,095 chromites, 189
ilmenites, 19 orthopyroxenes and 161 olivines. A selection of these have been submitted to
Geological Consulting Inc. in London, Ontario for electron microprobe analysis and confirmation
of kimberlitic origin. This analysis is ongoing.
Approximately 60 per cent. of the total samples collected contained indicator minerals, the
maximum count in any one sample being 91. Plotting of these samples which contain indicator
minerals has revealed a series of indicator clouds that suggest the general locality of possible
kimberlite clusters but are not sufficiently closely spaced to confirm the exact locations of
individual kimberlites.
The geochemical sampling, conducted as part of the Field Exploration Program, together with the
probe analysis to date, have demonstrated that the Mackenzie Diamond Project has the potential to
host diamondiferous kimberlite clusters.
9.
Current and future exploration programs
The exploration program planned for the 2005 field season is based on the continuation of the two
pronged exploration strategy which has been employed to date. The Company is planning an
extensive exploration program in 2005 that will consist of:
15
Rev: 0
Gal: 0015
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1191
TCP No. 7
Airborne geophysical surveys
앫
Flying approximately 130,000 line kilometers in the area south of 68 degrees north latitude,
which commenced in Spring 2005; and
앫
Flying approximately 60,000 line kilometers in the area north of 68 degrees north latitude,
commencing in Summer 2005.
Summer 2005 Exploration Program
This will involve following up on the targets indentified during the airborne geophysical surveys,
targets previously identified during Summer 2004, multi sourced anomalous areas of potentially
diamondiferous kimberlite clusters and new areas of kimberlite prospectivity, with the following
fieldwork:
앫
closer density till sampling;
앫
ground truthing and prospecting; and
앫
ground geophysics.
During Winter 2005/2006, the results of the 2005 exploration programs will be processed and
targets will be generated and prioritised between those requiring follow up field work in 2006 or
those which are drill ready for testing during the 2006 field season. High priority drill targets that
emerge during this 2005 field program may be drill tested in Autumn 2005.
10. Mining regulation in Canada
In Canada, surface rights and mineral rights came with the purchase of land until some time in the
early 1900s, depending on the jurisdiction. Since then, mineral rights have been government-owned
and cannot be purchased, but only leased, by individuals or companies. As a result, the mineral
rights on more than 90 per cent. of Canada’s land are currently owned by the Canadian
government.
Where mineral rights are privately owned, they can be sold independently of surface rights, so that
surface and mineral rights on the same property can be held by different owners. In accordance with
the Canadian law, the regulation of mining activities on publicly owned mineral leases falls under
provincial/territorial government jurisdiction. In the NWT, DIAND is responsible for the
administration of Crown lands, including minerals under the Territorial Lands Act and its
regulations including the Canada Mining Regulations. There are three forms of tenure under the
Canada Mining Regulations: Prospecting Permits, Mineral Claims and Mineral Leases.
Prospecting permits are the lowest of these forms, but they are also the least expensive to maintain.
Mineral claims and mineral leases are more secure and more expensive forms of tenure. Prospecting
permits provide a measure of security to a prospector wishing to explore large geographic areas and
identify specific locations to take to mineral claim or mineral lease.
Prospecting Permits
Prospecting permits allow the holder the exclusive right to prospect in a specified area, which is
approximately 18,750 ha (45,000 acres) in size. A prospecting permit is valid for a period of 3 or 5
years, depending on the area. North of 68 degrees north latitude a permit can be held for 5 years.
South of 68 degrees north latitude a permit can be held for 3 years. The Permits are located both
North and South of 68 degrees north latitude. The Canada Mining Regulations prescribe minimum
levels of exploration work which prospecting permit holders must conduct in their permit area in
order to maintain the permit in good standing. North of 68 degrees north latitude, permit holders
must expend at least 10 cents per acre during a first two-year work period, 20 cents per acre for a
second two-year work period and 40 cents per acre during a final one-year work period to maintain
their permit in good standing. South of 68 degrees north latitude, permit holders must expend at
least 10 cents per acre during a first one-year work period, 20 cents per acre for a second one-year
work period and 40 cents per acre during a final one-year work period. Provided this required
16
Time: 22:19
Rev: 0
Gal: 0016
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DD
ID Number: 1192
TCP No. 7
exploratory work has been completed, a permit holder may locate mineral claims within their
permit area. So long as a prospecting permit is in good standing, no person other than the permit
holder or a person authorised in writing by the permit holder to act on his behalf may locate claims
within the prospecting permit area.
Mineral Claims
Mineral claims allow the holder to prospect and exploit any minerals contained within the relevant
claim, provided that all representation work commitments have been met and the relevant federal
and territorial legislative requirements adhered to. Once recorded, a mineral claim is valid for a
period of two years. Thereafter, the mineral claim can only be renewed if the holder has completed a
certain amount of representation work on the mineral claim. The mineral claimholder must
complete work to a value of at least $4.00 per acre during the first two-year period. Thereafter, the
mineral claim can be renewed on an annual basis, as long as representation work to a value of at
least $2.00 per acre is completed each year. The Canada Mining Regulations require that a mineral
claim be taken to lease after 10 years, or before production begins on the mineral claim, whichever
is first.
Mineral Leases
To take a mineral claim to lease, the holder of the mineral claim must hold undisputed title to the
relevant claim, record a survey of the claim with the Mining Recorder, have completed
representation work on the mineral claim to a value of $10 per acre, and must submit the required
application and pay the prescribed fees. A mineral lease is issued for 21 years, and is renewable for a
further 21 year term. A mineral lease allows its holder to prospect, develop, extract and sell
minerals from the lease area subject to the requirements of a Land Use Permit or lease issued under
the Territorial Land Regulations.
11. Directors, officers and management
The Directors believe that the present Board and operational management structure is appropriate
for, and reflects, the current scale of the Company’s proposed operations.
Summary Director biographies are set out below.
Richard Prickett (Non-executive Chairman), aged 53, is a Fellow of the Institute of Chartered
Accountants and has 30 years experience in the corporate finance sector specialising in natural
resources. He was appointed as finance director of Brancote Holdings plc in 1992 and became
executive chairman from 1994. Brancote Holdings plc was an AIM listed mineral exploration
group which, from 1996, focused its activities in Argentina and developed the Esquel Gold Project
which culminated in a takeover of the company by Meridian Gold Inc. for US$368 million in July
2002. Richard is currently a director of Landore Resources Ltd, The Capital Pub Company plc and
Patagonia Gold plc.
Glenn Laing (Chief Executive Officer), aged 53, holds a BSc Eng (Mining Geology) degree from the
University of Witwatersand, Johannesberg and an MSc (Mining Engineering) degree from the
Colorado School of Mines, USA and has been involved in the natural resources and financial sectors
for over 30 years. He is currently president and chief executive officer of St. Andrew Goldfields Ltd,
Heritage Explorations Limited, Jumbo Development Corporation, Glass Earth Limited and
president of Silverbridge Capital Inc. He has extensive experience in the diamond mining and
exploration industry which began in 1981 with over 10 years of alluvial, marine and underground
diamond mining and exploration experience in South Africa. In the 1990s Glenn’s experience
extended to Canadian diamond exploration as president and chief executive officer of Lytton
Minerals Limited and Tahera Diamond Corporation.
Peter Miles (Executive Vice President) aged 46, holds a B.Comm. in accounting and management
information systems from the University of British Columbia. He has over 20 years of experience in
investment banking and retail stock brokerage and was a Vice President of Midland Doherty Inc.,
Dean Witter Reynolds, and CIBC World Markets. Over the past several years Mr. Miles has
arranged more than $20,000,000 in financings for a number of public and private companies,
primarily in the natural resource sector. Mr. Miles is a co-founder of the Jaeger Joint Venture.
17
Time: 22:19
Rev: 0
Gal: 0017
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1193
TCP No. 7
Edward Marlow (Non-executive Director), aged 41, holds an MBA degree from Cranfield
University, a post graduate certificate in Law and is a graduate of Manchester University, RMA
Sandhurst and of the US Army Command and General Staff College. He is currently the Director of
UK Private Banking at Insinger de Beaufort and a non-executive director of Award International
plc. Prior to that he held similar banking positions at UBS and Citigroup and before this he was an
officer in the British Army.
Merfyn Roberts (Non-executive Director), aged 55, has a BSc in geology from Liverpool
University, a MSc degree in Geochemistry from Oxford University and is an Associate of the
Institute of Chartered Accountants. He has extensive experience in the financial and investment
sectors. He is currently a director of Ocean Resources Capital Holding plc and investment director
of Arc Advisers Limited. He ws formerly an investment director of Endeavour Securities Limited
and was investment manager with Minorco Services (UK) Limited.
Harley Hotchkiss (Non-executive Director), aged 77, is a business and community leader who has
made great contributions to health and sports development in Canada. After World War II service
in the Canadian Merchant Marine he graduated in geology and worked as a geologist, manager and
president of a number of petroleum companies. He is now self-employed with business interests in
oil and gas, real estate, agriculture and professional sports. He is a member of several professional
societies relating to petroleum and mineral exploration and has served on a number of corporate
Boards. He was previously a director of Alberta Energy Company, Landin Resources, Jascan
Resources, TransCanada Pipelines and Telus Corporation in Canada. He is Chairman of the
Alberta Heritage Foundation for Medical Research, part owner and Governor of the Calgary
Flames Hockey Club and Chairman of the Board of Governors of the National Hockey League. He
is an Officer of the Order of Canada, a member of the Alberta Order of Excellence and holds an
Honourary Doctor of Laws Degree from the University of Calgary and an Honourary Doctor of
Science Degree from Michigan State University.
Senior management
Buddy Doyle (Vice-President Exploration), aged 45, has extensive diamond exploration and
development experience. Most recently Mr. Doyle was vice-president, diamonds for Kennecott
Canada Exploration Inc. where, for the last ten years, he has managed a successful exploration
team which discovered and then brought the Diavik diamond project in the NWT to pre-feasibility
project handover. He also played a key role on the Lihir gold project, with involvement in the
discovery and definition of the Minifie ore body. Mr. Doyle has had a successful history of
discovery in multi-commodity types, including over 100 kimberlites in Canada.
Employees
As the Company is in the early exploration phase, its operations have been structured in a manner
that brings in the requisite skills and services to the Company in order to operate efficiently and at
the same time containing overhead costs. It is anticipated that the Company will not recruit any full
time employees until the proposed exploration programs are complete, with independent
contractors being engaged to undertake the exploration programs. The Directors believe that there
are sufficiently well qualified contractors available in Canada to fulfil the Company’s current
requirements.
12. Share Option Plan
The Directors consider that an important part of the Company’s future remuneration policy should
include the grant of equity incentives through the grant of share options to directors and employees.
The Company has therefore adopted and implemented the Share Option Plan. As at the date of
Admission, no options have been granted by the Company under the Share Option Plan. Further
details of the rules governing the Share Option Plan are set out in paragraph 9 of Part VI of this
document.
13. Reasons for Admission and use of proceeds
The Directors believe that the Company has reached a stage in its development where it will benefit
from the Admission and the Placing. In particular, the Directors believe that the future growth
18
Time: 22:28
Rev: 1
Gal: 0018
Job: 13340I--
Date: 19-07-05
Area: A1
Operator: MC
ID Number: 1194
TCP No. 7
Time: 19:27
potential of the Company should be enhanced by an AIM flotation which the Directors consider
will help to generate increased visibility and credibility for the Company in the market place.
Furthermore it is expected that an AIM flotation will provide the Company with the possibility to
access further capital in the future and the ability to provide quoted share based incentives to its
Directors, employees and consultants.
The Company intends to apply the net proceeds of the Placing (amounting to approximately £2.1
million) to fund the working capital requirements of the Company based on the exploration
programs detailed in paragraph 9 above entitled “Current and future exploration programs” and
set out in Part IV of this document.
14. Details of the Placing
The Company is proposing to raise approximately £2.4 million (before expenses) through a
conditional placing by Insinger de Beaufort and a subscription by certain Canadian investors of a
total of 2,890,398 new Common Shares representing 8.6 per cent. of the Enlarged Share Capital at
the Placing Price pursuant to the Placing Agreement, the principal terms of which are summarised in
paragraph 10(a) of Part VI of this document. The Placing Shares will, when issued, rank pari passu
in all respects with the Existing Common Shares.
15. Summary financial information
The financial information of the Company is provided in the accountants’ report on the Company
included in Part V of this document.
16. Lock-in and orderly market arrangements
Immediately following Admission, the Directors, related parties and significant shareholders will
be interested in an aggregate of 14,386,373 Common Shares, representing 42.9 per cent. of the
Enlarged Share Capital.
In accordance with the AIM Rules, the Directors, related parties and significant shareholders have
agreed that they will not (save in limited circumstances) dispose of any of their respective interests in
Common Shares held at the time of Admission (and any Common Shares issued pursuant to the
exercise of options or warrants) for a period of 12 months after Admission, and have agreed to
certain restrictions on disposal for the following year so as to ensure an orderly market for the share
capital of the Company.
Certain other Shareholders, who, following Admission, will be interested in an aggregate of
9,185,967 Common Shares, representing 27.4 per cent. of the Enlarged Share Capital, have agreed
not to dispose of Common Shares or interests in Common Shares without the prior written consent
of the Company and Insinger de Beaufort for a period of one year following Admission.
Further details of the lock-in and orderly market arrangements are disclosed more fully in
paragraphs 10(c) and 10(d) of Part VI of this document.
17. Corporate Governance and share dealing code
The Directors support high standards of corporate governance and confirm that, following
Admission, they intend to comply with the Combined Code published by the Committee on the
Financial Aspects of Corporate Governance so far as practicable taking into account the size and
stage of development of the Company.
The Directors will hold regular meetings at which operating and financial reports will be
considered. The Board will be responsible for formulating, reviewing and approving the
Company’s strategy, budgets, major items of capital expenditure and senior personnel
appointments.
The Audit Committee consists of three Non-executive Directors of the Company and will be
chaired by Richard Prickett. It will meet at least three times a year. The Audit Committee is
responsible for ensuring that the financial performance of the Company is properly monitored,
controlled and reported on. It will also meet the auditors without executive Board members being
present and review reports from the auditors relating to accounts and internal control systems.
19
Rev: 6
Gal: 0019
Job: 13340I--
Date: 21-07-05
Area: A1
Operator: KW
ID Number: 1195
TCP No. 7
Time: 20:22
The Remuneration Committee, consisting of two Non-executive Directors and chaired by Richard
Prickett, will review the performance of executive Directors and set the scale and structure of their
remuneration and the basis of their service agreements with due regard to the interests of
shareholders. In determining the remuneration of executive Directors, the Remuneration
Committee will seek to enable the Company to attract and retain executives of the highest calibre.
The Remuneration Committee will also make recommendations to the full Board concerning the
allocation of incentive shares to employees. No Director will be permitted to participate in
discussions or decisions concerning his own remuneration.
The Company has adopted a code governing share dealings by Directors and key employees which
is appropriate for an AIM quoted company and in accordance with Rule 21 of the AIM Rules and
applicable Canadian securities laws.
18. Dividend policy
Any future decision to declare dividends on Common Shares will be made by the Directors
depending upon the financial requirements of Sanatana Diamonds to finance growth, the financial
condition of Sanatana Diamonds and other factors which the Directors may consider appropriate
in the circumstances. The Directors anticipate that future earnings will be retained for development
of its business and do not anticipate the payment of dividends to Shareholders for the foreseeable
future.
19. Canadian takeover law
In Canada, securities laws are a matter of provincial/territorial jurisdiction and as a result,
take-over bids are governed by the securities legislation in each province or territory.
In Ontario and British Columbia, a takeover bid is generally defined as an offer to acquire
outstanding voting or equity securities of a class made to any holder of the securities subject to the
offer to acquire and resident in such province, if the securities subject to the offer to acquire,
together with securities held by the offeror and any person acting in concert with the offeror,
constitute in aggregate 20 per cent. or more of the outstanding securities of that class of securities at
the date of the offer to acquire. Subject to limited exemptions, a takeover bid must be made to all
holders of securities of the class that is subject to the bid who are in Ontario or British Columbia, as
the case may be, and must allow such security holders 35 days to deposit securities pursuant to the
bid. The offeror must deliver to the security holders of the target company a takeover bid circular
which describes the terms of the takeover bid and the directors of the target company must deliver
to the security holders of the target company a directors’ circular within fifteen days of the date of
the bid, making a recommendation to security holders to accept or reject the bid.
20. Reporting issuer status
The Company intends to file shortly after Admission a non-offering prospectus with a view to
becoming a “reporting issuer” under Ontario securities laws.
21. Taxation
The attention of prospective investors is drawn to paragraph 13 of Part VI of this document.
Shareholders who are in any doubt as to their tax position should consult their professional
advisers immediately.
22. Admission, settlement and CREST
The Common Shares will be issued in registered form. Shares of non-UK companies cannot be held
and transferred directly into the CREST system. CREST is a paperless settlement system allowing
securities to be transferred from one person’s CREST account to another without the need to use
share certificates or written instruments of transfer. Shareholders who wish to hold and transfer the
rights to Common Shares in uncertificated form may do so pursuant to a Depository Interest
arrangement to be established by the Company. Depository Interests facilitate the trading and
settlement of the rights to shares in non-UK companies into CREST.
20
Rev: 2
Gal: 0020
Job: 13340I--
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1196
TCP No. 7
Time: 18:10
The Common Shares will not themselves be admitted to CREST. Instead Computershare will issue
Depository Interests in respect of the Common Shares. The Depository Interests will be
independent securities constituted under English law that may be held and transferred through the
CREST system. Depository Interests will have the same security code (ISIN) as the underlying
Common Shares. The Depository Interests will be created and issued pursuant to a deed poll which
was entered into by Computershare on 23 May 2005 and which will govern the relationship
between Computershare and the holders of the Depository Interests.
Common Shares represented by Depository Interests will be held on bare trust for the holders of the
Depository Interests.
Each Depository Interest will be treated as one Common Share for the purposes of determining
eligibility for dividends, issues of bonus stock and voting entitlements. In respect of dividends, the
Company will put Computershare (or a third party custodian if appointed) in funds for the
payment and Computershare will transfer the money to the holders of the Depository Interests. In
respect of any bonus stock, the Company will allot any bonus stock to Computershare and will
issue such bonus stock to the holder of the Depository Interest (or as such holder may have directed)
in registered form. In respect of voting, Computershare will cast votes in respect of the Common
Shares as directed by the holders of the Depository Interests which the relevant Common Shares
represent. Application has been made for the Depository Interests in respect of the underlying
Common Shares to be admitted to CREST with effect from Admission.
23. Additional information
The attention of potential investors is drawn to Parts II to VI of this document, which provide
additional information, and in particular the risk factors set out in Part III entitled “Risk Factors”.
21
Rev: 2
Gal: 0021
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DD
ID Number: 1197
TCP No. 7
PART II
Diamonds and the Diamond Industry
Diamonds
Geology of Diamonds
Diamonds are one of the most recognised, most brilliant and hardest of all gem minerals.
Diamond is carbon in its most concentrated form. Except trace impurities like boron and nitrogen,
diamond is composed solely of carbon. Diamond differs from common graphite simply in its crystal
structure.
Most diamonds consist of primeval carbon that has crystallised at very high pressures. This
suggests that diamonds are created by geological processes at great depth within the Earth,
generally more than 150 km down, in a region beneath the crust known as the mantle.
