The Faraj List of Exploding Stock Part 4.05

African Diamonds PLC
21 December 2005

21 December 2005



African Diamonds plc (AIM: AFD)
Preliminary Results for the year ended June 30th, 2005


HIGHLIGHTS


Botswana:


• The De Beers/African Diamonds joint venture on 11 licences in the Orapa /
Lethlakane was the main focus of activity.
• The joint venture is evaluating 30 known kimberlite pipes, including AK24
a new kimberlite discovered in early 2005.

AK 6 (Size 9 hectares)



• AK6 upgraded to an Advanced Exploration Project by De Beers.
• Bulk sampling produced a modelled grade of 25cpht and modelled revenue of
US$138ct.
• Current drilling programme has resulted in new geological model showing 3
distinct lobes.
• Current phase of drilling is expected to be completed in February 2006.
• The current stage of evaluation indicates the potential for a commercial
mine producing over 1 million carats a year
• De Beers budgeted to spend $20 million on AK6 in 2006.

AK8 (Size 5.1 hectares)



• A 12 hole drill programme was carried out on the AK8 kimberlite including
two 23-inch large diameter drill holes.
• 152 macro diamonds recovered producing a model grade of 4-8 cpht for the
north lobe and 9-16cpht for the south lobe.
• Encouraging early results indicate commercial possibilities that require
follow up work.

Other Areas



• Two 12 inch large diameter drill holes on AK 12 (size 5-8 hectares) being
currently treated.
• Early drilling on BK11 (size 6.5 hectares) was inconclusive and requires
further work.
• Airborne magnetic survey on African Diamonds wholly owned Mmashoro licence
has identified two targets that require follow-up.



West Africa



• Over 700 carats were produced in 2004/2005 from part of the 12,000 ton
bulk sample taken from the Pipe 3 kimberlite in Koidu, Sierra Leone. Total
output from the sample was 1,123 carats valued at $225,000. Further work is
ongoing to assess grade and potential.
• Plans for the 7 million ton undersize dump at Plant 11 in Koidu are being
evaluated. African Diamonds holds a mining licence on the area. Joint
venture proposals to mine the deposit are under consideration.
• African Diamonds has mapped 14m of kimberlite dykes in the Koidu area.
All are estimated to contain diamonds. Development plans which may include
a joint venture are being analysed.
• A small scale alluvial mine has been established on the Bomboko/Seria
licence in Guinea. The purposes are to evaluate the potential of the
licence and to gain experience of operating in country.



Corporate



• Management team was strengthened significantly during the year.
• Alex van Zyl, ex De Beers, joined the main board as Technical Director.
• Tafilani Machacha, ex director Botswana Geological Survey, joined the
board of the Botswana operating subsidiary.





African Diamonds is an exploration company. Exploration is high risk,
difficult, often dangerous, with the chance that investors will lose their
money.



Hard rock diamond exploration is among the most risky of all ventures. It is
reported that some 6,000 kimberlite pipes, the main source of diamonds, have
ever been discovered in the world and, of these, less than 50 contain
significant quantities of diamonds. Even fewer, maybe 20, have become
substantial mines. These figures cover the entire history of hard rock diamond
exploration and mining!



Experienced explorers try to reduce the vast risk. You try to avoid places
where there is no known relevant geology. It is said that the best place to
find a mine is where there is or was a mine. As you grow in experience your
admiration for ancient miners increases. How they did what they did with the
tools available at the time is remarkable.



So it is with African Diamonds. We set out to become a gem quality diamond
miner within a short period. We went to Botswana, the world's pre-eminent
diamond province, to Sierra Leone with a history of large beautiful stones and
to Guinea, which has geology and a diamond mining history similar to that of
Sierra Leone. We looked at projects in other diamond producing areas, Lesotho
and Angola but decided not to proceed.



In each area we sought acreage either close to an existing producer, a former
producer or with a relevant history. In Botswana, we obtained top quality
ground containing 21 known kimberlites, now 30, close to the world class Orapa
and Lethlakane diamond mines. In Sierra Leone, we obtained licences in Koidu
adjacent to where a new diamond mine was being developed and another licence
with known diamondiferous kimberlite dykes. We also took further ground in
Botswana, Sierra Leone and Guinea, with no known discoveries but with positive
geological indicators.



Very occasionally fortune favours the brave. Our strategy has been vindicated.
Our joint venture, in Botswana with De Beers, shows every indication of being a
company maker for African Diamonds. The AK6 discovery near Orapa is a large
pipe with good grades and good quality stones. The pipe was one of eight
contributed by De Beers to our joint venture. The discovery is on track to be
declared commercial in the next year. Current tonnage estimates are 54 million
tons of kimberlite. If the previously announced grades of 25 carats per hundred
tons (cpht) are maintained and if the values of US$138 per carat are maintained
then a 5 million ton a year mine producing in excess of 1 million carats with
revenues of US$150 million is possible. I must caution you that it is still a
prospect but it looks good. De Beers is proposing to spend in excess of $20m on
AK6 in 2006. There is no cost to African Diamonds.



We are hopeful of other discoveries, in particular kimberlite AK8 has potential.
A great deal of work including Large Diameter Drilling has been done to
estimate size, carats and value. One lobe of this pipe, about 2.5 hectares in
size is, as previously reported, estimated to have a grade and value which may
have commercial possibilities. This is of particular interest to African
Diamonds as the joint venture agreement with De Beers specifies that small mines
will be operated by African Diamonds who, as a result, would keep 70% of the
profits. De Beers would buy all of the diamonds. We will discuss options with
De Beers.



