Blina rights issue for $6m

Blina Diamonds NL has announced its own almost $6 million rights issue, to be fully underwritten at no cost by its parent company, Kimberley Diamond Company NL which revealed a $41 million expansion plan yesterday.

The funds raised will be used for Blina's 2006 diamond exploration, evaluation and mine development program following its highly successful 2005 field season, including a proposed further expansion of its diamond recovery plant to full production status.

Blina will lodge a Prospectus shortly with the Australian Securities and Investments Commission for a fully underwritten rights issue on 1 for 10 (one-for-ten) basis at 38 cents to raise a total of approximately $5.8 million.

Blina's parent company, Kimberley Diamond Company, has indicated that it will take up its full entitlement pursuant to the rights issue to maintain its 54% equity position in Blina, and has also agreed to fully underwrite the issue at no cost (contingent upon ASX approval if required). The anticipated timetable for the rights issue is as follows.

Following allotment of the new shares issued pursuant to the rights issue and assuming a 100 percent take-up, Blina will have a total of 168,906,190 shares on issue.

The full announcement is below:

BLINA ANNOUNCES $5.8 MILLION RIGHTS ISSUE

TO UNDERPIN EXPANDED 2006 DIAMOND PROGRAM

Blina Diamonds NL (ASX: BDI) (Blina) today announced a $5.8 million rights issue, to be fully underwritten at no cost by its parent company, Kimberley Diamond Company NL (ASX: KIM). The funds raised will be used for Blina's 2006 diamond exploration, evaluation and mine development program following its highly successful 2005 field season, including a proposed further expansion of its diamond recovery plant to full production status.

Blina will lodge a Prospectus shortly with the Australian Securities and Investments Commission (ASIC) for a fully underwritten rights issue on 1 for 10 (one-for-ten) basis at 38 cents to raise a total of approximately $5.8 million.

Blina's parent company, Kimberley Diamond Company, has indicated that it will take up its full entitlement pursuant to the rights issue to maintain its 54% equity position in Blina, and has also agreed to fully underwrite the issue at no cost (contingent upon ASX approval if required). The anticipated timetable for the rights issue is as follows.

Prospectus lodgement: 5 December 2005

Record date to determine entitlements: 13 December 2005

Rights issue closing date or acceptances: 16 January 2006

Allotment and confirmation of holding: 24 January 2006

Trading commences in new shares: 25 January 2006

Following allotment of the new shares issued pursuant to the rights issue and assuming a 100 percent take-up, Blina will have a total of 168,906,190 shares on issue.

Application of Funds

Blina commenced its inaugural field season in 2005 following its ASX listing in August 2004. Blina's focus is on locating, evaluating and mining diamond deposits in the Ellendale Diamond Field within a high-quality 1,800km2 tenement package covering and surrounding the central core of the field.

While the tenements exclude the 124km2 Ellendale Mining Lease held and operated by Kimberley Diamond Company, Blina has an agreement with Kimberley that enables it to explore for and mine alluvial deposits within the Mining Lease under a joint venture with Kimberley.

During the year, Blina commenced a major evaluation of gravels within the Terrace 5 palaeo-channel. These gravels are processed through a 50 tonne per hour (tph) dense media separation (DMS) plant which was constructed and commissioned during the year. The Company also commenced evaluation of known lamproite bodies within its tenements and undertook a major regional re-evaluation of the entire lease area after flying a detailed airborne electromagnetic ("AEM") survey over the central section of the Ellendale Field in late 2004.

A significant highlight of the year was the discovery of the Ellendale 9 north alluvial diamond prospect, which was explored under an agreement with Kimberley that gives Blina exploration access to alluvial diamond deposits within the Ellendale Mining Lease.

Blina recently completed a limited mining operation in the Ellendale 9 North area during which a total of 19,762 diamonds weighing 7,287 carats were recovered at an average grade of over 20 cpht (carats per one hundred tonnes).