Figure 1: Diamond model
Source: American Museum of Natural History
Diamonds were created up to 3 billion years ago and they rise to the Earth’s surface in molten rock
or magma that originates at great depths, carrying diamonds and other minerals from the earth’s
mantle. This magma rises through deep cracks and fissures and erupts in very small but violent
volcanoes. Just beneath such volcanoes it forms a carrot-shaped “pipe” filled with volcanic rock,
mantle fragments, and some embedded diamonds. The volcanic rock is called “kimberlite” after
the city of Kimberley, South Africa, where the pipes were first discovered in the 1870’s. The
complex volcanic magmas that solidify into kimberlite are not the source of diamonds, only the
elevators that bring them to the Earth’s surface. The “pipes” or “diatremes” can be up to 1-1.5 km
in diameter, which then contracts downwards eventually diminishing in size, perhaps over 2-3
kilometres, to long, narrow 1 to 5 meter wide kimberlite dykes. The complete kimberlite
phenomenon is often called a “pipe” although the upper cone part is usually absent because of
erosion.
22
Time: 22:19
Rev: 0
Gal: 0022
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DD
ID Number: 1198
TCP No. 7
Part II – Diamonds and the Diamond Industry
Figure 2: Kimberlite “pipe”
Source: American Museum of Natural History
Kimberlite magma rises through the earth’s crust in networks of cracks or dykes. The carrot-shaped
pipes or diatremes form near the Earth’s surface as a result of an explosive eruption. The base of the
pipe, or the “root-zone” starts in fissures a few kilometres beneath the surface at the time of the
eruption. When the kimberlite magma encounters fractures in the earth’s crust at this level, gases
are rapidly released from the rising magma – akin to releasing the cork in a bottle of champagne –
and this drives the eruption at supersonic speed, blowing out the fragment laden kimberlite to form
the volcanic pipe. Such eruptions must be incredibly violent; none are known to have occurred
during human history.
For a kimberlite to be diamondiferous, it must originate at or below the zones of diamond bearing
material within the mantle root zone and within the diamond stability field (150 -200 km below the
Earth’s surface). See Figure 1: Diamond Model. Kimberlites that do not contain diamondiferous
mantle material or originate above the diamond stability field will be completely barren of
diamond, as is the case for 70 per cent. of all known kimberlite occurrences.
Geological processes create two basic types of diamond deposits, referred to as primary and
secondary sources. Primary sources are the kimberlite pipes and dykes. Secondary sources, created
by erosion, include such deposits as surface scatterings around a pipe or concentrations in river
channels or ocean coasts. Mining of deposits depends on sufficient concentration and quality of
diamonds. In North America, advancing glaciers have dispersed the eroded material, and
kimberlite pipes and dykes have been found up-ice and independent of the actual drainage.
Exploration for primary sourced diamonds is focussed on kimberlite pipes and dykes in the oldest
portions of continents known as cratons. Cratons are divided into the oldest Achaean-age Archons
that are older than 2,500 million years, and Proterozoic-age Protons which are 1,600-2,500 million
years old.
23
Time: 22:19
Rev: 0
Gal: 0023
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1199
TCP No. 7
Most primary deposits are found in stable Archons within intrusive pipes or dykes or in overlying
platforms of younger sedimentary rocks. Kimberlite pipes do not usually occur in isolation.
Kimberlites typically occur as clusters within the stable cratons, typically averaging 6-40 pipes per
cluster. Each cluster can cover an area from a radius of 10 km to over 75 km. The Lac de Gras area
in the Slave Craton of Canada is among the most prolific cluster of pipes in the world with over 200
pipes of which at least 14 are confirmed as economic at present.
Quality of diamonds
The majority of diamonds produced are not suitable for gem stones and are known as “industrial”
diamonds.
The minority, 5 to 20 per cent. of the diamonds are known as gemstones and the beauty, rarity and
price of a gem diamond depends on the interplay of what is known as the 4Cs, namely cut, clarity,
carat and colour. The 4Cs are used throughout the world to classify the rarity of diamonds.
Diamonds with the combination of the highest 4C ratings are rarer and consequently more
expensive.
Uses of diamonds
It is believed that diamonds have been prized as a gemstone as well as for their more industrial uses
since at least the 4th century BC. Diamonds first began appearing in European jewellery in the 13th
century but remained a rare gem, associated with the aristocracy, until the 1870’s, when the first
South African discoveries began to reach more public hands. Today, despite the increasing numbers
of diamonds that have been recovered and polished annually around the world, diamonds are still
treasured gems.
Diamond is fundamentally an industrial mineral, with some 80 per cent. of the diamonds mined
annually being used in three primary industrial roles; it is used as a cutting tool; it is imbedded in
other material and used as a tool or abrasive and it is turned to a powder or paste for grinding and
polishing. It is commonly used to fashion stones, ceramics, metals and concrete, as well as glass
lenses, gems and computer chips.
Production of diamonds
Most of the diamond deposits first discovered were alluvial, being concentrations in streambed or
riverbed sand and gravel. They are still actively exploited in many ways, from the most primitive to
the highly sophisticated. Irrespective of whether the mining operation uses shovels or earth-movers,
the basic process involves removing the overlying barren ground, extracting the diamonds from the
surrounding materials and, nowadays, restoring the landscape when finished.
Mining of diamond-bearing pipes starts with the excavation of a pit into the pipe. In this open cast
mining process, the initially loose and eventually hard ore material is removed with large shovels
and ore-trucks. Hard rock is drilled and blasted with explosives so the broken material can be
removed. When deep rich ore warrants it, the mining goes underground with vertical or decline
shafts descending to horizontal passageways to enter the pipe.
Once a mining operation yields ore, the diamonds are separated from the other materials and
graded for gem or industrial use.
The Diamond Industry
Geography of diamonds
For 1,000 years, starting roughly with the 4th century BC, India was the only source of diamonds.
In 1725, important sources were discovered in Brazil, and in 1866, diamonds were discovered in
Southern Africa. The magnitude of the Southern African find was enhanced in the 1870’s with
numerous alluvial and then the first ever in situ discoveries. In 1871, diamonds were found on the
Vooruitzicht estate of the De Beer brothers, whose name endured to become what is today the
dominant diamond house. Vooruitzicht was renamed Kimberley. However, only a few diamond
deposits were known until the 20th century, when scientific understanding and technology
extended diamond exploration and mining around the globe.
24
Time: 22:19
Rev: 0
Gal: 0024
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1200
TCP No. 7
In North America, isolated finds of diamonds have been recorded since the early 1800’s. Over the
past 160 years, diamonds have been identified in, inter alia, Indiana, Michigan, Ohio, Arkansas,
Saskatchewan and Ontario. The only attempt at commercial production occurred in Arkansas in
the early 1900’s on the Prairie Creek pipe. The pipe produced the then largest diamond found in
North America, the 40.23 carat Uncle Sam. Production from Prairie Creek was sporadic in part due
to inadequate diamond recovery. Since the 1970’s, Prairie Creek, as part of an area called the Crater
of Diamonds, has been designated as a State Park.
Over the period 1970-1990, exploration in North America for diamonds met with only limited
success; that being the identification of kimberlites. None had exhibited commercial viability. This
all changed in 1991 with the discovery of diamonds at Point Lake, in the NWT, which would result
in Canada becoming a major player in the world’s diamond industry.
Just 14 years after diamonds were first discovered in the NWT, there are now two major mines,
Ekati and Diavik, on stream. A third, Jericho, is commencing construction in 2006 and a fourth,
Snap Lake, announced in May 2005 that it was proceeding to production in 2007.
In 2003, Canada’s NWT mines produced 11.2 million carats, 7.5 per cent. of the world total by
weight, worth an estimated value of US$1.24 billion, which is over 12 per cent. of the world total by
value, making Canada the third largest producer of diamonds in the world, behind Botswana and
Russia but surpassing South Africa and Angola.
World Diamond Industry
World natural diamond production for 2003 has been estimated at a total of 144 million carats
with a value of US$9.4 billion.
About 20 per cent. of this volume is gems, which will be polished and set into diamond jewellery
and 45 per cent. are near-gem qualities, which would have been graded as industrial 40 years ago
but are now polished by the vast low-cost Indian cutting industry. The balance is of industrial
quality. Although more than 90 per cent. of the industrial diamonds are produced synthetically,
there are still some preferred uses of natural stones.
De Beers is the largest diamond miner in the world. Its mines in Botswana, South Africa, Namibia
and Tanzania produced 41 per cent. (estimated at US$3.9 billion) by value or 31 per cent. by
caratage (43.9 million carats) of the world’s 2003 production. The company’s marketing arm, the
Diamond Trading Company (“DTC”), sold 48 per cent. of world total production; a steep fall from
the recent past when (in 2000) the company’s market share was about 60 per cent. and the 1970s
and 1980s when it was 80 per cent. DTC also bought US$ 634 million worth of diamonds from
Russia during 2003.
Botswana was again the world’s number one diamond-producing country in 2003 by value
(estimated at US$2.48 billion) and only marginally behind Australia in carats mined (30.4 million
carats).
South Africa contributed an estimated 12.4 million carats to the world’s total production, which
represents about 11 per cent. by value (US$1.1 billion), 96 per cent. of which comes from mines
owned by De Beers.
Russia is the world’s number two producer of diamonds. All the mines are situated in the Western
Yakutia, and the vast majority of diamond production, and all of the hard rock production, is
controlled by the state company, Al Rosa.
In Russia, half of the rough output is currently sold for polishing and half is exported. Of this, most
is sold to the DTC through a five year agreement signed in 2001.
In Australia, the Rio Tinto-owned Argyle mine is currently the largest producer in the world by
volume; however the open pit will reach the end of its life in 2007. A decision has yet to be made as
to whether an underground mine will be developed. Although most of the annual output of 30
million carats is of small size and of very low quality, the mine is also famous for its very valuable
pink stones, which are polished and sold annually by worldwide tender.
25
Time: 22:19
Rev: 0
Gal: 0025
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1201
TCP No. 7
World Diamond Production by Country, 2003
Carats Average Price
(000)
$ p.ct.
Producer
Country
Angola
Australia
Botswana
Brazil
Central African Rep.
Canada
Congo (Dem. Rep.)
Ghana
Guinea
Namibia
Russia
Sierra Leone
South Africa
Tanzania
6,300
30,994
30,412
700
500
11,200
29,000
900
400
1,550
19,000
500
12,400
166
175.00
13.00
82.00
166.00
146.00
111.00
24.00
26.00
220.00
306.00
84.00
276.00
89.00
115.00
US$M
Value
1,100
417
2,489
83
65
1,240
686
23
88
474
1,600
138
1,100
19
Sources: De Beers, Rio Tinto, BHP Billiton
Diamond Prices
The diamond industry depends on the intrinsic value of natural diamonds and once again, faces
threats from synthetically produced gem diamonds and treated diamonds (those which have had
their colour altered by being exposed to very high temperatures and pressure).
Prices of rough diamonds rose strongly during 2004 in response to the strength of demand. Overall
the supply of rough is tightening. This has created shortages, particularly in high colour and quality
stones of over 2 carats. De Beers has announced that it raised prices three times during the year by
14 per cent. in total. Sale prices of Ekati stones were raised by 14 per cent. overall. De Beers are
estimating approximately 55 per cent. increase in rough demand by 2012 (US$9 billion to
US$14 billion).
All the major producers are responding to strong demand by stepping up output where possible, to
defend or increase their share in the growing market.
The diamond industry continues to be robust. The global diamond jewellery industry continues to
grow in terms of increased demand for jewellery supported by strong marketing and branding
initiatives. Preliminary global retail sales estimates for 2004 by De Beers are 8 per cent. higher in
2004 compared to 2003.
Canadian Diamond Industry
Exploration
Diamond exploration began in Canada as early as the 1960s but major kimberlite discoveries were
not made until the 1980s. In 1991, the first economic diamond deposit (Point Lake Kimberlite) was
discovered in the Lac de Gras area of the NWT.
Exploration in Canada during the period 1991-1993 focussed primarily on the Slave Craton in the
NWT and Nunavut where some 60 million acres were staked. The results of this exploration was a
number of significant discoveries:
1991
1994
1995
1996
Ekati
Diavik
Jericho
Snap Lake
(Diamet Minerals Ltd and BHP Billiton Plc)
(Rio Tinto plc and Aber Diamond Corporation)
(Lytton Minerals)
(Winspear Resources Inc.)
26
Time: 22:19
Rev: 0
Gal: 0026
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1202
TCP No. 7
All four discoveries were “company making” opportunities for the Canadian junior exploration
companies involved.
Canada has continued to attract exploration dollars by offering a number of advantages over other
areas in the world:
앫
First world country – in terms of investment, politics, legal and regulatory systems.
앫
Canadian diamonds are a sought after product – based on quality, value per carat, grade and
workability.
앫
Country is under explored – considerable exploration potential.
앫
Canadian Explorers have come of age – 15 years plus of exploration knowledge and expertise
that can now be applied to exploration.
In 2004 it was forecast that approximately 50 per cent. of global diamond exploration dollars were
spent in Canada.
Production
Canada became a diamond producer in October 1998 when the Diamond Minerals Ltd’s Ekati
diamond mine opened about 300 kilometres northeast of Yellowknife. By April 1999, the mine had
produced one million carats. Ekati’s average production over its projected 20-year life is expected
to peak at three to five million carats a year, four per cent. of world production by volume. A total of
6.96 million carats were recovered from the Ekati mine in 2003, the highest annual output since the
mine opened in 1998.
Aber Diamond Corporation’s Diavik mine, Canada’s second diamond mine, started producing
diamonds at the beginning of 2003, and during the ramp-up phase achieved its targeted 3.8 million
carats. Full-scale production will be reached during 2004, and the mine plan has been revised to call
for the processing of over 7 million carats. During its projected 20-year life, average diamond
production from this mine is expected to peak at six to eight million carats a year, about five per
cent. of the world’s total supply.
A large proportion of the gem-quality diamond produced by both the mines in the NWT is in the
range of high colour and quality, and in sizes that are most in demand in the world’s leading
diamond consumer market, the US.
Canada’s diamond industry has now become a $1.7 billion industry with all indicators pointing to
potential for future growth. Canadian diamond production in 2002 was almost 5 million carats
and in 2003 was 11.2 million carats.
The Canadian market, estimated at about US$850 million in 2003, grew by only 2 per cent. in
Canadian dollars, but by 8 per cent. in US dollars.
Another three mines may open by 2007. The owners of the Jericho project in Nunavut, Tahera
Corporation, are planning to construct the mine in 2005 and bring it into production in 2006. The
project feasibility study indicated mining 3 million carats over a projected 8-year mine-life.
The Canadian junior Winspear Resources Inc. discovered the Snap Lake deposit in the NWT in
1996. This deposit was acquired by De Beers in 2001. The Snap Lake project gained environmental
approval in October 2003. De Beers plans to start building the mine in 2005 and to produce 1.5
million carats a year from 2007 over a 20-year mine-life.
Similarly, the Victor project in Northern Ontario is expected to grow steadily over the next three
years.
These mines will consolidate Canada’s position in world diamond production by value, third after
Botswana and Russia, mining between 12 per cent. and 15 per cent. of the world’s diamonds.
27
Time: 22:19
Rev: 0
Gal: 0027
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1203
TCP No. 7
Time: 22:19
Figure 3: World diamond production 1999 through 2007
Exploration for diamonds
Exploration techniques for diamonds focus on finding the kimberlite pipes and usually rely on
either geochemical or geophysical techniques. Although diamonds are very rare inclusions in
kimberlites, even when present in economic quantities, minerals such as pyrope garnets, chromites,
picroilmenites and chrome diopsides are far more common in kimberlites. These kimberlite
indicator minerals are often eroded from the kimberlites and in the case of the Canadian deposits by
glaciers. Explorers search for these kimberlite indicator minerals in the glacial sediments and follow
them back up ice to the kimberlite source. Only very rarely are diamonds ever found far away from
the kimberlite hosts. Recently, scientific understanding of the kimberlite indicator minerals has
advanced to a degree where, given a statistically large enough number of grains, the detailed
chemistry of these kimberlite indicator minerals will permit explorers to predict with some degree
of confidence whether the kimberlite source of those minerals unequivocally contain no diamonds
(i.e. barren), has some indeterminate diamond potential or has a strong potential to be significantly
mineralised.
The alternative exploration technique is to undertake geophysical surveys and then drill anomalies
found as a result of the survey. Often the geochemical technique above and the geophysical
technique are combined to give the maximum result.
Once a diamondiferous kimberlite is discovered, it needs to be evaluated through a system of
sampling procedures, procedures which are designed to overcome the “extreme” nugget effect
which characterises diamond deposits. Sample sizes range from tens of kilograms for exploration
type samples to several thousands of tonnes collected during feasibility studies.
The cost of proceeding to final feasibility study stage is variable and depends ultimately on the
experience and expertise of the explorers.
28
Rev: 0
Gal: 0028
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1204
TCP No. 7
PART III
RISK FACTORS
THE EXPLORATION AND DEVELOPMENT OF NATURAL RESOURCES IS A HIGHLY
SPECULATIVE ACTIVITY THAT INVOLVES A HIGH DEGREE OF FINANCIAL RISK. The
risk factors which should be taken into account in assessing the Company’s activities should
include the fact that the Company has only been recently established and its business is that of
mineral exploration. In addition to the normal business risks an assessment of the risks associated
with an investment in the Company should include, but are not necessarily limited to, the risk
factors set out below. Any one or more of these risks could have a material effect on the value of any
investment in Sanatana Diamonds.
Prospective investors are accordingly advised to consult an independent financial adviser
authorised under the Financial Services and Markets Act 2000 and who specialises in advising on
the acquisition of shares and other securities before making a decision to invest.
Exploration, mining and operational risks
앫
The business of exploring for and mining minerals involves a high degree of risk. Few
properties that are explored are ultimately developed into mines. At present none of the
Company’s properties have a known diamond deposit and the proposed exploration
programs are an exploratory search for such a deposit.
앫
The Company’s operations are subject to all the hazards and risks normally associated with
the exploration, development and mining of diamonds, any of which could result in damage
to life, or to property or the environment. The Company’s operations may be subject to
disruptions caused by unusual or unexpected formations, formation pressures, fires, power
failures and labour disputes, flooding, explosions, cave-ins, landslides, the inability to obtain
suitable or adequate equipment, machinery, labour or adverse weather conditions. The
availability of insurance for such hazards and risks is extremely limited or uneconomical at
this time.
앫
In the event the Company is fortunate enough to discover a diamond deposit, the economics
of commercial production depend on many factors, including the cost of operations, the size
and quality of the diamonds, proximity to infrastructure, financing costs and Government
regulations, including regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting diamonds and environmental protection. The effects of these
factors cannot be accurately predicted, but any combination of these factors could adversely
affect the economics of commencement or continuation of commercial diamond production.
앫
The profitability of the Company’s operations will be dependent, inter alia, on the market
price of diamonds. Diamond prices are affected by numerous factors beyond the control of
the Company, including international economic and political conditions, levels of supply and
demand, the policies of the Diamond Trading Company and international currency exchange
rates.