While AK6 and AK8 are the focus of activities we have other interesting projects
in Botswana. Kimberlite AK12 is a good size with interesting geology. It is
currently being drilled. BK11 estimated at 6.5 hectares has been drilled.
Results were mixed but more work needs to be done. Our 100% owned Botswana
licence, Mmashoro, shows promise and needs to be drilled. There are more
opportunities in Botswana which will be looked at in the coming year.



De Beers propose spending US$22 million on our licences in 2006. At least as
important as the cash expenditure is the skill, expertise, experience and
facilities which De Beers bring to bear on exploration. De Beers have unique
exploration, processing, evaluation and analytical competence. All of this is
being brought to bear on AK6 and the other prospects.



We have been active in West Africa in the period under review. In Sierra Leone
we completed an initial bulk sampling of about 12,000 tons of weathered
kimberlite from Pipe 3 in Koidu. We had major difficulties with the plant and
with the material. We recovered 1,123 carats of diamonds including some large
stones. One, 7.22 carat stone, was valued at $2,336 per carat. The grade
obtained, is not exciting but a consultants' review of the project revealed that
over 50% of the material needs reprocessing to recover diamonds. To do this we
need a new plant.



African Diamonds has mapped over 14 kms of dykes on our Koidu licences.
Kimberlite dykes tend to be narrow, up to 1.5 metres wide, but if
diamondiferous, tend to be high grade. Petra Diamonds Ltd / Mano River
Resources Inc in joint venture, intend to mine their dyke system, at a rate of
75 tons per hour. Their dykes run into those of African Diamonds. Koidu
Holdings, who operate the mine at Pipes 1 and 2, are developing a dyke project
within 20 kms of our licences. We have had discussions with a number of parties
interested in mining the dykes. Kimberlite dyke mining, which is akin to narrow
vein underground gold mining, is challenging. To date we have not been
satisfied with the technical skills of potential partners. In the coming year
we intend to drive a number of shallow shafts into the dykes, and to process the
material through a small new 5 ton per hour plant as well as discussing
proposals with potential partners.



We have a mining licence on the Plant 11 undersize dumps. This 7 million ton
resource accumulated during the 23 year life of the Plant 11 alluvial operation
which processed the rich gravels from the Moinde and Oyie rivers. The commercial
value of a mining licence should not be underestimated. It can take years to
negotiate such a licence. We have taken small samples from Plant 11 dump and
have recovered gold grades and platinum indicators. The tests we used recovered
no diamonds but artisans working the dump have recovered and continue to recover
stones.



During the period under review we received a number of proposals in relation to
the undersize. We have not accepted any of them. A project of particular
relevance to the development of Plant 11 undersize dump is the proposal to mine
the Plant 11 oversize dump which is adjacent to our ground. The project is at
an advanced stage. Initial approaches have been made to consider co-operating
together.



In Guinea we obtained a small scale mining licence to work the Bomboko
alluvials. Initial production figures indicate a grade of 0.257 carats per cubic
metre. Operations are being upgraded by the addition of some mechanical
equipment. We hope to establish a small scale alluvial mine.



The Diamond Industry



This is a good time to be in the diamond industry. Demand is rising faster than
supply particularly for gemstone quality stones - which African Diamonds expects
to produce. The demand is being driven by the United States, followed by India
and China. The powerful consumer advertising and promotion campaign undertaken
by De Beers seems to be bearing fruit. Three stone engagement rings in the US,
diamond encrusted gold jewellery in India and, in China, the demand for diamond
rings, are all contributing to a demand estimated to be rising by 5 million
carats a year.



Where are the new mines to meet this rising demand? Existing gem quality large
mines are mature with the exception of Diavik in Canada. There are potential
mines in Canada but they will not be on stream for 4 or 5 years. Angola and the
Congo are potential sources but mines there will take even longer to come into
production. Russia is an unknown. For the next decade Botswana is the most
likely source of new large scale gem quality diamonds. Our AK6 discovery in
Botswana is widely talked about as one of, if not, the best diamond discovery in
recent times. There is little doubt that other discoveries are likely in
Botswana. But given the time lag between discovery and production, a period of
supply shortage is likely with a consequent rise in prices.



Management



Since year end in June 2005 we have strengthened management by recruiting two
acknowledged diamond experts. Alex van Zyl has joined the main board as
Technical Director. Alex has spent his entire career spanning 40 years in
diamonds, mainly with De Beers where he rose to the highest levels.



Tafilani Machacha has joined the board of Kukama Exploration, our Botswana
subsidiary. Tafilani is a career geologist and a former director of the
Botswana Geological Survey. Both men will have central roles to play as our
projects move towards commercial development. Mark Scowcroft, a founding
director, resigned in August 2005.


Future


Our main outlay in the coming year is in Botswana where De Beers will spend in
excess of $22m on our joint licences. We will spend nothing on these. Our
wholly owned operation in Botswana is expected to expand but it will be low
cost. Development proposals on Plant 11 undersize dump and the dykes in Sierra
Leone are likely but they may very well be in joint venture, so reducing capital
cost. We have offers of capital from numerous sources.



African Diamonds is facing a very bright future. Beginning in early 2006 the
likely development path for AK6 will unfold. We are in the right place at the
right time with the right partner.



John Teeling
Chairman
21st December 2005