The largest diamond recovered during this program weighed just less than 10 carats and is one of the largest diamonds found in the Ellendale Field. Overall, the average size of the diamonds was 0.37 carats with the population containing a significant proportion of fancy yellow stones. While not all the diamonds have been valued, they are expected to achieve a price of just under US$200 a carat.

Plant Upgrade

Following the success of the trial mining program, Blina intends to utilise the funds raised from the rights issue to further expand the 50tph diamond processing plant to 100tph alluvial production plant status to enable it to move to continuous mining operations after all statutory approvals have been received.

In addition, the Company plans to construct a stand alone Flowsort X-Ray Diamond Recovery Facility at the Blina plant site similar to the facility already in operation at Kimberley's Ellendale 9 operation.

The balance of the funds raised will be used to advance Blina's exploration activities in other areas, including additional exploration and sampling to determine the extent of mineralised gravels identified from the Western Channel, downstream of the Ellendale 9 north trial mining area. Further exploration is also planned on the Eastern Channel located about 1,000 metres from the Western Channel, and further development within the Terrace 5 palaeo-gravels.

"The 2005 field season has been extremely successful, with the Ellendale 9 north alluvial discovery representing the standout development," Mr Jones said. "The current rights issue, which is supported by Kimberley, will enable us to move to alluvial production plant status, while also providing funding to continue our other exploration, evaluation and development activities."

Application of Funds

Blina commenced its inaugural field season in 2005 following its ASX listing in August 2004. Blina's focus is on locating, evaluating and mining diamond deposits in the Ellendale Diamond Field within a high-quality 1,800km2 tenement package covering and surrounding the central core of the field.

While the tenements exclude the 124km2 Ellendale Mining Lease held and operated by Kimberley Diamond Company, Blina has an agreement with Kimberley that enables it to explore for and mine alluvial deposits within the Mining Lease under a joint venture with Kimberley.

During the year, Blina commenced a major evaluation of gravels within the Terrace 5 palaeo-channel. These gravels are processed through a 50 tonne per hour (tph) dense media separation (DMS) plant which was constructed and commissioned during the year. The Company also commenced evaluation of known lamproite bodies within its tenements and undertook a major regional re-evaluation of the entire lease area after flying a detailed airborne electromagnetic ("AEM") survey over the central section of the Ellendale Field in late 2004.

A significant highlight of the year was the discovery of the Ellendale 9 north alluvial diamond prospect, which was explored under an agreement with Kimberley that gives Blina exploration access to alluvial diamond deposits within the Ellendale Mining Lease.

Blina recently completed a limited mining operation in the Ellendale 9 North area during which a total of 19,762 diamonds weighing 7,287 carats were recovered at an average grade of over 20 cpht (carats per one hundred tonnes).

The largest diamond recovered during this program weighed just less than 10 carats and is one of the largest diamonds found in the Ellendale Field. Overall, the average size of the diamonds was 0.37 carats with the population containing a significant proportion of fancy yellow stones. While not all the diamonds have been valued, they are expected to achieve a price of just under US$200 a carat.

Plant Upgrade

Following the success of the trial mining program, Blina intends to utilise the funds raised from the rights issue to further expand the 50tph diamond processing plant to 100tph alluvial production plant status to enable it to move to continuous mining operations after all statutory approvals have been received.

In addition, the Company plans to construct a stand alone Flowsort X-Ray Diamond Recovery Facility at the Blina plant site similar to the facility already in operation at Kimberley's Ellendale 9 operation.

The balance of the funds raised will be used to advance Blina's exploration activities in other areas, including additional exploration and sampling to determine the extent of mineralised gravels identified from the Western Channel, downstream of the Ellendale 9 north trial mining area. Further exploration is also planned on the Eastern Channel located about 1,000 metres from the Western Channel, and further development within the Terrace 5 palaeo-gravels.

"The 2005 field season has been extremely successful, with the Ellendale 9 north alluvial discovery representing the standout development," Mr Jones said. "The current rights issue, which is supported by Kimberley, will enable us to move to alluvial production plant status, while also providing funding to continue our other exploration, evaluation and development activities."