Volatility of diamond prices
The availability of a ready market for diamonds to be sold by the Company depends upon
numerous factors beyond the Company’s control, the exact effects of which cannot be accurately
predicted. The factors (the list of which is not exhaustive) include general economic activity, world
diamond prices, action taken by other producing nations, the availability and pricing of other
substitute minerals, and the extract of government regulation and taxation. Historically, diamond
prices have fluctuated and are affected by numerous factors including world production levels,
international economic trends, currency exchange fluctuations or regional political events, over all
of which the Company has no control. The aggregate effect of these factors is impossible to predict.
Consequently, as a result of the above factors, price forecasting can be difficult to predict. If the
price of certain stones should drop significantly, the economic prospect of operations in which the
Company has an interest could be significantly reduced or rendered uneconomic. In addition, De
Beers and the Diamond Trading Company, which is owned by De Beers, retain substantial
influence, controlling approximately 50 per cent. of the world production of diamonds.
29
Time: 22:19
Rev: 0
Gal: 0029
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1205
TCP No. 7
Part III – Risk Factors
Luxury goods market is affected by adverse economic conditions
Downturns in general economic conditions and uncertainties regarding future economic prospects
have historically affected sales of luxury goods such as jewellery. Accordingly, such downturns or
uncertainties in the future or a decline in consumer confidence could have a material adverse affect
on the business, financial condition or results of operations of the Company.
Mining Licences and Permits
The Company’s prospecting activities are dependent upon the grant of appropriate licences,
concessions, leases, permits and regulatory comments which may be withdrawn or made subject to
limitations. Prospecting permits are renewable subject to certain expenditure requirements.
Although the Company believes the prospecting permits it benefits from will be transferred into
claims over the relevant areas of land, there can be no assurance that they will be transferred or as to
the terms of any such a transfer.
Joint Ventures
The Company holds, and expects to hold in the future, interests in joint ventures. Joint ventures
may involve special risks associated with the possibility that the joint venture partners may:
앫
have economic or business interests or targets that are inconsistent with those of the
Company;
앫
take action contrary to the Company’s policies or objectives;
앫
be unwilling or unable to fulfil their obligations under the joint venture or other agreements;
or
앫
experience financial or other difficulties.
Any of the foregoing may have a material adverse effect on the results of operations or financial
condition of the Company.
Financing risks
The Company has limited financial resources, which, in the opinion of the Directors, even after
taking to account the proceeds from the Placing, are only sufficient to finance the exploration
programs outlined in Part I and Part IV. Further exploration and development of one or more of the
Company’s properties will be dependent on the Company’s ability to find additional funding
through the joint venturing of the properties, public financing or other means. There can be no
assurance that such funding required by the Company will be available to it, and, if such funding is
available, that it will be offered on reasonable terms, or that the Company will be able to secure
such funding through third party financing or cost sharing arrangements.
Short Operating History
The Company’s business operations are at an early stage of development and its success will be
largely depend on the outcome of the exploration programs that the Company proposes to
undertake.
Limited operating history
The Company has no properties producing positive cash flow and its ultimate success will depend
on its ability to generate cash flow from producing properties in the future. The Company has not
earned profits to date and there is no assurance that it will do so in the future. Significant capital
investment will be required to achieve commercial production from the Company’s existing
projects. There is no assurance that the Company will be able to raise the required funds to continue
these activities.
30
Time: 22:19
Rev: 0
Gal: 0030
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1206
TCP No. 7
Competition
The Company competes with numerous other companies and individuals possessing greater
financial resources and technical facilities than itself in the search for and acquisition of mineral
claims, leases, and other mineral interests as well as the recruitment for and retention of qualified
employees.
Commercial deposits
The Company has no known commercial deposits or production as its current activities are
directed towards the search for diamond deposits. The exploration for and the development of
diamond deposits is highly speculative. While the rewards can be substantial, there is no guarantee
that exploration on the Company’s properties will lead to a discovery of commercial quantities of
diamonds and commercial production.
Land Claims
Aboriginal rights may be claimed on Crown properties or other types of tenure with respect to
which mining rights have been conferred. Native land claim settlements are more advanced in the
NWT than they are in most other areas of Canada. The Permits are located in the Gwich’in, Sahtu
and Inuvialuit settlement regions. With the exception of the Gwich’in Comprehensive Land Claim
Agreement, Sahtu Dene and Metis Comprehensive Land Claim Agreement, and the Inuvialuit Final
Agreement pertaining to certain areas in the Northwest Territories, the Company is not aware of
any aboriginal land claims having been asserted or any legal actions relating to native issues having
been instituted with respect to any of the Permits.
The legal basis of a land claim is a matter of considerable legal complexity and the impact of a land
claim settlement and self-government agreements cannot be predicted with certainty. In addition,
no assurance can be given that a broad recognition of aboriginal rights by way of a negotiated
settlement or judicial pronouncement would not have an adverse effect on the Company’s
activities. Such impact could be marked and in certain circumstances, could delay or even prevent
the Company’s exploration or mining activities.
Environmental factors
Mining operations are subject to various environmental laws and regulations including, for
example, those relating to waste treatment, emissions and disposal, and companies must generally
comply with permits or standards governing, among other things, tailing dams and waste disposal
areas, water consumption, air emissions and water discharges. Existing and possible future
environmental legislation, regulations and actions could cause significant expense, capital
expenditures, restrictions and delays in the Company’s activities, the extent of which cannot be
predicted and which may well be beyond the capacity of the Company to fund. The Company’s
right to exploit any minerals it discovers is subject to various reporting requirements and to
acquiring certain Government approvals and there is no assurance that such approvals, including
environmental approvals, will be granted without inordinate delays or at all.
Uninsured risks
The Company, as a participant in exploration and mining programs, may become subject to
liability for hazards such as unusual geological or unexpected operating conditions that cannot be
insured against or against which it may elect not to be so insured because of high premium costs or
other reasons. The Company is currently uninsured against all such risks, as such insurance is either
unavailable or uneconomic at this time. The Company is also not currently able to obtain keyman
insurance or property insurance as such insurance is uneconomical at this time. The Company will
obtain such insurance once it is available and, in the opinion of the Directors, economical to do so.
The Company may incur a liability to third parties (in excess of any insurance cover) arising from
pollution or other damage or injury.
31
Time: 22:19
Rev: 0
Gal: 0031
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1207
TCP No. 7
Health & Safety Risks
A violation of health and safety laws or the failure to comply with the instructions of relevant health
and safety authorities could lead to, among other things, a temporary shut down of all or a
proportion of a field, a loss of the right to prospect for diamonds or the imposition of costly
compliance procedures. This could have a material adverse effect on the Company’s operations
and/or financial condition.
Assurance of title to properties
The Company has taken all reasonable steps to attempt to ensure that proper title to the Permits has
been obtained and that all grants of mineral rights for the Company’s properties have been
registered in the appropriate public offices. Despite the due diligence conducted by the Company,
there is no guarantee that title to such properties, or the Permits will not be challenged or impugned.
Surveys have not been conducted on all of the permits held by the Company. The Company’s
mineral property interests may be subject to prior unregistered agreements or transfers or
aboriginal land claims and title may be affected by undetected defects.
Requirement for permits and licences
The operations of the Company require licences, permits and in some cases renewals of existing
licences and permits from various governmental authorities. The Directors believe that the
Company has applied for all necessary licences and permits to carry on the activities which it is
currently conducting under applicable laws and regulations in respect of its properties, and also
believes that the Company is complying in all material respects with the terms of such licences and
permits. However, the Company’s ability to obtain, sustain or renew such licences and permits on
applicable terms is subject to changes in regulations and policies and to the discretion of the
applicable governmental authorities.
Conflicts of Interest
Certain of the Shareholders and Directors are or may become shareholders and/or directors of
other natural resource companies, and, to the extent that such other companies may participate in
ventures with the Company, the Directors may have a conflict of interest in negotiating and
concluding terms respecting the extent of such participation. In the event that such a conflict of
interest arises at a meeting of the Directors, a Director who has such a conflict will abstain from
voting for or against the approval of such a participation or of its terms. In appropriate cases the
Company will establish a special committee of independent Directors to review a matter in which
one or more Directors or management, may have a conflict. From time to time, the Company,
together with several other companies, may be involved in a joint venture opportunity where
several companies participate in the acquisition, exploration and development of natural resource
properties, thereby permitting the Company to be involved in a greater number of larger projects
with an associated reduction of financial exposure in any given project. The Company may also
assign all or a portion of its interest in a particular project to any of these companies due to the
financial position of the other company or companies. In accordance with the laws of the province
of British Columbia, the Directors are required to act honestly and in good faith with a view to
furthering the best interest of the Company. In determining whether or not the Company will
participate in a particular program and the interest therein to be acquired by it, the Directors will
primarily consider the potential benefits to the Company, the degree of risk to which the Company
may be exposed and its financial position at that time. Other than as indicated, the Company has no
procedures or mechanisms to deal with conflicts of interest.
Dependence on key personnel
As with any company the Company’s performance is dependent upon the performance and
continued services of its current key management. Whilst it has entered into contracts and adopted
the Share Option Plan with the aim of securing the services of the existing management, the
32
Time: 22:19
Rev: 0
Gal: 0032
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1208
TCP No. 7
retention of their services cannot be guaranteed. Accordingly, the loss of any key management of
the Company may have an adverse effect on the future of the Company’s business. The Company
competes with numerous other companies and individuals in the search for and acquisition of
mineral claims, leases and other mineral interests as well as for the recruitment and retention of
qualified employees and contractors.
Taxation
Existing and future tax regimes, legalisation, regulations, including royalty structures in Canada
could cause diamond deposits to be uncommercial.
Legal environment
All the Company’s properties lie within Canada. The Directors believe that Canada has a stable
legal and business environment in which to operate. However, unforeseen changes in Canada’s
political and legal systems could affect the ownership and operation of the Company’s interests,
including, inter alia, changes in the government, and the legislative and regulatory regimes.
Loss of Interests in Properties
Failure by the Company to meet applicable payment, work and expenditure commitments on its
properties may result of forfeiture of the Company’s interest in these properties.
Dividends
All the Company’s funds will be invested to finance the growth in the Company’s business, and,
therefore investors cannot expect to receive dividends on the Company’s shares in the foreseeable
future.
Currency risk
Any income generated in Canada as a result of the sales of diamonds in US or Canadian dollars will
be subject to exchange rate fluctuations.
Forward Looking Statements
Historical facts, information gained from historic performance, present facts, circumstances and
information and assumptions from all or any of these are not a guide to the future. Statements as to
the Company’s aims, targets, plans and intentions and any other forward looking statement
referred to or contained herein are no more than that and do not comprise forecasts. Any such
forward looking statements are based on assumptions and estimates and involve risks,
uncertainties and other factors which may cause the actual results, outcome, financial condition,
performance, achievements or findings of the Company to be materially different from any future
results, performances or achievements expressed or implied by such forward looking statements.
Areas of investment risk
The Common Shares will be quoted on AIM rather than the Official List. An investment in shares
quoted on AIM may carry a higher risk than an investment in shares quoted on the Official List.
AIM has been in existence since June 1995 but its future success and liquidity in the market for the
Company’s securities cannot be guaranteed. Investors should be aware that the value of the
Common Shares may be volatile and may go down as well as up and investors may therefore not
recover their original investment.
The market price of the Common Shares may not reflect the underlying value of the Company’s net
assets. The price at which investors may dispose of their shares in the Company may be influenced
by a number of factors, some of which may pertain to the Company, and others of which are
extraneous. On any disposal investors may realise less than the original amount invested.
The risks above do not necessarily comprise all those faced by the Company and are not intended to
be presented in any assumed order of priority.
The investment offered in this document may not be suitable for all of its recipients. Investors are
accordingly advised to consult an investment adviser, who is authorised under the Financial
Services and Markets Act 2000 and who or which specialises in investments of this kind before
making a decision to apply for Placing Shares.
33
Time: 22:19
Rev: 0
Gal: 0033
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1209
TCP No. 7
PART IV
Competent Person’s Report
SRK Consulting
Windsor Court
1-3 Windsor Place
Cardiff
United Kingdom
CF10 3BX
The Directors
Suite 1910
Vancouver B.C.
Canada V6C 3L2
The Directors
London EC2A 1NT
22 July 2005
Dear Sirs
1.
Introduction
1.1 Background
This report comprises Steffen Robertson and Kirsten (UK) Ltd (SRK)’s independent technical
review of the assets currently held by Sanatana Diamonds Inc. (Sanatana) and has been produced in
connection with Sanatana’s proposed placing and admission to the AIM Market of the London
Stock Exchange (AIM). Sanatana’s sole asset is the Mackenzie Diamond Project which comprises a
collection of diamond exploration permits to the north of the Great Bear Lake in Northwest
Territories approximately 700 kilometres northwest of the town of Yellowknife, Canada.
Sanatana’s stated goals are to assist in the development of a new kimberlite field and discover a
world class diamond deposit. Sanatana has already completed one full field season of exploration
comprising glacial till sampling and sample processing, which has yielded diamond indicator
minerals, and geophysical data interpretation, which has identified structural features worthy of
follow up investigation.
SRK’s review was commissioned by Sanatana in support of its proposed raising of equity funding
via the placing referred to above to progress exploration work planned for the 12 months ending
March 2006. Sanatana hopes that this work will result in the discovery of kimberlites or kimberlite
targets for follow up drilling in 2006/7.
1.2 Basis of opinion
This report is based on:
앫
a review of several reports commissioned by Sanatana summarising the results of exploration
work completed on the project to date;
앫
discussions with directors, employees and consultants of Sanatana regarding the above work;
앫
a visit to the Kennecott Thunder Bay Mineral Processing Laboratory (“Kennecott
Laboratory”) on 3 March 2005 to review the laboratory procedures utilised during the
processing of till samples collected during the 2004 field season;
앫
a review of Sanatana’s planned exploration program and budgeted expenditure for the 12
months ending March 2006.
34
Time: 18:10
Rev: 1
Gal: 0034
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1210
TCP No. 7
Part IV – Competent Person’s Report
The specific reports SRK has been provided with comprise a report on the exploration work
undertaken at the prospect during the 2004 field season (August to September) by Mr Buddy Doyle
and Mr Kevin Kivi (“Doyle and Kivi”) completed in January 2005, a report interpreting the results
of this work along with associated geophysical data completed by Geoinformatics Exploration
Australia Pty Ltd (Geoinformatics) also in January 2005 and a report entitled Preliminary
Diamond Indicator Review by Mr Buddy Doyle dated April 2005.
The Doyle and Kivi report describes the property and the local geology, summarises the historical
work done prior to the 2004 field program, describes the work done during the 2004 program and
gives recommendations regarding that work which should be carried out during 2005. The
Geoinformatics report presents a geological interpretation of the project area based on both the
results of the 2004 field program and of the available geophysical data and similarly gives
recommendations regarding the work that should be done next to further assess the diamond
potential of the project area. The April Doyle report describes the results received from the first
round of election micro-probe data on the kimberlite indicator minerals obtained from the 2004
field program.
While SRK has reviewed the exploration permits to assess the extent to which these may influence
the technical status and development of the asset, SRK has not undertaken a legal due diligence
study such as would be required to confirm that all statutory consents are in force and current.
1.3 Qualifications of Consultant
SRK is part of an international group (the SRK Group) which comprises over 500 professional staff
offering expertise in a wide range of engineering disciplines.
The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that
its ownership rests solely with its staff. The SRK Group has a demonstrated track record in
undertaking independent assessments of exploration and in preparing competent person’s reports
and independent feasibility evaluations on behalf of exploration and mining companies and
financial institutions world-wide. The SRK Group also has specific experience in both diamond
exploration and evaluation and transactions of this nature.
This report has been prepared by a team of consultants based at the SRK Group offices in Cardiff
(United Kingdom) and Toronto (Canada). These consultants are specialists in the fields of
exploration, diamond geology and resource estimation and classification.
Neither SRK nor any of its employees employed in the preparation of this report has any beneficial
interest in the assets of Sanatana. SRK will be paid a fee for this work and other project related work
in accordance with normal professional consulting practice.
The individuals responsible for this report, listed below, have extensive experience in the mining
industry and are members in good standing of appropriate professional institutions.
앫
Mike Armitage, CEng, CGeol, MIMMM, PhD;
앫
Gareth O’Donovan, FIMMM, Ceng, MSc;
앫
Jean-François Couture, Ph.D. P.Geo; and
앫
Ben Green, MSc.
2.
Location/Licence
The Mackenzie Diamond Project consists of 462 prospecting permits covering approximately
20 million acres in three separate project areas, the North East Bear Area, the Colville Lake Area
and the Mackenzie Valley Area respectively. The locations of each of these areas is shown in Figure
2.1.
All three areas are large and remote. Access is by ice road in winter and helicopter and sea planes in
summer. The entire project area is covered by ice and snow from October to June and temperatures
range from a maximum of 20쎷C in summer to a minimum of 앏45쎷C in winter.
35
Time: 22:21
Rev: 0
Gal: 0035
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1211
TCP No. 7
The North East Bear Area and the northeastern section of the Colville Lake Area are above the tree
line and consist of lakes and tundra. The remaining areas are dominated by spruce, muskeg, lakes
and marsh/swamps.
Apart from the deeply incised river valleys, the area is characterised by post glacial land forms, there
is little outcrop and the areas are largely covered by glacial till. Some 25 per cent. of the project area
is covered by lakes and 20 per cent. by marshes and swamps.
3.
Background to Diamond Exploration
Diamonds are an allotrope of carbon that form at high pressures and temperatures found at depths
of greater than 150km below the surface of the earth and in association with rocks of eclogite and
peridotite mineralogy and textures. Primary diamond exploration is therefore focussed on locating
areas where magma formed at this depth has been disrupted by deep seated structural features
which have enabled this magma to be transported sufficiently near to surface for the diamonds
within it to be explored and exploited.
Magmas formed at this depth, however, have varying compositions and only a relatively small
proportion contain diamonds. The composition type that has been shown to have most potential to
host diamonds is known as kimberlite.
Deep seated features and the presence of deep seated magma are not enough on their own to
confirm the potential of an area to host diamonds. In addition to the fact that not all magma formed
at this depth is kimberlitic in composition, not all kimberlites contain diamonds and not all
diamond bearing kimberlites contain sufficient diamonds of sufficient size and quality for them to
be economic to exploit.
Hardrock diamond exploration therefore follows a reasonably consistent sequential program. The
initial aim is to confirm whether or not rocks exist which have been formed at the correct pressures
and temperatures (this is normally achieved through surface sampling and the identification of
so-called indicator minerals) and also the presence of deep seated structural features that could
have allowed this material to be transported to surface (which is normally achieved through
regional mapping and interpretation of geophysical data). Once a tectonically favourable area has
been outlined, exploration moves on to locating individual kimberlite intrusives, pipes or dykes
themselves and then finally onto assessing whether or not these are diamondiferous and, if
diamondiferous, whether or not they contain sufficient diamonds of sufficient size and quality to be
exploited commercially.
It is also worth noting that diamondiferous kimberlites tend to form in clusters. Once
diamondiferous kimberlites have been reported in an area therefore, this tends to spark an increase
in exploration activity which often results in the location of further diamondiferous kimberlites in
relatively quick succession. This process has been underway now for several years in the Slave
Province of Canada which is to the southeast of the Mackenzie Diamond Project. Almost 300
diamondiferous kimberlites have now been discovered in this province, all in the past 12 years and
two diamond mines, Diavik and Ekati, came into production in 2003 and 1998 respectively, and
are now being mined, while several others are in the advanced stages of evaluation and/or
construction.
