Chairman's letter to shareholders

19 July 2007

Dear Fellow Shareholder

I am writing to advise you why your board has unanimously recommended that you
accept the offer for all your shares in Kimberley Diamond Company NL announced
by Gem Diamonds Ltd today.

The offer from Gem Diamonds is 70 cents cash for each of your Kimberley shares.
This offer represents a premium of 33% to the closing price of your shares on
Monday 16 July (which was the day before a trading halt was called pending the
announcement of the offer).

Gem Diamond's offer provides all of our shareholders with the opportunity to
sell their shares at a price which your directors unanimously believe to be
fair and reasonable at this time and along with each of my fellow directors, I
have advised Gem Diamonds that I will be accepting the offer in the absence of
a superior offer.

Your board and management team together with all of our employees have worked
hard over a long period of time to create value for our shareholders through
the development of the Ellendale Project. Despite our concerted efforts, we
have faced challenges which have been outside our control. Chief among these
has been the rapid appreciation of the A$. Our feasibility study was completed
on the basis of a 64 cent exchange rate against the US dollar (versus current
18 years highs of around 87.5 cents) and diamond prices during this time have
not kept pace with the rapid rise in the value of the Australian dollar. On top
of this there have been significant cost increases in fuel, personnel, mining
and other raw supplies in the past few years. In these circumstances, and after
careful consideration of the options available to us, your directors have
reached the unanimous decision that the Gem offer is both fair and reasonable
and should be recommended in the absence of any superior bid.

Gem Diamonds is a rapidly growing company with a strong balance sheet and a
diversified and growing portfolio of diamond projects. Kimberley's fancy yellow
diamonds will be an attractive addition to Gem's current product offering.

I am confident that, under Gem's control, the Ellendale Project and the
employees who work there will enjoy great success. Your board believes that Gem
has strong financial, technical and marketing resources which could unlock the
full potential of the Ellendale asset base. In conjunction with the Offer, Gem
has agreed to provide Kimberley with a short term working capital facility of
A$10m to assist in the continued optimisation of operations.

Gem is now preparing offer documentation which is expected to be sent to you in
mid August. Around that time we will send you our Target's Statement which will
set out in more detail the reasons behind our decision to recommend Gem's
offer.

In the meantime, on behalf of my fellow directors I thank you for the support
that you have given the company and we look forward to bringing this offer to a
successful close.

Yours sincerely

Miles Kennedy
Chairman
KIMBERLEY DIAMOND COMPANY NL ABN 91 061 899 634
12 Walker Avenue West Perth 6005 Western Australia
t: +61-8 9321 5887 f: +61-8 9321 5884 e: general@kimres.com.au w: www.kimberleydiamondco.com.au

The Company's Nominated Advisor is RFC Corporate Finance Ltd, contact Steve
Allen or Stuart Laing - tel: +618 9480 2500.

END

Kimberley Dia (LSE:KDC)
Historical Stock Chart
From Jun 2024 to Jul 2024