The reasons as to why kimberlites tend to occur in pipes and how these are formed is much debated
but the generally accepted theory is that they are a result of volcanic eruptions above dyke swarms.
These are thought to occur when the gas/vapour pressure exceeds the lithostatic load and this is
followed by a rapid upward rush of magma in the form of a diatreme which explosively outcrops at
surface before degassing and imploding to form a crater which self excavates, with each successive
explosive unloading, to form a breccia pipe. The pipe is then filled with variable combinations of
tuffs, re-worked sediments and debris flows of country rock and tuff in the upper part, tuff breccia
in the explosion zone, and hypabyssal dyke and sill material below that. In some cases pipe
excavation can be as deep as 4 km. There is disagreement as to whether meteoric water/melt
interaction or alternatively magmatic vapour and gases drive pipe formation in the first place but
most likely it is a combination of both.
36
Time: 22:21
Rev: 0
Gal: 0036
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1212
TCP No. 7
In the case of the Mackenzie Diamond Project, exploration is still at a relatively early stage and no
kimberlites have yet been located or diamonds discovered. Notwithstanding this, indicator
minerals have been identified in the till sampling, which confirms that the host rocks from which
these were derived formed at the appropriate temperatures and pressures for diamond formation
and, as commented below, diamonds have already been discovered to the north and west of the
project area.
4.
Historical Diamond Exploration
Regional diamond exploration was undertaken in the Colville Lake area in the late 1970s by
Diapros and Monopros, both companies controlled by De Beers.
South of Great Bear Lake to as far south as Wrigley NWT, and eastward to Lac La Marte,
Monopros, Selco, BP Resources and DiaMet explored for diamonds in the 1980s, with the most
advanced project at Blackwater Lake. Stream and esker sampling traced kimberlite indicator
mineral eastward to Lac La Marte and in 1991, a kimberlite was located at Point Lake, NWT
following a program of surface sampling
North of the Mackenzie Diamond Project, while exploring for base metals, Darnley Bay Resources
Ltd. discovered numerous isolated magnetic anomalies from an airborne survey of their property.
This led to a joint venture (JV) with De Beers, who conducted an extensive exploration on the 8
million acre property. De Beers found indicator minerals, diamonds in till, and eventually
discovered 10 kimberlites, of which six have been demonstrated to be diamondiferous. This project
has since been dropped by De Beers, and is now held by Darnley Bay and Diadem Resources.
West of the Mackenzie Diamond Project is the Lena West Project, held by Diamondex Resources
Ltd. The Lena West prospecting permits cover 6.15 million acres. A sampling program in 2002
yielded pyropes up to 3 mm in diameter and five diamonds (long dimensions between 0.5 to 1.5
mm). An aeromagnetic survey was then completed in 2003 and several prominent 500-1,000 m
targets were reportedly identified. Follow-up till sampling, auger drilling and diamond drilling
(1500m) has reportedly since been carried out but no kimberlite discoveries had been reported as of
May 2005.
Southeast of the Mackenzie Diamond Project is a large property first held by De Beers Canada
Exploration, but now held under option by Pure Gold Resources Ltd (Pure Gold). De Beers
conducted regional till sampling in the area first in 1970, and later in 2003. De Beers found
widespread kimberlite indicator minerals from two distinct populations in the area. Pure Gold
collected till and rock samples during the 2004 field season, which are now being processed, is
currently flying some 29,000 line kilometres of airborne geophysics and plans a program of follow
up ground geophysics and diamond drilling during 2005.
5.
Regional Geological Setting
As already commented, the bulk of the project area, and the Mackenzie Platform as a whole, is
covered by extensive thick glacial deposits that reflect a complex and variable glacial history.
Formations observed are lacustrine sediments, several thin to thick boulder till sheets and huge
moraines. Drumlins are present in the north, and aligned lakes suggest rapid ice flow in the
southwest and southeast parts of the property. Glaciofluvial deposits include large delta and
floodway deposits, as well as prominent esker ridges, and kettle lakes. Glaciofluvial deposits are
more dominant in the northern and north-eastern parts of the property.
Notwithstanding the above, Palaeozoic and Mesozoic sediments have been identified along the
Western Inland Seaway east of the Mackenzie Mountains, and have attracted a great interest from
oil and gas exploration companies. Large formations of Palaeozoic shales, organic-rich shales, reef
and platform carbonates are present.
The existence of an underlying Archaean craton has been theorized by diamond explorers in the
Mackenzie Platform for years although no exposures have yet been identified. Discovery of
kimberlite indicator minerals (pyrope, chromite and ilmenite) with fragile surface textures such as
37
Time: 22:21
Rev: 0
Gal: 0037
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1213
TCP No. 7
leucoxene alteration on ilmenite, and kelyphite coronas on pyrope garnet, suggests that
undiscovered kimberlites may occur in the area and supports the proposed existence of the
Mackenzie Craton beneath the glacial cover and Palaeozoic and Mesozoic sediments.
In addition, half-metre sized gneiss boulders observed in the western part of the Mackenzie
Diamond Project, suggest glaciers may have sampled a local source and government glaciologists
have predicted that these Archaean erratics were carried by the Laurentide Ice sheet from exposed
Archaean rocks some 350 km east. Contrary to this interpretation, however, granitic erratics were
not observed in the eastern part of the property and field observations of till and beaches suggest
most boulders, cobbles and pebbles have local provenance.
To the east is the Proterozoic Bear structural sub-province, which sits between the (proposed)
Mackenzie Craton and Slave Craton. The Bear Sub-province is dominated by the Wopmay
Orogeny, which reflects mid-Proterozoic rifting and subduction. The Wopmay is divided into
tectonic belts including the sedimentary Hepburn Asiak and Tree River belts. The Great Bear Zone
is a result of Andean-type magmatic arc volcanism. Post collisional sedimentation is represented by
the mid-Proterozoic to early Cambrian Coppermine and Rae Groups of the Coppermine
Homocline. In the eastern part of the property, near Dease Arm of Great Bear Lake are
gently-dipping clean-white sandstones and orthoquartzite, which are the basal unit of the Hornby
Bay Group. Minor extension is represented by a large layered ultramafic body known as the
Muskox Intrusion, and north-south Franklin diabase sills and dykes form prominent ridges near
Dease Arm of Great Bear Lake.
6.
Exploration Completed by Sanatana
6.1 Introduction
As commented already Sanatana has completed a program of geophysical exploration and one field
season of fill sampling, has processed the resulting till samples to recover potential kimberlite
indicator minerals and has commenced electron micro-probe analysis of the kimberlite indicator
minerals themselves.
6.2 Geophysical exploration
The geophysical exploration work carried out to date has comprised:
앫
the interpretation of seismic data, in combination with gravity data, to locate areas with
potentially deeper lithosphere where temperature and pressures could be sufficient to support
the formation of diamonds, with a view to targetting regional areas;
앫
the interpretation of gravity, magnetics and seismic data to identify significant structural
weaknesses that may have acted as conduits for magma movement; and
앫
the interpretation of airborne magnetics with a view to delineating potential kimberlites.
6.3 Geochemical exploration
The 2004 work program comprised an interpretation of the surficial geology, a regional sampling
program for diamond indicator minerals and a multi-element ICP analysis of the fine fraction of the
same samples. In total over 1,400 samples were taken primarily in glacial till but also from beaches,
eskers, glaciofluvial sands and streams.
Samples were collected from holes dug by shovel to a depth of 0.5m. The sample weights varied
from 15 to 20kg. No processing was carried out in the field and the full sample was bagged for
transport. A total of nearly 60 tonnes of till was collected in this manner.
In total some 1981 grains of possible kimberlitic origin were identified in the field samples including
171 pyrope garnets, four eclogitic garnets, 342 chrome diopsides, 1095 chromites, 189 ilmenites,
19 orthopyroxenes, and 161 olivines. A selection of these have been submitted to Geological
Consulting Inc., in London, Ontario for electron microprobe analysis and confirmation of
kimberlitic origin, the preliminary results of which are already available.
38
Time: 22:21
Rev: 0
Gal: 0038
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1214
TCP No. 7
Approximately 60 per cent. of the total samples collected contained indicator minerals, the
maximum count in any one sample being 91. When plotted it is clear that these occur in several
“clouds” that suggest the general locality of several possible kimberlite clusters but are not
sufficiently closely spaced to confirm the exact locations of any individual kimberlite targets.
This work has been supplemented by Multi-element ICP analysis aimed at determining whether the
samples are elevated in elements that tend to be similarly elevated in kimberlites, including for
example nickel, chrome, cobalt, vanadium and magnesium.
The preliminary results of the electron microprobe analyses indicate that many of the diamond
indicator minerals collected (notably the pyropes and ilmenites) have chemistries that support the
fact that these formed at temperatures and pressures suited to diamond formation though some
also appear to have an ultramafic origin.
Further, although many samples have yet to be probed, the results to date suggest there may be four
anomalous areas worthy of more detailed follow up sampling.
6.4 Sample Processing
Due to the large number of samples and the pressure of assessment deadlines for the permits, two
separate laboratories were employed to process the samples, the Kennecott Laboratory and the
VIPI laboratory in Burnaby, British Columbia. Observations of the grains were completed at the
Kennecott Laboratory, by KimDynamics in Vancouver and by Diatech of Perth, Western Australia.
The till samples processed at the Kennecott Laboratory were deslimed to remove silt- and clay-size
material and wet sieved to remove the 쏜0.979 mm material. The 쏝0.979 mm material was then
oven-dried and screened to remove all remaining 쏝0.25 mm material. The 0.25-0.5 mm material
was passed through a Reading Pilot Roll magnetic separator to separate the paramagnetic and
diamagnetic minerals (including kimberlite indicator minerals). Heavy minerals (쏜2.89 SG) were
then separated from the magnetic concentrate using sodium polytungstate liquid separation. The
magnetic heavy mineral concentrate was sent to the miscoscopy laboratory for observation and
sorting.
The VIPI laboratory produced a magnetic heavy mineral concentrate using a process similar in all
respects to that of the Kennecott Laboratory. Samples were first deslimed and disaggregated and
wet screened using one or more of 4.75 mm, 2 mm, and 1.13 mm screens. The 0.25 to 0.5 mm
fraction was then separated by further wet screening and oven dried. The 0.25-0.5 mm material was
then passed through a magnetic separator to separate paramagnetic and ferromagnetic minerals
(including kimberlite indicator minerals). Heavy liquid processing was carried out at the Global
Discovery Laboratories of TeckCominco Ltd, using a heavy liquid separation using
tetrabromoethane (2.96 SG).
In both cases, the heavy minerals themselves were identified by technicians using binocular
microscopes, checked by mineralogists and then numbered, described and logged.
Sanatana incorporated a certain amount of check analyses into its procedures to ensure
comparability between the two laboratories used as well as to verify the results themselves. While
there are some differences between the indicator mineral counts made at the different laboratories
for the same samples, samples containing indicator minerals were consistently identified by each
laboratory and this supports the integrity of the results obtained.
SRK has visited the Kennecott Laboratory in preparing this report. This laboratory was set up in
1995 and is accredited ISO 17025 which is the equivalent of ISO 9000 for calibration and testing
laboratories.
SRK’s review did not identify any concerns which could potentially adversely affect the results
delivered by the Kennecott Laboratory to Sanatana and as a result considers the laboratory results
to be reliable. SRK has, however, recommended to Sanatana that it obtains the results of internal
39
Time: 22:21
Rev: 0
Gal: 0039
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1215
TCP No. 7
quality control measures for samples prepared and picked by the Kennecott Laboratory. Internal
control measures include the results for the three blank samples and the “spiked” heavy mineral
concentrate samples. This information should be archived with other project data for future
reference.
6.5 Geoinformatics Interpretation
The main conclusions of the Geoinformatics work completed subsequent to the 2004 field season
were that:
앫
the modelling of the gravity data in combination with the seismic data has identified areas
where the craton extends to a depth where temperatures and pressures should be sufficient to
support the formation of diamonds;
앫
the interpretation of gravity, magnetic and seismic data has identified several deep seated
structures that could provide pathways for magma movement towards surface;
앫
the interpretation of magnetic data along with the geochemical sampling and microprobe
analysis has identified several areas worthy of more detailed exploration which have the
potential to host kimberlite clusters.
6.6 SRK Comments
SRK considers that the work commissioned by Sanatana to date reflects a logical sequence of steps,
has been undertaken by extremely experienced diamond geologists and scientists and has been
undertaken in a thoroughly professional manner.
However, while this work has confirmed the potential of the project area to host diamonds, neither
the presence of kimberlites or diamonds has not yet been proved. From a kimberlite perspective, the
key part of Sanatana’s next phase of exploration will be the collection of detailed magnetic data in
areas containing anomalous geochemical sampling results and further geochemical sample data in
the vicinity of the possible kimberlite targets identified by the geophysical and geochemical work
already completed. It is the marrying of these two data types together that will give the best chance
for kimberlite discovery.
7.
Planned Exploration
7.1 Planned Work
The exploration program provided by Sanatana to SRK for the 2005 field season is based on the
continuation of the two pronged exploration strategy followed to date and comprises further
geochemical, largely till, sampling and geophysical, primarily airborne geophysics, data collection.
As was the case with the data collected during the 2004 field season, this data will again be
incorporated into the Geoinformatics database, which will be used to model and interpret the
results and highlight targets for more detailed follow up.
While Sanatana hopes that this work will identify its first kimberlite and confirm the interpreted
underlying presence of the Mackenzie Craton, should this not be the case, this would not rule out
the said interpretation. SRK envisages that if kimberlites are discovered, then this work would be
followed by a program of diamond drilling during 2006. Should this not be the case, then most
likely the next phase would be further till sampling and geophysics.
Sanatana has budgeted some CAN$7.5 million for the above work, inclusive of project
management and CAN$1.8 million which is required to be posted as a bond, but exclusive of
corporate/head office costs.
7.2 SRK Comments
SRK is confident that Sanatana’s budgeted expenditure for the above work is justified by the
available data and realistic given the work planned. SRK stresses, however, that the above sums
cover the next 12 months only and that significant further funding will be required to evaluate any
kimberlites found and possibly to continue the exploration for further kimberlites. Even if the
exploration work continues to yield positive results, it is unlikely Sanatana would be in a position to
announce any resource estimates for several years to come.
40
Time: 22:21
Rev: 0
Gal: 0040
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: MC
ID Number: 1216
TCP No. 7
Sanatana has a significant land holding and will need to continue to explore for regional features to
identify areas to keep and relinquish respectively to some extent therefore hinders its ability to focus
on individual kimberlites. Sanatana will therefore need to continue to balance both of these aspects
during the coming year.
8.
Concluding Remarks
The aim of SRK’s review has been to assess the potential of the Mackenzie Diamond Project to a
sufficient degree to determine whether the work planned for the 12 months ending March 2006 by
Sanatana, and the expenditure required to do this, is justified by the information currently
available.
While the Mackenzie Province has not yet been proved to be diamondiferous, there are good
indications that the presence of kimberlites at least will be confirmed in due course.
Sanatana has proposed a program of geochemical and geophysical exploration work and
interpretation to explore the potential of this province with a view to delineating kimberlite targets
for follow up drilling. Should drill targets be identified, further funding would need to be raised and
exploration work would likely continue through much of 2006 before any Mineral Resource could
be demonstrated to be present.
SRK’s opinion is that sufficient work has been completed to demonstrate that the Mackenzie
Diamond Project does have the potential to contain diamondiferous kimberlites and that further
work is certainly justified to explore this potential further. While some revisions to Sanatana’s plans
should be expected as the work proceeds, SRK considers the work planned for the next 12 months
and the estimated cost of this to be appropriate and justified.
For and on behalf of Steffen, Robertson & Kirsten (UK) Ltd
Dr Mike Armitage
Managing Director
41
Time: 22:21
Rev: 0
Gal: 0041
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1217
TCP No. 7
PART V
Accountants’ Report on the Company
8 Baker Street
London W1U 3LL
BDO Stoy Hayward
Chartered Accountants
The Directors
Sanatana Diamonds Inc
Suite 1910
Vancouver, B.C.
Canada
V6C 3L2
The Directors
London
EC2A 1NT
22 July 2005
Dear Sirs
Sanatana Diamonds Inc. (“the Company”)
Introduction
We report on the financial information set out below. This financial information has been prepared
for inclusion in the admission document dated 22 July 2005 of the Company (“the Admission
Document”).
The Company was incorporated on 25 June 2004.
Basis of preparation
The financial information set out below is based on the statutory financial statements of the
Company for the period from 25 June 2004 to 31 March 2005, to which no adjustments were
considered necessary.
BDO Dunwoody LLP, 600 – 925 W. Georgia Street, Vancouver, British Columbia V6C 3L2
audited the statutory financial statements for the period ended 31 March 2005. Their audit report
was unqualified.
Responsibility
The statutory financial statements of the Company are the responsibility of the directors of the
Company and have been approved by them.
The directors of the Company are responsible for the contents of the Admission Document in which
this report is included.
It is our responsibility to compile the financial information set out in our report, to form an opinion
on the financial information and to report our opinion to you.
42
Time: 18:10
Rev: 1
Gal: 0042
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1218
TCP No. 7
Time: 22:21
Part V – Accountants’ Report on the Company
Basis of opinion
We conducted our work in accordance with the Statements of Investment Circular Reporting
Standards issued by the Auditing Practices Board. Our work included an assessment of evidence
relevant to the amounts and disclosures in the financial information. The evidence included that
recorded by the auditors who audited the financial statements underlying the financial information.
It also included an assessment of significant estimates and judgements made by those responsible
for the preparation of the non-statutory accounts underlying the financial information and whether
the accounting policies are appropriate to the entity’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance
that the financial information is free from material misstatement whether caused by fraud or other
irregularity or error.
In forming our opinion, we had regard to the uncertainties over going concern referred to under
“Going Concern” under Accounting Policies below. On the basis of the disclosures set out therein,
we have been able to conclude that it is appropriate to prepare the financial information on a going
concern basis and our opinion is not qualified in this regard.
Opinion
In our opinion the financial information gives, for the purposes of the Admission Document, a true
and fair view of the state of affairs of the Company as at 31 March 2005 and of its loss for the period
then ended.
Consent
We consent to the inclusion in the Admission Document of this report and accept responsibility for
the report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to the Public Offers of Securities
Regulations 1995.
FINANCIAL INFORMATION
Accounting policies
The financial information has been prepared under the historical cost convention and in
accordance with applicable accounting standards applied in Canada. A reconciliation between the
net loss and net assets drawn up under Canadian GAAP and the net loss and net assets drawn up
under International Financial Reporting Standards (“IFRS”) is set out in note 6.
Going concern
The Company was incorporated on 25 June 2004 in the Province of British Columbia under the
British Columbia Business Corporations Act. The Company is an exploration stage company, and
its principal business activity is the acquisition, exploration and development of mineral properties.
The Company has entered into an agreement in respect to properties in the Northwest Territories in
Canada.
The financial statements on which the financial information is based were prepared on a going
concern basis, which contemplates that the Company will continue realising its assets and
discharging its liabilities and commitments in the normal course of business. As at 31 March 2005,
the Company was only recently incorporated and has no source of operating cash flow. The
Company selected 31 March as its fiscal year end.
The Company is in the process of exploring its mineral property interests and has not yet
determined whether its mineral property interests contain mineral reserves that are economically
recoverable. The Company’s continuing operations and the underlying carrying value and
recoverability of the amounts shown for deferred exploration costs are entirely dependent upon the
existence of economically recoverable mineral reserves, the ability of the Company to obtain the
necessary financing to complete the exploration and development of the mineral property interests,
43
Rev: 0
Gal: 0043
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1219
TCP No. 7
Time: 22:21
and on future profitable production or proceeds from the disposition of the mineral property
interests. These conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Although there are no assurances that management’s plan will be realised,
management believes the Company will be able to continue operations into the future. The
financial statements did not include any adjustments to the recoverability and classification of
recorded assets, or the amounts of, and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
The Company is considered to be an exploration stage company as it has yet to generate revenue
from operations.
The following principal accounting policies have been applied under Canadian GAAP:
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial information and the reported amounts of revenue and expenditures during the reporting
period. Actual results could differ from those estimated.
Cash and cash equivalents
Cash and cash equivalents include cash and short-term money market instruments that are readily
convertible to cash with an original term of less than 90 days.
Mineral properties and deferred exploration costs
Exploration costs are deferred until the property to which they relate is placed into production,
sold, abandoned or allowed to lapse. These costs will be amortised over the estimated life of the
property following commencement of commercial production or will be written off if the property
is impaired, sold, allowed to lapse or abandoned.
Deferred exploration costs consist of costs for mineral property interests pursuant to the terms of
the related property agreement. Unspent advances in respect of future exploration to a company
performing exploration work on the Company’s behalf are presented separately and are
non-interest bearing.
Payments relating to a property acquired under an option or joint venture agreement are recorded
as mineral property costs upon payment.
Although the Company has taken steps to verify title to mineral properties in which it has an
interest, in accordance with industry standards for the current stage of exploration of such
properties, these procedures do not guarantee the Company’s title. Property title may be subject to
unregistered prior agreements and regulatory requirements.
The amount shown for mineral property interests represents acquisition and exploration costs
incurred to date and does not necessarily reflect present or future value. Management reviews the
carrying value of mineral properties periodically and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable, reductions in the carrying value of the
property are recorded to the extent that the carrying value exceeds the estimated fair value. No
write-downs were recognised during the period ended 31 March 2005.
Income taxes
Income taxes are calculated using the liability method of accounting. Temporary differences arise
from the difference between the tax basis of an asset or liability and its carrying amount on the
balance sheet. These temporary differences are used to calculate future income tax liabilities or
assets. Future income tax liabilities or assets are calculated using the tax rates anticipated to apply
in the periods that the temporary differences are expected to reverse.
44
Rev: 0
Gal: 0044
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1220
TCP No. 7
Time: 22:21
The Company has issued flow-through shares to finance its exploration activities. Such shares were
issued for cash in exchange for the Company giving up tax benefits arising from an equal dollar
amount of exploration expenditures. The Company records such share issues by crediting share
capital for the full value of cash consideration received. The Company follows the
recommendations of Emerging Issues Committee (EIC) Abstract No. 146, “Flow-Through Shares”
to account for expenditures related to flow-through share issues. This abstract requires the
recognition of a future income tax liability on the date that exploration expenditures are renounced
to investors. This date may be different than the effective date of renunciation. Any offsetting future
tax asset is recognised as a recovery of income tax expense.
Loss per common share
Loss per common share is computed using the weighted average number of common shares
outstanding during the period. The Company has not granted or issued stock options or warrants
during the period from 25 June 2004 to 31 March 2005.
Asset retirement obligation
The Company follows the recommendations of CICA Handbook section 3110, “Asset Retirement
Obligations” which requires companies to record the fair value of an asset retirement obligation as
a liability in the period in which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development, and/or normal use of
the assets. The obligation will be measured initially at fair value using present value methodology
and the resulting costs will be capitalised into the carrying amount of the related asset. In
subsequent periods, the liability will be adjusted for any changes in the amount or timing of the
underlying future cash flows. Capitalised asset retirement costs will be depreciated on the same
basis as the related asset and the discounted accretion of the liability is included in determining the
results of operations.
At 31 March 2005 the Company has only performed preliminary exploratory work on its mineral
properties, and has not incurred significant reclamation obligations. As such, no asset retirement
obligation accrual has been made in this financial information.
45
Rev: 0
Gal: 0045
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1221
TCP No. 7
Time: 22:21
Rev: 0
Statement of loss and accumulated deficit
Period
ended
31 March
2005
$000
Legal, accounting and audit
Consulting fees
Office and administration
Investor communications
Travel
114
7
30
2
69
Operating loss
Interest income
(222)
1
Loss for the period before and after taxation
(221)
Loss per share ($)
(0.07)
Weighted average common shares outstanding (000)
2,965
46
Gal: 0046
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1222
TCP No. 7
Time: 22:21
Rev: 0
Balance sheet
Notes
ASSETS
Current assets
Cash and cash equivalents
Receivables
As at
31 March
2005
$000
1,184
172
1,356
Deferred offering costs
Exploration advances
1
189
320
4,947
6,812
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities
Future income tax liability
187
3
599
786
Shareholders’ equity
Share capital
Subscriptions receivable
Accumulated deficit
2
7,422
(1,175)
(221)
6,026
6,812
47
Gal: 0047
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1223
TCP No. 7
Time: 22:21
Rev: 0
Cash flow statement
Period ended
31 March
2005
Notes
$000
Net loss for the period
Increase in receivables
Increase in accounts payable and accrued liabilities
(221)
(172)
187
(206)
Investing activities
Exploration advances
1
(320)
(4,947)
(5,267)
Financing activities
Common share proceeds
Deferred offering costs
6,846
(189)
6,657
Increase in cash and cash equivalents
1,184
Supplementary information
Interest and taxes paid
Non-cash financing and investing activities
Shares issued to acquire mineral properties
Shares issued for finder’s fee
—
2
2
48
—
5
Gal: 0048
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1224
TCP No. 7
Time: 22:21
Notes to the consolidated financial information
1.
Mineral Properties and Deferred Exploration Costs
As at
31 March
2005
$000
Helicopter and fixed wing aircraft costs
Sampling and geologist fees
Labour
Reimbursable bond
Geological services
Other
911
438
127
2,369
525
577
4,947
On 31 July 2004, the Company entered into an agreement with the Jaeger Joint Venture (“Jaeger”),
an entity partially-owned by a director of the Company, to purchase the right to any diamonds
located on a series of properties (the MacKenzie Diamond Project). The MacKenzie Diamond
Project covers approximately 20 million acres in the Inuvialuit, Gwich’in and Sahtu mining districts
in the Northwest Territories, Canada. Jaeger initially retained a 20 per cent. carried interest in the
properties. The agreement required the Company to issue 16,000,000 common shares to Jaeger
and to reimburse costs incurred by Jaeger. In addition, the Company agreed to pay 100 per cent. of
the first $4,000,000 in exploration costs, after which Jaeger was to contribute 11.12 per cent. of
exploration costs above $4,000,000. At 31 March 2005, 16,000,000 shares had been issued, and
$76,933 had been reimbursed under this agreement.
On 4 March 2005, the Company entered into another agreement with Jaeger to purchase for
3,000,000 common shares (based on a valuation report obtained by management) an additional
10 per cent. carried interest in the property discussed above, increasing the Company’s interest to
90 per cent. The purchase of this additional 10 per cent. carried interest requires that the Company
now pay all exploration and mine construction costs, relieving Jaeger of any responsibility for costs
toward the property. At 31 March 2005, 3,000,000 shares had been issued.
At 31 March 2005, the property is subject to a 2.9 per cent. gross overriding royalty on diamond
production, consisting of a 2 per cent. overriding royalty to a member of the Jaeger Joint Venture
and 1 per cent. of the Company’s 90 per cent. interest in the MacKenzie property to a company with
a common director.
The reimbursable bond consists of amounts paid to the Northwest Territories government on
deposit to ensure required exploration and reporting is done. Exploration activity must be
performed on the property in the amount of the deposit during the period to which the deposit
relates in order for the deposit to qualify for refund. These deposits must accompany the
application for permit that must be filed in the month of December previous to the calendar year to
which the application pertains. Future exploration deposits required on a calendar year basis are as
follows:
$000
Property located above the 68th parallel
2006/2007
2008
1,275
2,551
Property located below the 68th parallel
2005
2006
2007
155
5,046
619
Total for entire property
9,646
49
Rev: 0
Gal: 0049
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1225
TCP No. 7
Time: 22:21
Rev: 0
In December 2003, deposits were paid to the Northwest Territories government of approximately
$1,822,000 by Jaeger for 2004 exploration permits, which have not yet been refunded to Jaeger as
of the date of this report. In the event that the deposits are not refunded in full to Jaeger due to
insufficient exploration expenditures being incurred by the Company on the property in 2004, the
Company may be liable to Jaeger for the shortfall. Management believes such amounts will be fully
refunded to Jaeger. Any shortfall in amounts refunded will be recorded in the period it becomes
likely.
2.
Share capital
On incorporation
Shares issued for property acquisition (Note 1)
Shares issued in private placements:
Flow-through private placements (a)
Private placements (a)
Finders’ fees (shares and cash)
Tax value of assets renounced to flow-through share investors
Number of
shares
$000
1
19,000,000
—
—
2,644,159
9,025,650
10,000
—
2,229
5,918
(126)
(599)
30,679,810
7,422
Authorised: Unlimited common shares without par value
(a) Private placements
On 22 September 2004, 996,667 flow-through common shares were issued at $0.60 per share and
4,274,000 non flow-through common shares were issued at $0.50 per share for gross proceeds of
$2,735,000.
On 24 December 2004, 933,328 flow-through common shares were issued at $0.60 per share and
200,000 non flow-through common shares were issued at $0.50 per share for gross proceeds of
$659,997. 10,000 non flow-through common shares were issued at $0.50 per share and $126,100
was paid as finders’ fees.
On 18 February 2005, 297,000 non flow-through common shares were issued at $1.35 per share
for gross proceeds of $400,950.
On 23 March 2005, 791,666 flow-through common shares were issued at $0.60 per share as part of
a private placement for gross proceeds of $475,000.
On 31 March 2005, 2,200,000 non flow-through common shares were issued at $0.50 per share
for gross proceeds of $1,100,000. These shares were issued pursuant to the Jaeger agreement signed
31 July 2004 (Note 1).
On 31 March 2005, 714,148 flow-through common shares were issued at $1.50, and 1,263,000
non flow-through common shares were issued at $1.35 per share for gross proceeds of $2,776,272.
Cash for private placements of $1,175,000 received subsequent to 31 March 2005 has been
classified as subscriptions receivable.
(b) Deferred offering costs
Costs incurred during the period ended 31 March 2005 in respect of the Company’s proposed AIM
registration have been deferred and will be recorded as a reduction to proceeds received from
associated common shares to be issued upon registration.
(c) Flow-through shares
The flow-through shares issued effectively pass on tax credits associated with Canadian
exploration expenditures (as defined in the Canadian Income Tax Act) funded by the proceeds of
the shares. $1,683,086 of the proceeds were renounced to the subscribers as tax benefits during the
50
Gal: 0050
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1226
TCP No. 7
Time: 22:21
Rev: 0
period ended 31 March 2005. As of 31 March 2005, the Company was committed to spend unused
proceeds from flow-through share issuances of $1,021,133 on qualifying Canadian exploration
activities.
(d) Stock options and warrants
The Company did not issue stock options or warrants during the period from 25 June 2004
(Incorporation) to 31 March 2005.
3.
Income and resource taxes
$000
Statutory tax rate
35.62%
Loss for the period
(221)
Expected tax (recovery) expense
Valuation allowance
(79)
79
Actual tax expense
—
$000
Non capital losses
Valuation allowance
Deferred exploration costs
79
(79)
(599)
Future income tax liability
(599)
The realisation of benefits relating to the operating losses carried forward is uncertain and cannot
be viewed as more likely than not. Accordingly, no future income tax asset has been recognised for
accounting purposes.
The Company has Canadian non-capital losses carried forward (expiring in 2015) of $220,851.
4.
Financial Instruments
The Company’s financial assets and liabilities comprise cash and cash equivalents, receivables,
reimbursable bonds (note 1), and accounts payable and accrued liabilities. The fair value of these
financial instruments approximates their carrying values due to the immediate or short-term
maturity of the financial instruments, with the exception of reimbursable bonds, for which it is not
practical to assess the fair value.
5.
Related Party Transactions
Related party transactions not disclosed elsewhere in this financial information include exploration
costs of $466,217 payable to a company in which the Company’s chief executive officer is a
director.
6.
Reconciliation from Canadian GAAP to IFRS
Had the financial information been drawn up in accordance with IFRS, the net loss for the period
and assets/liabilities and shareholders’ equity at 31 March 2005 would have been as follows:
Period
ended
31 March
2005
$000
Net loss under Canadian GAAP
Amortisation of mineral property valuation (fair value)
Capitalisation of amortisation charge as deferred exploration costs
Net loss under IFRS
(221)
(1,113)
1,113
(221)
51
Gal: 0051
Job: 13340I--
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1227
TCP No. 7
Time: 22:21
Rev: 0
As at
31 March
2005
$000
Assets/liabilities and shareholders’ equity under Canadian GAAP
Fair value of mineral properties
Accumulated amortisation of mineral property valuation
Capitalisation of amortisation charge as deferred exploration costs
6,812
8,050
(1,113)
1,113
Assets/liabilities and shareholders’ equity under IFRS
14,862
Fair value of mineral properties
During the period ended 31 March 2005, the Company purchased the right to any diamonds on a
number of properties from Jaeger Joint Venture, using its own shares as payment. Under Canadian
GAAP, the properties have been recorded at their previous carrying value less the cash
reimbursement to Jaeger (which has resulted in a carrying value in the Company’s balance sheet of
$Nil). IFRS 2 (Share-based payments) requires that where shares are used to purchase goods and
services, these goods and services are included within the financial statements at their fair value.
19 million shares were issued as consideration for the property under the agreement with Jaeger, in
two separate issues. The first issue, of 16 million shares, took place in July 2004 at a fair value of
$0.25 per share. 3 million shares were issued in March 2005 at a fair value of $1.35 per share. These
share issues result in a valuation of $8,050,000 and the related intangible asset thus created is being
amortised from the issue date over three years, which is the minimum period of the exploration
licence.
In line with the Company’s accounting policy of full deferral of exploration costs, the amortisation
charge has been included within deferred exploration costs. This deferral will remain until either
the diamonds are ready for extraction (at which point amortisation will commence) or the deferred
exploration costs are considered to be impaired in value.
With regard to the commencement date of amortisation, IAS38 (Intangible assets) requires that
amortisation shall begin when the asset is available for use, that is when it is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
Yours faithfully
Chartered Accountants
52
Gal: 0052
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1228
TCP No. 7
PART VI
Additional Information
1.
(a)
Incorporation and Status of the Company
The Company was incorporated as a private British Columbia corporation and registered
under the Act on 25 June 2004 with the name Sanatana Diamonds Inc. and with
incorporation number BC0698458. The Company will become a public company under the
Act on Admission. The Company’s registered office is located at Suite 1040, 999 West
Hastings Street, Vancouver, British Columbia, Canada, V6C 2W2.
(b)
The liability of shareholders of the Company is limited.
2.
(a)
Subsidiaries
The Company does not have any subsidiaries and is not part of a group.
3.
(a)
Share capital of the Company
The Company was incorporated with an authorised share structure consisting of an
unlimited number of Common Shares without par value. One such Common Share was
issued as fully paid and non-assessable at the time of incorporation in consideration for
C$0.25.
(b)
The Company may issue, allot, sell or otherwise dispose of the unissued shares, and any
issued shares held by the Company, at the times, to the persons, including directors, in the
manner, on the terms and conditions and for the issue prices that the directors may determine.
(c)
The Company may issue share purchase warrants, options and rights upon such terms and
conditions as the directors determine, which share purchase warrants, options and rights may
be issued alone or in conjunction with debentures, debenture stock bonds, shares or any other
securities issued or created by the Company from time to time.
(d)
From the date of incorporation up to the date of this document, there have been the following
changes in the issued share capital of the Company:
(i)
On 31 July 2004, by a director’s consent resolution, the Company resolved to issue
791,666 Common Shares of the Company as contemplated in an option agreement of
the same date to be issued at a deemed price of $0.60 per share. The option agreement
was subsequently exercised and the Common Shares were actually issued as fully paid
and non-assessable in consideration for a total of $474,999.60 on 23 March 2005. The
consideration received for such shares was property as further discussed below in
paragraph 10(m) of this Part VI.
(ii)
On 31 July 2004, by a director’s consent resolution, the Company resolved to issue
16,000,000 Common Shares as contemplated in a sale and purchase agreement with
the Jaeger Joint Venture of the same date to be issued at a deemed price of $0.25 per
share. The Common Shares were issued in consideration for property as further
discussed below in paragraph 10(e) of this Part VI.
(iii)
On 1 September 2004, by director’s consent resolution, the Company resolved to issue
5,270,667 Common Shares to be issued as fully paid and non-assessable in
consideration for a total of C$2,735,000.20. 996,667 of such shares to be issued at a
price of C$0.60 per share and 4,274,000 of such shares to be issued at a price of C$0.50
per share. The consideration received for all such shares was cash and all of such shares
were issued in a private placement transaction.
(iv)
On 9 December 2004, by director’s consent resolution, the Company resolved to issue
1,143,328 Common Shares of the Company to be issued as fully paid and
non-assessable in consideration for a total of C$664,996.80. 933,328 of such shares to
be issued at a price of C$0.60 per share and 210,000 of such shares to be issued at a
price of C$0.50 per share. The consideration received for all of such C$0.60 shares and
53
Time: 22:21
Rev: 0
Gal: 0053
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1229
TCP No. 7
Part VI – Additional Information
all but 10,000 of such C$0.50 shares was cash. 10,000 of such $0.50 shares were issued
in consideration for past services. All of such shares were issued in a private placement
transaction.
(v)
On 18 February 2005, by director’s consent resolution, the Company resolved to issue
297,000 Common Shares of the Company to be issued as fully paid and non-assessable
in consideration for a total of C$400,950.00. All such shares to be issued at a price of
C$1.35 per share. The consideration received for such shares was cash and all of such
shares were issued in a private placement transaction.
(vi)
On 4 March 2005, by director’s consent resolution, the Company resolved to issue
3,000,000 Common Shares of the Company as contemplated in a purchase agreement
in connection with the sale and purchase agreement with the Jaeger Joint Venture at a
deemed issue price of $1.35 per share in consideration for property as further discussed
below in paragraph 10(h) of this Part VI.
(vii) On 11 March 2005, by director’s consent resolution, the Company issued 2,200,000
Common Shares of the Company as contemplated in paragraph 9.02 of the sale and
purchase agreement with the Jaeger Joint Venture dated 31 July 2004 for a price of
$0.50 per share in consideration for cash and all such shares were issued in a private
placement transaction.
(viii) On 31 March 2005, by director’s consent resolution, the Company resolved to issue
1,977,148 Common Shares of the Company. 714,148 of such shares were issued at a
price of $1.50 per share in consideration for cash and 1,263,000 of such shares were
issued at a price of $1.35 per share in consideration for cash. All of such shares were
issued in a private placement transaction.
(e)
The authorised and issued share capital of the Company at the date of this document is set out
below.
Issued and fully paid up
C$
Number
Authorised
Unlimited number of Common Shares without par
value.
(f)
16,202,218.85
30,679,810
Assuming full subscription under the Placing, the authorised and issued share capital of the
Company as it will be immediately following the Placing and Admission is set out below.
Issued and fully paid up
C$
Number
Authorised
Unlimited number of Common Shares without par value
21,324,440.85
33,606,794
(g)
The Placing Shares and Subscription Shares in issue following Admission will rank pari passu
in all respects with the Existing Common Shares, including the right to receive all dividends
and other distributions declared, made or paid after Admission on the Common Shares.
(h)
Save as disclosed in this document, no share or loan capital of the Company is proposed to be
issued or is under option or is the subject of an agreement, conditional or unconditional, to be
put under option.
4.
(a)
Notice of Articles, Articles and Governing Statute
The Company’s Notice of Articles and Articles are issued pursuant to the Act. The Act does
not require these documents to specify the objects of the Company.
(b)
Set out below is a summary of the main provisions of the Company’s Notice of Articles and
Articles:
54
Time: 18:11
Rev: 4
Gal: 0054
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1230
TCP No. 7
(c)
Shares
(i)
Transfer of Shares
All transfers of shares may be effected by a proper instrument of transfer in any usual form or
in any other form acceptable to the Directors and shall be duly executed by or on behalf of the
transferor. For as long as the Company is not a public Company under the Act, no share or
designated security may be sold or transferred or otherwise disposed of without the consent
of the directors and the directors are not required to give any reason for refusing to consent to
any such sale, transfer or other disposition.
(ii) Share Register
The Company must maintain in British Columbia a central securities register.
(iii) Repurchase of Shares
Subject to the provisions of the Articles and the Act, the Company may, if authorised by the
directors, purchase or otherwise acquire any of its shares at the price and upon the terms
specified in a resolution of the directors.
The Company must not make payment or provide consideration to purchase or otherwise
acquire its shares if there are reasonable grounds to believe that the Company is insolvent or
that making such payment would render the Company insolvent.
(d)
Borrowing Powers
If authorized by the directors, the Company may borrow money on the terms and conditions
that they consider appropriate, issue debt obligations, guarantee repayment or performance
by any other person, or grant a security interest in the whole or part of the present and future
assets of the Company.
(e)
Meetings
(i)
Meetings of Shareholders, Notice and Record Date
The directors may call a meeting of shareholders whenever they think fit.
(ii) Notice
The Company must send notice of the meeting to each shareholder entitled to attend the
meeting, to each director and to the auditor of the Company at least 21 days before the
meeting, if the Company is a public company within the meaning of the Act, or otherwise at
least 10 days before the meeting.
(iii) Annual General Meeting
The Company must hold an annual general meeting at least once each calendar year and not
more than 15 months after the last annual reference date at such time and place as may be
determined by the directors.
(iv) Quorum
The quorum for the transaction of business at a meeting of shareholders is two persons who
hold or represent by proxy at least 5 per cent. of the issued shares entitled to vote at a meeting.
(v) Voting
On a vote by show of hands, every person present who is a shareholder or a proxy holder and
is entitled to vote has one vote. On a poll, every shareholder entitled to vote on the matter has
one vote in respect of each share entitled to be voted on the matter and may exercise that vote
either in person or by proxy.
(vi) Special Resolution
The majority of votes required for the Company to pass a special resolution at a meeting of
shareholders is two-thirds of the votes cast on the resolution.
55
Time: 22:21
Rev: 0
Gal: 0055
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: DS
ID Number: 1231
TCP No. 7
(f)
Directors
(i)
Election of Directors
The number of directors may be established by ordinary resolution of the shareholders. If the
Company is a public company, within the meaning of the Act, the Company must have at
least three directors. The shareholders must elect the requisite number of directors at the
annual general meeting. The Company may remove any director before the expiration of his
or her term by special resolution of the shareholders.
(ii) Indemnification
Subject to the Act, the Company must indemnify a director or former director of the
Company against penalties incurred by reason of being or having been a director of the
Company. The failure of a director to comply with the Act or the Articles does not invalidate
any indemnity to which he or she is entitled. The Company may purchase liability insurance
for its directors, officers, employees or agents.
(g)
Committees
(i)
The directors may, by resolution, appoint an executive committee consisting of the
directors that they consider appropriate. The executive committee will have all of the
powers of the board of directors in the intervals between meetings of the board of
directors except the power to fill vacancies on the board, remove directors, or change
membership in committees of directors or such other powers set out by resolution.
(ii)
The directors may by resolution appoint one or more other committees consisting of
the director(s) that they consider appropriate. The directors may delegate to such a
committee the same powers as may be delegated to the executive committee except that
the committee will not have the power to appoint or remove officers appointed by the
directors.
(iii)
The board of directors may, at any time, revoke the any authority given to a committee
or change the membership of a committee.
(h)
Dividends and Winding Up
Subject to the provisions of the Act, the Board may from time to time declare dividends
payable to the Shareholders according to their respective rights and interests in the Company.
Dividends may be paid in money or property or by issuing fully-paid shares or bonds,
debentures or other securities in the Company. On dissolution or winding up each share
participates equally in the remaining assets of the Company. The issued shares of the
Company are not redeemable. Subject to the Act, the Company may alter its share capital by
special resolution of the Shareholders.
(i)
Records
The directors must cause adequate accounting records to be kept to record properly the
financial affairs and condition of the Company and to comply with the Act.
56
Time: 22:21
Rev: 0
Gal: 0056
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1232
TCP No. 7
5.
(a)
Directors’ and other Interests
The interests of the Directors, their immediate families and persons connected with them
(within the meaning of section 346 of the Companies Act 1985) in the share capital of the
Company all of which are beneficial as at the date of this document and as expected to be
immediately following the Placing and Admission are as follows:
Name
As at the date
of this document
Number of Per cent. of
Existing
the issued
Common
Common
Shares Share capital
Following
Admission
Per cent. of
Number of the Enlarged
Common
Share
Shares
Capital
Glenn Laing†
Peter Miles
Richard Prickett
Edward Marlow
Merfyn Roberts
Harley Hotchkiss
1,200,000
3,739,001
200,000
258,000
100,000
383,000
1,214,286
3,739,001
200,000
258,000
125,000
443,000
3.9%
12.2%
0.7%
0.8%
0.3%
1.2%
3.6
11.1
0.6
0.8
0.4
1.3
†400,000 of these shares are held by the Hughnie Laing Trust, whose sole beneficiary is Hughnie Laing, Glenn Laing’s wife.
Silverbridge Capital Inc, a company wholly owned by the Hughnie Laing Trust, subscribed for 14,286 Subscription Shares
pursuant to the Placing.
(b)
(c)
(d)
6.
(a)
Save as set out in sub paragraph (a) above, following the Placing and Admission, no Director
or any member of a Director’s immediate family or any person connected with them (within
the meaning of section 346 of the Companies Act 1985) is expected to have any interest in the
issued common share capital of the Company.
There are no outstanding loans granted or guarantees provided by the Company to or for the
benefit of any of the Directors.
Save in relation to the agreements with the Jaeger Joint Venture disclosed in Part I and in
paragraph 10 of this Part VI and as disclosed in this paragraph 5, no Director has any interest,
whether direct or indirect, in any transaction which is or was unusual in its nature or conditions
or significant to the business of the Company taken as a whole and which was effected by the
Company during the current or immediately preceding financial year, or during any earlier
financial year and which remains in any respect outstanding or unperformed.
Substantial Shareholders
The following person(s) (other than the Directors, their immediate families and persons
connected with them (within the meaning of section 346 of the Companies Act 1985)) are, at
the date of this document or will be following Admission, interested (for the purpose of
Part VI of the Companies Act 1985) directly or indirectly in 3 per cent. or more of the
Company’s issued common share capital.
Name
Jamie Mackie‡
Matthew Mason
Chen Fong
James Veitch
Rio Tinto Minerals Development
Limited
Oceanic Greystone Securities Inc.
Deesons Investments Ltd.
Michael L. Henson
As at the date of this
document
Existing
the issued
Common
Common
Shares Share capital
Following
Admission
Common the Enlarged
Shares Share Capital
3,939,166
3,925,000
2,725,000
1,469,367
12.8
12.7
8.9
4.8
4,082,086
3,925,000
2,865,000
1,483,667
12.1
11.7
8.5
4.4
—
1,118,500
1,000,000
1,000,000
—
3.6
3.3
3.3
1,428,572
1,404,300
1,285,800
1,000,000
4.3
4.2
3.8
3.0
‡ Includes 2,242,050 Common Shares as at the date of this document and 2,299,250 Common Shares following Admission held
by Brenda Mackie, Jamie Mackie’s wife.
57
Time: 18:11
Rev: 5
Gal: 0057
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1233
TCP No. 7
(b)
Save as set out in this document, the Directors are not aware of any person or persons who,
directly or indirectly, jointly or severally exercise or could exercise control over the
Company, nor are they aware of any arrangements between any persons to exercise control
over the Company.
7.
(a)
Directors’ Letters of Appointment and Consultancy Agreements
On 21 July 2005, Glenn Laing entered into a letter of appointment with the Company under
the terms of which he agreed to act as a director of the Company for an annual fee of £5,000
per annum. The appointment is terminable by 12 months notice on either side. The letter of
appointment contains the usual restrictive covenants.
(b)
On 21 July 2005, the Company entered into a management services agreement with Misape
Management Inc (“Misape”) to provide management and administrative services of Glenn
Laing. Misape is entitled to a monthly fee of US$5,000. The term of the agreement is for an
initial term of one year and thereafter is a rolling twelve month term unless either party
delivers written notice of termination to the other to be given not less than three months prior
to the expiry of each one year period. Under the agreement with Misape, Glenn Laing is
required to sign an undertaking containing the usual restrictive covenants.
(c)
On 21 July 2005, Peter Miles entered into a letter of appointment with the Company under
the terms of which he agreed to act as Executive Vice President of the Company for an annual
fee of £5,000 per annum. The appointment is terminable by 12 months notice on either side.
The letter of appointment contains the usual restrictive covenants.
(d)
On 21 July 2005, European Sales Company Limited entered into an agreement with the
Company under the terms of which it agreed to provide the services of Richard Prickett as a
non-executive director and Chairman of the Company for a fee of £10,000 per annum. The
agreement is terminable by 3 months notice on either side.
(e)
On 21 July 2005, Edward Marlow entered into a letter of appointment with the Company
under the terms of which he agreed to act as a non-executive director of the Company for a fee
of £5,000 per annum. The appointment is terminable by 3 months notice on either side.
(f)
On 21 July 2005, Merfyn Roberts entered into a letter of appointment with the Company
(g)
On 21 July 2005, Harley Hotchkiss entered into a letter of appointment with the Company
(h)
Save as disclosed in paragraphs 7(a) to (g) above, there are no service contracts, existing or
proposed, between any Director and the Company.
(i)
The aggregate remuneration and benefits in kind paid by the Company to the Directors in
respect of the period since incorporation until 31 March 2005 (being the last completed
financial period) is £0. It is estimated that under arrangements currently in force, the
aggregate remuneration and benefits in kind to be paid by the Company to the Directors for
the financial year ending 31 March 2006 (being the current financial year) will be
approximately £71,250.
58
Time: 18:17
Rev: 2
Gal: 0058
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1234
TCP No. 7
8.
(a)
(b)
Additional Information on the Board
In addition to directorships of the Company the Directors hold or have held the following
directorships or have been partners in the following partnerships within the five years prior to
the date of this document:
Director
Current Directorships
Past Directorships
Richard Prickett
Capital Pub Company PLC
European Sales Company Ltd
HPD Exploration Limited
HPD Mining Limited
Landore Resources Inc.
Landore Resources Ltd
Patagonia Gold Plc
Brancote Holdings Plc
Primeent Plc
Probus Estates Plc
Regent Inns Plc
Edward Marlow
Award International plc
Family Foundation Group
None
Merfyn Roberts
Beaver Capital Limited
Arc Advisers Limited
Central China Gold Fields PLC Dragon Capital Holdings
Limited
Country Circle Limited
Endeavour Financial Limited
Emerald Energy Plc
European Minerals Corporation Estelar Resources Plc
Resources Investment Trust Plc
Global Nickel PLC
Match Number Limited
Ocean Resources Capital
Holdings Plc
Rambler Metals and Mining
PLC
Toledo Mining Corporation Plc
Uranium Mines of Canada PLC
Harley Hotchkiss
Triquest Energy Corp.
Calgary Flames L.P.
Riverbend Farms (Ontario) Ltd.
Sebring Energy Inc.
Spartan Holdings Ltd.
Peter Miles
Vancouver Aquarium and
Marine Science Centre
Glenn Laing
Gigantic Petroleums Limited
Glass Earth Limited
GlenFred Holdings Inc.
Heritage Explorations Limited
Jumbo American Petroleum
Company
Jumbo Development
Corporation
Misape Management Inc.
Mystery Creek Mining Limited
Silverbridge Capital Inc.
St Andrew Goldfields Limited
Geoinformatics Exploration Inc.
Geoinformatics Exploration
(Australia) Pty Ltd.
Geoinformatics (Ireland)
Limited
Royal Victoria Minerals Limited
United Tex-Sol Mines Inc.
Richard Prickett was:
(i)
a director of London Securities Plc which agreed a corporate voluntary arrangement
(CVA) with its creditors and shareholders on 16 October 1992. The CVA was
completed in October 1994 as agreed. Richard Prickett resigned as a director in July
1994;
59
Time: 22:21
Rev: 0
Gal: 0059
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1235
TCP No. 7
(ii)
a non-executive director of Cloud Cover Limited from June 1996 to November 1996.
On 12 June 1997, Cloud Cover Limited went into liquidation. There is no outstanding
deficit to creditors; and
(iii)
a director of Brancote Holdings NL when it was placed into voluntary administration
on 3 March 2000. The company was subsequently placed in creditors liquidation. The
sole creditor was Brancote Holdings plc, the holding company, who wrote off all
outstanding debt. The liquidation has been finalised and Brancote Holdings NL struck
off.
(c)
Peter Miles has been censured by the Investment Dealers Association, Canada for failing to
learn the essential facts of one order in a client account.
(d)
Save as disclosed in this paragraph 8, none of the Directors has:
(i)
any unspent convictions in relation to indictable offences;
(ii)
had any bankruptcy order made against him or entered into any voluntary
arrangements;
(iii)
been a director of a company which has been placed in receivership, compulsory
liquidation, administration, been subject to a voluntary arrangement or any
composition or arrangement with its creditors generally or any class of its creditors
whilst he was a director of that company or within the 12 months after he ceased to be a
director of that company;
(iv)
been a partner in any partnership which has been placed in compulsory liquidation,
administration or been the subject of a partnership voluntary arrangement whilst he
was a partner in that partnership or within the 12 months after he ceased to be a partner
in that partnership;
(v)
been the owner of any assets or a partner in any partnership which has been placed in
receivership whilst he as a partner in that partnership or within the 12 months after he
ceased to be a partner in that partnership;
(vi)
been publicly criticised by any statutory or regulatory authority (including recognised
professional bodies);
(vii) been disqualified by a court from acting as a director of any company or from acting in
the management or conduct of the affairs of a Company;
(viii) save as disclosed in this document, no Director is or has been interested in any
transaction which is or was unusual in its nature or conditions or significant to the
business of the Company and which was effected by the Company and remains out
standing or unperformed.
(e)
No loans made or guarantees granted or provided by the Company to or for the benefit of any
Directors are outstanding.
(f)
Pursuant to the letter agreement dated 25 November 2004 between the Company and
Geoinformatics, further details of which are set out in paragraph 10(j) of Part VI of this
document, the Company paid to Geoinformatics a consulting fee of $466,217 between June
2004 and February 2005 in respect of the Geoinformatics Intervention Project. Glenn Laing,
a Director of the Company, was a director of Geoinformatics at the time such payment was
made.
9.
Summary of the rules of the Share Option Plan
The Share Option Plan was adopted by the Company in general meeting on 11 May 2005, when the
rules of the Share Option Plan were approved (“Rules”). The Rules provide for the following:
(a)
the board of the Company has absolute discretion to select from time to time any number of
persons who are at the intended date of grant of an option a director or employee of the
Company or of any other company which is controlled by the Company (“Eligible
Employee”) (“Group Member”) and grant options to them;
60
Time: 22:21
Rev: 0
Gal: 0060
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: PH
ID Number: 1236
TCP No. 7
(b)
the number of shares in respect of which options may be granted under the Share Option Plan
shall not, when added to the number of shares issued or capable of being issued on exercise of
options granted during the previous ten years by the Company under any other employees’
option scheme approved by the Company or adopted by the board which provide for the
acquisition of shares in the Company, exceed 10 per cent. of the Company’s shares in issue
(“Plan Limits”). In calculating the Plan Limits, options which have been granted prior to the
admission of the shares to trading on AIM, lapsed or been surrendered, shall not be included;
(c)
no options may be granted to any director or senior officer of the Company or of an affiliated
entity of the Company (as defined in Canadian securities laws) or to an associate (as defined in
Canadian securities laws) of any of the aforementioned persons (“Related Person”) if such
options, together with all the securities of the Company previously issued or granted as
compensation on a fully diluted basis, (collectively the Share Compensation Arrangements)
could result, at any time, in:
(i)
the number of shares reserved for issuance pursuant to the Share Compensation
Arrangements granted to Related Persons collectively exceeding 10 per cent. of the
number of the Company’s shares then issued and outstanding; or
(ii)
the issuance to Related Persons, within a 12 month period of a number of shares
exceeding 10 per cent. of the Company’s shares then issued and outstanding; or
(iii)
the number of shares reserved for issuance pursuant to Share Compensation
Arrangements granted to any Related Person exceeding 5 per cent. of the number of the
Company’s shares then issued and outstanding; or
(iv)
the issuance to any Related Person and any associate of a Related Person (as defined
under applicable Canadian securities law) within a 12 month period, of a number of
shares exceeding 5 per cent. of the number of shares in the Company then issued and
outstanding;
(d)
the exercise of an option shall be subject to the satisfaction of performance conditions
specified by the Board at the date of grant and set out in the option certificate. However where
events happen which the Board reasonably considers have effected the viability of such
performance conditions and that they no longer represent a fair measure of performance the
Board may waive or vary the performance conditions so long as the variation is not more
onerous than the original performance conditions and all relevant option holders are given
notice in writing of the variation as soon as practicable;
(e)
it shall be a condition of the grant of an option that each option holder indemnifies the
Company and any Group Member to the extent permitted by law against any income tax,
social security contributions and/or employment or withholding tax or costs arising as a
consequence of the grant, exercise, disposal or release of an option or in respect of shares in
the Company acquired pursuant to the exercise of the option (“Tax Liability”);
(f)
each option shall be exercisable only by the option holder to whom it is granted and may not
be transferred, assigned or charged, and the option shall lapse on any purported transfer,
assignment or charge by the option holder;
(g)
the period during which the option holder may exercise an option shall commence on the
third anniversary of the date of grant of the option and end on the day prior to the tenth such
anniversary or on such earlier date as the board may have determined at the date of grant
(“Exercise Period”) subject to the satisfaction of the performance conditions;
(h)
the price at which each share subject to an option may be acquired on exercise of the option
(“Option Price”) shall not be less than:
(i)
in respect of an option holder not resident in Canada, the market value of the share on
the day on which the option was granted; and
(ii)
in respect of an option holder resident in Canada, the fair market value of a share on the
day on which the option was granted;
61
Time: 22:21
Rev: 0
Gal: 0061
Job: 13340I--
Santan Prosp
Date: 13-07-05
Area: A1
Operator: KW
ID Number: 1237
TCP No. 7
(i)
an option may not be exercised, accept in certain circumstances, prior to the commencement
of the Exercise Period, nor in any circumstances after the expiry of the Exercise Period, nor at
any time when the option holder, save in certain circumstances, is not an Eligible Employee,
nor at any time during a period where there are restrictions in trading in the shares;
(j)
if an option holder, while continuing to hold an office or employment with the Group is
transferred to work in another country and a result of such transfer he will become subject to
a Tax Liability and/or the Board is satisfied that as a result of the transfer he shall suffer a tax
disadvantage in connection with the option or he becomes subject to restrictions on his ability
to exercise an option or deal in the shares he will acquire on exercise under the laws of the
country to which he is transferred, the Board may at its discretion permit the option holder to
exercise the option in the period commencing three months before and ending three months
after the transfer takes place; and may at its discretion permit such exercise not withstanding
any performance conditions which are required to be achieved;
(k)
the option shall cease to be exercisable and shall lapse forthwith on the expiry of the Exercise
Period; on the option holder doing or suffering any act whereby he would or might be
deprived of the legal or beneficial ownership of the option; save in certain circumstances, on
the option holder ceasing to be an Eligible Employee; and on certain lapsing events as set out
in the Rules and/or referred to in the option certificate;
(l)
if an option holder dies before exercising an option, at the time when he is an Eligible
Employee, an option which has not lapsed may (and must, if at all) be exercised by his
personal representatives within the period ending on the earlier of the expiry of the period of
twelve months after the date of death and the expiry of the Exercise Period, failing which the
option shall lapse;
(m)
if an option holder ceases to be an Eligible Employee by reason of ill health, injury or
disability, or retirement, then an option which has not lapsed may be exercised at any time up
to the last day of the sixth month following the date of cessation, but any option not so
exercised shall automatically lapse thereafter;
(n)
if an option holder ceases to be an Eligible Employee for any reason whatsoever other than for
a reason specified in paragraphs (l) and (m) above, then any option not exercised by the time
of such cessation and which has not lapsed shall immediately cease to be exercisable and shall
lapse three months after such cessation, unless within the three months after cessation the
Board in its absolute discretion shall permit the option to be exercised in whole or in part
within a specified period, in which event the option may be exercised by the option holder to
the extent so permitted by the board;
(o)
if there is a change in control of the Company the Board shall notify in writing each option
holder of such fact and the option holder may at any time within specified periods as set out in
the Rules exercise any option which has not lapsed but any option which is not so exercised
shall lapse at the expiry of the specified periods set out in the Rules;
(p)
if at any time holders of shares in the Company enter into negotiations with any person or
persons which will or may give rise to a change of control of the Company then the Board on
becoming aware of such negotiations shall make representations to the such holders of the
shares and procure that each option holder is given the opportunity to join in such sale, and
each option holder may, if he agrees to join in such sale in respect of all the shares under
option held by him, thereafter exercise his option at any time prior to the completion of the
sale and if not so exercised the option shall lapse upon completion of the sale, if such an
opportunity is not given and a sale is completed following negotiations an option holder can
exercise his options within 6 months after completion, subject to the satisfaction of
performance conditions and other restrictions on exercise. To the extent the option is not
exercised it will lapse on the expiry of the 6 month period;
62
Time: 22:21
Rev: 0
Gal: 0062
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: KW
ID Number: 1238
TCP No. 7
(q)
if the Board enters into negotiation in respect of an unconditional agreement for the sale of the
whole of the business or assets of the Company the Board shall inform all option holders and
each option holder shall be entitled to exercise his options which have not lapsed within such
period permitted by the Board prior to and subject to the completion of the unconditional
agreement, but in the event there is no such completion any purported exercise under this
provision shall be invalid;
(r)
if a company has acquired control of the Company any option holder may by agreement with
the acquiring company at any time within a specified period as defined in the Rules, release his
rights in respect of any option held by him which has not lapsed, in consideration of a grant to
him of rights which relate to shares in the acquiring company or a company associated with
the acquiring company;
(s)
in the event of an increase or variation of the share capital of the Company by way of
capitalisation or rights issue, or sub-division, consolidation or reduction, or otherwise
howsoever, the Board may make adjustments to the number of shares in respect of which an
option granted under the Share Option Plan may be exercised and the Option Price, but
except in the case of a capitalisation issue no adjustment shall be made without the prior
confirmation in writing by the auditors to the Board that such adjustment is in their opinion
fair and reasonable and no adjustment shall be made as a result of which the aggregate
amount payable on the exercise of an option in full would be increased;
(t)
subject to the performance conditions having been met, if at any time while any option
remains unexercised, notice is given of a general meeting of the Company at which a
resolution will be proposed for the voluntary liquidation of the Company, any option which
has not lapsed prior to the resolution shall be exercisable in whole or in part, until the
commencement of the winding up of the Company;
(u)
the Board may by resolution at any time make any alterations to the Rules as it thinks fit
subject to the approval of the Company in general meeting save for any alterations to take
into account of legislation or statutory regulations or to maintain favourable tax treatment
for the Company and participants which can be made by Board resolution. No alterations
shall be made which would materially increase the liability of any option holder or which
would materially decrease the value of his subsisting rights attached to an option without in
each case the option holders prior written consent;
(v)
participation in the Share Option Plan by an option holder shall not form part of its
entitlement to remuneration or benefits pursuant to his contract of employment, and rights
granted pursuant to the option shall not forward him any rights or additional rights to
compensation or damages for any matter, including loss of rights to be granted under an
option or to exercise any option in consequence of loss or termination of his office or
employment with the Company or any Group Member for any reason whatsoever, and
nothing in the Rules shall confirm upon any person any right to continue in the employment
of the Company or any Group Member or shall affect the right of the Company or any Group
Member to terminate the employment of an option holder; and
(w)
the Rules shall in all respects be governed by the laws of England.
10. Material contracts
The following contracts, not being contracts entered into in the common course of business, have
been entered into by the Company within the period from incorporation to the date immediately
preceding the date of this document and are, or may be, material:
(a)
The Placing Agreement dated 22 July 2005 between the Company (1), the Directors (2) and
Insinger de Beaufort (3) pursuant to which conditional upon, inter alia, Admission taking
place on or before 9:00 a.m. on 28 July 2005 (or such later time and or date as the Company
and Insinger de Beaufort may agree being not later than 29 July 2005), Insinger de Beaufort
have agreed to use reasonable endeavours to procure subscribers for new Common Shares
proposed to be issued by the Company at the Placing Price.
63
Time: 20:22
Rev: 5
Gal: 0063
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1239
TCP No. 7
The Placing Agreement contains customary warranties from the Company and the Directors
in favour of Insinger de Beaufort together with provisions which enable Insinger de Beaufort
to terminate the Placing Agreement in certain circumstances prior to Admission including
circumstances where any warranties are found to be untrue or inaccurate in any material
respect. The liability of the Directors for breach of warranty is limited. Under the Placing
Agreement the Company has agreed to pay Insinger de Beaufort a fee of £125,000, of which
£30,000 is to be settled by the issuance of new Common Shares at the Placing Price, and
commission of 5 per cent. of the value of the Placing Shares placed by Insinger de Beaufort at
the Placing Price.
(b)
A Nominated Adviser and Broker Agreement dated 22 July 2005 between the Company (1),
the Directors (2) and Insinger de Beaufort (3) pursuant to which the Company has appointed
Insinger de Beaufort to act as Nominated Adviser and Broker to the Company for the
purposes of AIM. The Company has agreed to pay Insinger de Beaufort a fee of £30,000 per
annum for its services as Nominated Adviser and Broker under this agreement. The
agreement contains certain undertakings and indemnities given by the Company and the
Directors in respect of, inter alia, compliance with all applicable laws and regulations. The
agreement continues for a fixed period of one year from the date of the agreement and
thereafter is subject to termination on the giving of 30 days notice.
(c)
Lock-in Agreements between the Company, Insinger de Beaufort, the Directors and related
parties, and Rule 7 Shareholders pursuant to which they have agreed not to dispose of
Common Shares held by them save in certain limited circumstances until the date 12 months
from the date of Admission and then for a further 12 months will only dispose of Common
Shares through Insinger de Beaufort to ensure an orderly market for the Company’s shares.
(d)
Lock-in Agreements between the Company, Insinger de Beaufort and certain Shareholders
(not being required to be locked in under AIM Rule 7) pursuant to which the significant
Shareholders have undertaken that, save in certain limited circumstances, they will not
dispose of the Common Shares held by them for a period of 12 months from Admission
except with the consent of the Company and Insinger de Beaufort.
(e)
A sale and purchase agreement dated 31 July 2004 between the Company and Jaeger Joint
Venture (the “Jaeger Diamond Property Sale and Purchase Agreement”) pursuant to which
the Company purchased rights to any and all rough uncut diamonds in or under certain
prospecting permits situated in the NWT, Canada, and registered in the name of Matthew
Mason, including any successor mineral title ownership such as claims and leases, and
including the right to explore for and exploit all such rough uncut diamonds (the
“Property”). On the completion of the transaction contemplated in this agreement, Jaeger
Joint Venture retained: (a) the “Production Carried Interest”, a 10 per cent. undivided
interest in the Property; (b) the “Performance Carried Interest”, a 10 per cent. undivided
interest in the Property; and (c) all rights to all minerals except rough uncut diamonds.
Accordingly, on closing, the Company owned 80 per cent. of the Property and Jaeger Joint
Venture owned 20 per cent. of the Property.
Under the terms of this agreement, the Company acknowledges that Geoinformatics is
entitled to a 1 per cent. gross overriding royalty and Matthew Mason is entitled to a 2 per
cent. gross overriding royalty.
As consideration for the purchase, the Company agreed to issue and deliver 16,000,000
common shares in the capital of the Company at a deemed price of $0.25 per share, such shares
to be registered in such names and such denominations as directed by the Jaeger Joint Venture
and to reimburse Matthew Mason for his out of pocket costs (up to the amount of $100,000) in
managing the acquisition and subsequent administration of the Permits. The Company also
agreed with Jamie Mackie that he be allowed to apply the refund of a deposit lodged with the
Chief Mining Recorder as part of the application for the prospecting permits containing the
Company’s diamond rights to a subscription for shares at the price of $0.50 per share, such
shares to be registered in such names and in such denominations as he might direct.
64
Time: 18:13
Rev: 6
Gal: 0064
Job: 13340I--
Date: 15-07-05
Area: A1
Operator: MC
ID Number: 1240
TCP No. 7
Time: 19:40
(f)
A joint venture agreement dated as of the closing of the Jaeger Diamond Property Sale and
Purchase Agreement between the company and Jaeger Joint Venture (the “Jaeger-Sanatana
Joint Venture Agreement”), pursuant to which the Company and Jaeger Joint Venture agree
to a joint operation for the purpose of exploring for diamonds and, if deemed warranted,
establishing and operating a mine. The agreement defines a geographical area of common
interest within which either party may require any mineral interests acquired by either party
to be added to the property to which the agreement applies. It provides for the establishment
of a management committee composed of two representatives of Jaeger Joint Venture and
two representatives of the Company which shall make all decisions in respect of mining
operations with respect to the property to which the agreement applies. As long as the
Company’s interest in this property is 50 per cent. or more, the Company is required to
manage and carry out all mining operations as directed by the management committee.
This agreement contains mechanisms by which the interests of Jaeger Joint Venture and the
Company in the property to which it applies may be increased or decreased depending upon
the proportion of costs borne by each. In the event that a mine is established and brought into
production, each party is required to contribute its proportionate share to the costs of
establishing such mine, failing which it shall be deemed to have assigned and conveyed its
interest to the other party. The sole consideration payable to the party so assigning its interest
is will be a 5 per cent. royalty on net proceeds of production from the mine.
This agreement is expressly restricted to rights to diamonds, it being acknowledged that
Jaeger Joint Venture retains the right to all other mineral interests in the geographical area to
which it applies. The agreement states that, except as expressly provided, each party may
independently engage in and receive full benefits from business activities, whether or not
competitive with the joint operation, without consulting the other party. It further provides
that, in the event that the Company decides to surrender any part of the property to which this
agreement applies, or permit such property to lapse, Jaeger Joint Venture has the right to have
such property conveyed to it, together with any engineering data relating to the same.
(g)
An agreement dated 27 January 2005 between Jaeger Joint Venture and the Company, pursuant
to which the parties agree to amend the Jaeger Diamond Property Sale and Purchase Agreement
to include a geographical area of common interest within which either party may require that
any mineral interests acquired by either party be added to the property to which that agreement
applies. The geographical area of interest includes that part of the NWT bounded by the line of
latitude 65쎷 North; bounded on the west by meridian 135 West; bounded on the east by
meridian 115쎷 West; and bounded on the north by the coastline of the Arctic Ocean. This
agreement obligates the Company to allow representatives of the holder of the 2 per cent.
royalty in favour of Matthew Mason access to the property to which the Jaeger-Sanatana Joint
Venture Agreement applies. This agreement further requires the Company to provide such
representatives with all technical records and other factual engineering data and information in
the possession of the Company which relates to such property.
(h)
An agreement dated 4 March 2005 between Jaeger Joint Venture and the Company, pursuant
to which the Company purchases from Jaeger Joint Venture the 10 per cent. Performance
Carried Interest which it retained under the Jaeger Diamond Property Sale and Purchase
Agreement. As consideration for the purchase, the Company agreed to issue and deliver
3,000,000 common shares at a deemed price of $1.35 per share, such shares to be registered
in such names and such denominations as directed by Jaeger Joint Venture.
(i)
An agreement dated 15 June 2005 between Jaeger Joint Venture and the Company (the
“Mineral Acquisition Agreement”), pursuant to which the Company purchases from Jaeger
Joint Venture all other mineral rights to the Permits, excluding any rights in respect of
uranium, subject to the Jaeger Joint Venture retaining a 10 per cent. production carried
interest and subject to Matthew Mason retaining a 2 per cent. gross overriding royalty in
respect of diamonds and a 2 per cent. net smelter royalty in respect of other minerals
excluding uranium.
65
Rev: 3
Gal: 0065
Job: 13340I--
Date: 15-07-05
Area: A1
Operator: MC
ID Number: 1241
TCP No. 7
Time: 19:41
(j)
A letter agreement dated 25 November 2004 between the Company and Geoinformatics,
pursuant to which the Company has agreed to create a strategic alliance with Geoinformatics
for the exploration of diamond deposits in the area of the Company’s diamond rights in the
NWT. The project consists of a 2004 field exploration program, and an intervention project
to generate a targeting strategy for large kimberlitic deposit searches. The Company has
agreed to pay Geoinformatics the costs of the field exploration program (estimated to be
$2,200,000) plus a management fee of 10 per cent. of all costs incurred. The Company has
also agreed to pay the costs of the intervention project (estimated to be $450,000) and has
granted Geoinformatics a 1 per cent. gross over-riding royalty on all diamonds mined by the
Company and its affiliates from within the area of its diamond rights.
One of the principal aims of the intervention project is to produce a 3D crustal scale
geodynamic model of the area of the Company’s diamond rights, which will form the basis of
a targeting strategy for developing prioritized areas. This model will be delivered in a 3D
geosciences database and a full 3D tectonic reconstruction of the mega-element architecture
based on the re-interpretation of crustal scale datasets and any other data acquired during the
intervention project which has been sourced from both within existing Geoinformatics
databases and from external sources.
Under the terms of this agreement, the Company grants Geoinformatics: (a) a fully paid
royalty free perpetual license to use the data and work product of the intervention project and
the right to sublicense the same; (b) a further right to incorporate any data generated into its
Geoinfobank for licence to third parties; and (c) a right of first offer on any targets identified
as having strong potential to contain kimberlitic intrusions that the Company chooses to
abandon. The Company also agrees to indemnify Geoinformatics and its representatives
from and against any loss, cost, liability, claim, demand, damage, expense, injury and death
resulting from Geoinformatics involvement in this project, unless incurred as a result of gross
negligence or willful misconduct of Geoinformatics.
(k)
The Exploration Management Agreement dated 13 June 2005 between the Company and
Geoinformatics, effective for the 2005 calendar year, pursuant to which the Company has
agreed with Geoinformatics that Geoinformatics will manage the Company’s 2005
exploration program.
The exploration program planned for 2005 will continue the 2004 exploration strategy of
using geochemistry and geophysics to define potential kimberlite targets ahead of test
drilling. C$2,560,000 has been budgeted for spring-summer airborne surveys, C$2,266,000
has been budgeted for the summer-fall 2005 sampling program and C$546,500 has been
budgeted for summer 2005 prospecting and supervision.
The Company has agreed to pay Geoinformatics a management fee of 10 per cent. of all direct
costs incurred for projects that make up the 2005 exploration program, excluding costs of
airborne geophysical surveys. Geoinformatics has agreed to prepare an interim report on the
exploration program in November 2005 and a final field exploration report in January 2006.
Geoinformatics has also agreed to take responsibility for preparing the 2005 assessment
report in respect of the exploration program for filing by the Company in January 2006.
(l)
An authorisation for expenditures dated 31 January 2005 between the Company and
Geoinformatics, pursuant to which the Company has approved a C$400,000.00 authorisation
for expenditures from Geoinformatics for various activities related to the Company’s diamond
rights, including the purchase and positioning of a summer mining camp.
(m)
An option agreement dated 31 July 2004 between the Company and Glencairn Gold
Corporation (“Glencairn”), pursuant to which the Company granted Glencairn an option to
acquire up to a 3.8 per cent. undivided interest in the Company’s diamond rights by
contributing to the Company’s exploration expenses, and an option to require the Company
to repurchase this interest in consideration for the issuance of up to 791,666 common shares.
Glencairn subsequently acquired the full 3.8 per cent. interest and exercised its option
requiring the Company to repurchase it for 791,666 common shares.
66
Rev: 4
Gal: 0066
Job: 13340I--
Date: 19-07-05
Area: A1
Operator: MC
ID Number: 1242
TCP No. 7
Time: 19:27
(n)
An amended and restated declaration of trust dated 15 June 2005, pursuant to which
Matthew Mason acknowledges that, to the extent of the diamond rights and other mineral
rights, excluding any rights in respect of uranium, he holds the Permits as bare trustee and
nominee for and on behalf of the Company and confirms that the Company is the beneficial
owner of a 100 per cent. interest in and to the diamond rights and other mineral rights,
excluding any rights in respect of uranium, to the Permits. The declaration of trust provides
that the diamond and other mineral rights to the Permits are subject to a 2 per cent. gross
overriding royalty with respect to diamonds and a 2 per cent. net smelter royalty with respect
to other minerals, excluding uranium, payable to Matthew Mason in accordance with the
Mineral Acquisition Agreement.
(o)
The Kennecott Agreement dated 19 July 2005 between the Company and Kennecott,
pursuant to which Kennecott has agreed to invest C$2.5 million in the Placing and has the
right to participate in further private placements in the Company to take its holding up to a
maximum of 9.9 per cent. of the enlarged issued share capital of the Company.
Kennecott has agreed to contribute C$2.5 million towards the Company’s 2005 exploration
program and may contribute a further C$2.5 million towards the Company’s 2006
exploration program. If it makes these investments and contributions, Kennecott will earn a
15 per cent. interest in the Mackenzie Diamond Project and an exploration joint venture will
be formed. The Company will manage and operate the exploration program and Kennecott
will be required to contribute 15 per cent. of ongoing exploration costs.
Kennecott has the right to earn up to a 60 per cent. interest in any individual kimberlite or
mineral deposit identified by the Company on the following basis:
앫
Kennecott will earn a 49 per cent. interest in each individual project by completing, at
its sole expense, a bulk sample and a positive feasibility study within 4 years; and
앫
Kennecott will earn a further 11 per cent. interest in each individual project by solely
funding and managing all future evaluation until such time as a decision to mine is
made.
Upon Kennecott earning a 49 per cent. interest in a kimberlite or other material deposit and
electing not to solely fund further evaluation, or upon Kennecott earning a 60 per cent.
interest, a development joint venture will be created in respect of that particular kimberlite or
mineral deposit and each party will be obliged to fund the development of that kimberlite or
mineral deposit in proportion to the interest it owns.
From 2008, Kennecott will be required to make a C$1 million investment in the Company
each year to retain the earn in right.
Once production of diamonds starts from any particular deposit, all kimberlites, mineral
deposits and mineral title in the exploration area will become the property of the
development joint venture and all subsequent exploration, evaluation and development will
be carried out by the development joint venture. Rio Tinto Diamonds, a subsidiary of
Kennecott, will market all diamonds from the development joint venture in exchange for a
3 per cent. marketing fee.
11. Litigation
The Company is not involved in any legal or arbitration proceedings which may have or have had
since incorporation a significant effect on the Company’s financial position and, so far as the
Directors are aware, there are no such proceedings pending or threatened against the Company.
12. Working capital
The Directors are of the opinion, having made due and careful enquiry and having taken into
account the net proceeds of the Placing, that following Admission, the Company will have sufficient
working capital for its present requirements, that is for at least the next 12 months.
67
Rev: 9
Gal: 0067
Job: 13340I--
Date: 18-07-05
Area: A1
Operator: DD
ID Number: 1243
TCP No. 7
Time: 10:38
13. Taxation
Canadian Tax
Residency
In this section, “Canadian resident” means a person who is resident in Canada or deemed to be
resident in Canada for the purposes of the Income Tax Act, Canada (“ITA”). “Non-resident”
means those persons who are not resident in Canada for the purposes of the ITA. In certain
circumstances, persons who would otherwise factually be resident or deemed to be resident in
Canada for the purposes of the ITA may be considered non-residents due to the application of a tax
treaty or convention to which Canada is a party.
Capital Gains
Canadian resident shareholders
Generally, the Common Shares will be considered to be a capital property to a shareholder
provided that the shareholder does not hold such Common Shares in the course of carrying on a
business of buying and selling securities and has not acquired them in one or more transactions
considered to be an adventure in the nature of trade. Certain shareholders who might not otherwise
be considered to hold their Common Shares as capital property may, in certain circumstances, be
entitled to have them treated as capital property by making the irrevocable election permitted by
subsection 39(4) of the ITA.
Sub-section 39(4) is not applicable to a shareholder that is a financial institution (as defined in the
ITA for purposes of the mark-to-market rules), or a specified financial institution (all as defined in
the ITA).
Canadian resident shareholders who hold their Common Shares as capital property will be subject
to Canadian income tax on capital gains realised on the disposition of their Common Shares.
A Shareholder will realise a capital gain on the disposition of Common Shares to the extent that the
consideration received on the disposition exceeds the adjusted cost base (“ACB”) for tax purposes
and reasonable expenses of disposition of the Common Shares. Canadian resident individuals and
corporate Shareholders will be required to include 50 per cent. of the capital gain in their taxable
income in the taxation year in which the sale occurs. A Shareholder will realise a capital loss on the
disposal of Common Shares to the extent that the consideration on disposition is less than the ACB
for tax purposes of the Common Shares as well as reasonable expenses of disposition. A
Shareholder’s allowable capital loss in a year will be 50 per cent. of the capital loss and may be
offset against taxable capital gains realised in the relevant tax year. The remaining allowable capital
loss may be carried back to the preceding three taxation years or forward indefinitely to offset any
taxable capital gains incurred in those years, to the extent and under the circumstances specified in
the ITA.
Non-residents of Canada
A Shareholder who is non-resident in Canada will only be subject to tax under the ITA in respect of
a capital gain realised upon the disposition of Common Shares if the Common Shares are “taxable
Canadian property”. The Common Shares will be taxable Canadian property at a particular time
unless:
(i)
the Common Shares are listed on a prescribed stock exchange (which currently includes the
Toronto and London Stock Exchange but not the AIM Market of the London Stock
Exchange) at that time; and
(ii)
during the 60 months immediately preceding the disposition of Common Shares the
non-resident Shareholder, a person with whom the non-resident Shareholder did not deal at
arm’s length or the non-resident Shareholder together with such persons, did not own or have
an interest in, or an option to acquire 25 per cent. or more of the issued shares of any class of
shares of the Company.
68
Rev: 6
Gal: 0068
Job: 13340I--
Date: 18-07-05
Area: A1
Operator: MC
ID Number: 1244
TCP No. 7
Time: 17:50
A non-resident Shareholder who disposes of Common Shares that are taxable Canadian property
will be required to include one-half of the amount of any resulting capital gain (a “taxable capital
gain”) in income, and may deduct one-half of the amount of any resulting capital loss (an
“allowable capital loss”) against taxable capital gains realised by the non-resident Shareholder on
disposition of other taxable Canadian properties (other than treaty protected properties) in the year
of disposition. Allowable capital losses not deducted in the taxation year in which they are realised
may be carried back and deducted in any of the three preceding taxation years or carried forward
and deducted in any subsequent taxation year against taxable capital gains realised in such years on
the disposition of taxable Canadian properties (other than treaty protected properties), to the
extent and under the circumstances specified in the ITA.
A capital gain realised by a Shareholder who is not resident in Canada may be exempt from tax
under the ITA pursuant to the provisions of an applicable tax treaty or convention.
Dividends
Canadian Resident Individual Shareholders
Dividends received on the Common Shares by Canadian resident individual Shareholders will be
included in the Shareholders’ income in the year the dividend is received. The actual amount of the
dividend will be grossed up by 25 per cent. to compute the taxable amount of the dividend.
A federal dividend tax credit of 13.33 per cent. of the taxable amount of the dividend may be
deducted from the taxpayer’s basic federal tax.
Canadian Resident Corporate Shareholders
Dividends received on the shares by Canadian resident corporate Shareholders will be included in
their income in the year the dividend is received. The gross up and dividend tax credit provisions
with respect to dividends received by individuals do not apply to corporations. The corporate
Shareholder may generally deduct the dividend received for the purpose of computing its taxable
income.
Where dividends are received by a corporate Shareholder that is a private corporation resident in
Canada, the corporate Shareholder will generally pay refundable tax under Part IV of the ITA equal
to one-third of the dividend received provided it is not a connected corporation for the purposes of
the ITA. Two corporations are connected for Canadian income tax purposes if the Shareholder
controls the Company or owned, at that time, more than 10 per cent. of the issued share capital
(having full voting rights under all circumstances) and shares of the capital stock of the Company
having a fair market value of more than 10 per cent. of the fair market value of all the issued shares
of the capital stock of the Company. This tax is generally refundable when the corporate
Shareholder pays a dividend to its shareholders equal to the dividend it received from the Company.
Non-Residents of Canada
Dividends received or deemed to be received on shares by a Shareholder who is a non-resident of
Canada will generally be subject to Canadian withholding tax at the rate of 25 per cent. This rate
may be reduced pursuant to an income tax treaty between Canada and the country in which the
Shareholder is a resident.
Alternative Minimum Tax
Canadian resident individuals, including certain trusts, are subject to an alternative minimum tax.
Dividends received or deemed to be received on the Common Shares and capital gains realised on a
disposition or deemed disposition of Common Shares may increase a shareholder’s liability for
alternative minimum tax.
Qualified Investment
The Common Shares will not be qualified investments under the ITA for trusts governed by
registered retirement savings plans, registered retirement income funds, deferred profit sharing
plans and registered education savings plans (collectively, the “plans”). If the Common Shares are
69
Rev: 9
Gal: 0069
Job: 13340I--
Date: 18-07-05
Area: A1
Operator: DD
ID Number: 1245
TCP No. 7
Time: 10:40
listed on a prescribed stock exchange (which currently includes the Toronto and London Stock
Exchanges but not the AIM Market of the London Stock Exchange) the Common Shares will be
qualified investments for the plans at that time.
UK Tax
The following is a summary of certain material UK tax consequences arising for investors regarding
the ownership and disposition of Common Shares, where those Common Shares are held as capital
assets. It is based on current UK tax laws and Inland Revenue practice and rates of taxation in force
at the date of this document, which may be subject to change, perhaps with retrospective effect.
This summary does not address all possible tax consequences relating to an investment in the
Common Shares. In particular, it does not purport to address the tax consequences for special
classes of investors, such as dealers in securities, of owning shares in the Company or investors that
hold the Company’s Common Shares in connection with a trade, profession or vocation carried on
in the UK (whether through a branch or agency, in the case of a corporate investor, a permanent
establishment, or otherwise). Neither does it consider in any detail the impact which a double tax
agreement may have on liability to tax. All potential investors should satisfy themselves as to the tax
consequences of the ownership or disposition of Common Shares in the Company by consulting
with their own tax advisers.
Taxation of dividends on Common Shares
The Company will be required to withhold tax at source from dividend payments it makes to
individual Shareholders resident in the UK for tax purposes at a rate of 15 per cent. pursuant to the
Canadian-UK Income Tax Convention and reduced to 5 per cent. if the Shareholder is a company
owning more than 10 per cent. of the voting shares. An individual shareholder who is resident, but
not domiciled, in the UK, and is not taxable in the UK because the dividend is not remitted to the
UK, is not entitled to any treaty relief and is subject to full withholding tax at a rate of 25 per cent.
UK tax resident individual Shareholders will generally be liable to income tax on the gross amount
of any dividends paid by the Company before deduction of any Canadian tax withheld. UK tax
resident corporate Shareholders will generally be liable to corporation tax on dividends paid by the
Company before deduction of any Canadian tax withheld. Shareholders who carry on a trade,
profession or vocation in the United Kingdom through a branch or agency or permanent
establishment in connection with which the Common Shares are held will generally be subject to
UK income tax or corporation tax, as the case may be, on the gross amount of dividends paid by the
Company before deduction of any Canadian tax withheld. Canadian withholding tax withheld
from the payment of a dividend (and not recoverable from the Canadian tax authorities) will
generally be available as a credit against the income tax or corporation tax payable by the
Shareholder in respect of the dividend.
The income tax charge in respect of dividends for UK tax resident individual Shareholders, other
than higher rate taxpayers, will be at the rate of 10 per cent. A higher rate taxpayer will be liable to
income tax on dividends paid by the Company (to the extent that, taking the dividend as the top
slice of his income, it falls above the threshold for the higher rate of income tax) at the rate of
32.5 per cent. UK tax resident individual Shareholders who are not liable to income tax on their
income will not be subject to tax on dividends paid by the Company.
Capital gains tax
Any disposal by UK tax resident or ordinarily resident holders of the Common Shares may,
depending on their individual circumstances, give rise to a chargeable gain or allowable loss for the
purposes of UK taxation of capital gains. Shares traded on AIM are treated as “unlisted” for the
purposes of capital gains tax taper relief and consequently the Common Shares may qualify as
“business assets” in the hands of individual Shareholders.
An individual Shareholder who is resident or ordinarily resident in the United Kingdom but not
domiciled in the United Kingdom, and whose shares are not situated in the United Kingdom, will be
liable to United Kingdom capital gains tax only to the extent that chargeable gains made on the
70
Rev: 6
Gal: 0070
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: KW
ID Number: 1246
TCP No. 7
disposal of shares are remitted or deemed to be remitted to the United Kingdom. As the Company’s
principal share register is situated in Canada, the shares are considered to be located abroad for
capital gains tax purposes, but dealings in the shares on AIM may give rise to remitted profits which
would therefore be taxable.
Shareholders who are temporarily non-resident for a period of less than five years may be subject to
UK tax on capital gains on disposals of their shares as if, broadly, the disposal was made in such
Shareholders’ years of return to the UK.
Stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax (“SDRT”) will generally arise on the issue of new
Common Shares by the Company to shareholders.
Any subsequent disposal or transfer on CREST of the Common Shares by way of Depositary
Interests will give rise to SDRT generally at the rate of 0.5 per cent. of the amount or value of the
consideration paid, in that the Depositary Interests are not exempted from SDRT as they do not
meet all the criteria of the definition of ‘foreign securities’ as set out in the Stamp Duty Reserve Tax
(UK Depositary Interests in Foreign Securities) Regulations (SI 1999/2382). Liability to pay SDRT
is generally that of the transferee or purchaser.
Any person who is in any doubt as to his tax position or who is resident, or otherwise subject to
taxation, in a jurisdiction other than the UK, should consult his professional adviser.
14.
(a)
General
The gross proceeds of the Placing are expected to be approximately £2.4 million. The total
costs and expenses relating to Admission and the Placing are payable by the Company and are
estimated to amount to approximately £285,000 (excluding Value Added Tax), giving net
proceeds of the Placing of £2.1 million. £30,000 of the expenses will be settled by the issuance
of new Common Shares to Insinger de Beaufort at the Placing Price.
(b)
Insinger de Beaufort has given and not withdrawn its written consent to the inclusion of
references to them herein in the form and context in which they appear.
(c)
Other than the current application for Admission, the Common Shares have not been
admitted to dealings on any recognised investment exchange nor has any application for such
admission been made nor are there intended to be any other arrangements for dealings in the
Common Shares.
(d)
BDO Stoy Hayward LLP has given and not withdrawn its written consent to the inclusion in
this document of its report and references to its name in the form and context in which it
appears.
(e)
SRK (UK) Ltd has given and not withdrawn its written consent to the inclusion in this
document of reference to its name in the form and context in which it appears and to the
inclusion of its report in this document and has authorised the contents of its report for the
purposes of the AIM Rules and accepts responsibility for it.
(f)
The accounting reference date of the Company is 31 March.
(g)
The minimum amount which, in the opinion of the Directors, must be raised under the
Placing to provide the sums (or, if any part of them is to be defrayed in any other manner, the
balance of the sums) required in respect of the matters specified in paragraph 21 of Schedule 1
of the POS Regulations is £2.4 million made up as follows:
(i)
the purchase price of any property purchased or to be purchased which is to be defrayed
in whole or in part out of the proceeds of the Placing – £ nil;
(ii)
any preliminary expenses payable by the Company and any commission so payable to
any person in consideration of his agreeing to subscribe for, or of his procuring or
agreeing to procure subscription for, any ordinary shares of approximately £285,000
(excluding VAT);
71
Time: 20:23
Rev: 7
Gal: 0071
Job: 13340I--
Santan Prosp
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1247
TCP No. 7
(iii)
the repayment of any money by the Company in respect of any of the matters referred to
in (i) or (ii) above – £ nil; and
(iv)
working capital – £2.1 million.
(h)
For the purposes of paragraphs 48 and 49 of Schedule 1 of the POS Regulations, except as
stated in this document, there have been no significant recent trends concerning the business
of the Company since its incorporation and the prospects of the Company are dependent on
the successful implementation of the strategy referred to in Part I of this document.
(i)
None of the Directors or their immediate families has any interest in any financial product
(including a contract for difference or a fixed odds bet) whose value in whole or in part is
determined directly or indirectly by reference to the Common Shares.
(j)
It is expected that definitive share certificates will be despatched by hand or first class post by
4 August 2005. In respect of depositary interests it is expected that Shareholders’ CREST
stock accounts will be credited on 28 July 2005.
(k)
Save as disclosed in this document there are no exceptional factors which have influenced the
Company’s activities.
(l)
Save as disclosed in this document and except for the 3D geosciences database discussed in
more detail in paragraph 10(j) above, there are no patents or other intellectual property
rights, licences or particular contract which are or may be of fundamental importance to the
Company’s business.
(m)
Save as disclosed in this document, there has been no significant change in the trading or
financial position of the Company since 31 March 2005, being the date of the end of the last
completed financial period of the Company.
(n)
Save as disclosed above and except for the finders fees disclosed in this paragraph 14(n), no
person has directly or indirectly, (other than the Company’s professional advisors otherwise
disclosed in this document and trade suppliers) in the last twelve months received or is
contractually entitled to receive, directly or indirectly, from the Company on or after
Admission any payment or benefit from the Company to the value of £10,000 or more or
securities in the Company to such value or entered into any contractual arrangements to
receive the same from the Company at the date of Admission. The Company has paid the
following finders fees in connection with capital raised between the date of its incorporation
and the date of this document:
(o)
(i)
in respect of the option agreement with Glencairn, discussed in more detail in
paragraph 10(k) above, the Company paid a finder’s fee of C$23,750 cash to Siwash
Holdings Ltd. (Fred Leigh), which fee was equal to 5 per cent. of the capital raised;
(ii)
in respect of the shares issued on 22 September 2004, the Company paid: a finder’s fee
of C$19,850 cash to Insinger de Beaufort, which fee was equal to 5 per cent. of
subscriptions totalling C$397,000; and a finder’s fee of C$67,250 cash to Leith
Pederson, which fee was equal to 5 per cent. of subscriptions totalling $1,345,000; and
(iii)
in respect of the shares issued on 24 December 2004, the Company paid: a finder’s fee of
C$15,249.88 cash to Canaccord Capital Corporation, which fee was equal to 5 per
cent. of subscriptions totalling $299,997.60; and a finders fee of C$5,000 by the
issuance of 10,000 Common Shares at a deemed price of C$0.50 per share to Edward
Marlow, which fee was equal 5 per cent. of subscriptions totalling C$100,000.
The period within which placing participants may be accepted pursuant to the Placing and
the arrangements for payment in respect of the Placing Shares and Subscription Shares and
the holding of subscription monies are set out in the placing letters referred to in the Placing
Agreement and in the subscription agreements in respect of the Subscription Shares.
72
Time: 18:14
Rev: 5
Gal: 0072
Job: 13340I--
santan
Date: 21-07-05
Area: A1
Operator: MC
ID Number: 1248
TCP No. 7
Time: 18:19
(p)
Save as disclosed in this document, there are no significant investments in progress.
15. Availability of the Admission Document
Copies of this Admission Document are available free of charge from the Company’s registered
office and at the offices of Insinger de Beaufort, 131 Finsbury Pavement, London EC2A 1NT,
during normal business hours on any weekday (Saturdays and public holidays excepted) and shall
remain available for a period of one month after Admission.
Dated: 22 July 2005
73
Rev: 5
Gal: 0073
Job: 13340I--
Imprint
Date: 13-07-05
Area: A1
Operator: MR
Millnet Financial
(7100-01)
ID Number: 1249
TCP No. 7
Time: 22:43
Rev: 1
Gal: 0074

Sanatana Diamonds Inc. - Sanatana Resources Inc.

Transcription

Similar documents

From Markmans

HERE - visualjeff.com

Diamond Club - Seattle Mariners

DiamantmuseumAntwerpen

estate jewelry sale

Jewelry Auctioned to Benefit The People of Haiti

DIAMOND RADIATORS Brendan Pratt

DIAMOND GUIDE - Benold`s Jewelers

to the Cinderella`s Castle Pattern

CAVEAT EMPTOR