Kalahari Diamonds Ltd. (KDL) was formed at BHP Billiton Group’s (BHPB) initiative. BHPB is the world’s largest diversified resource group in terms of market capitalization. BHPB has a market capitalization of $33 billion and revenues of $17 billion (2002). BHPB has interests in coal, iron ore, copper, oil, gas, aluminum, nickel, zinc, manganese, chrome, silver, diamonds and industrial minerals. BHPB produces and markets 8% of the world’s production of rough diamonds by value from mines in Canada. KDL’s ownership is expected to be institutional investors (including IFC) about 40%; institutions involved in diamond cutting, polishing and retailing 40%; and BHPB 20%.

KDL is seeking to raise between $12 and $20 million in equity by private placement to fund a 2/3 year exploration program. The proposed IFC investment is a $2 million equity investment in KDL.

2.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	2.0

* These investment figures are indicative

KDL will explore 90 prospecting licenses comprising over 78,000 sq. km in Botswana. Most of this area is arid and semi arid desert.

This is a category B project according to IFC’s Environmental and Social Review Procedure. The aerial exploration work utilizing the Falcon system is an airborne system and environmental impacts will be minimal. During any subsequent ground exploration, environmental issues would be limited and associated with drilling of identified targets, water resources and water quality, habitat and ecology, solid and liquid waste management, vehicle impacts on desert environments, handling, use and storage of fuel and reclamation of exploration areas. Social issues include minimization of induced development, influx management and possible impacts on indigenous communities. These impacts can be minimized and mitigated with careful management.

The key environmental and social issue is that approximately one third of the exploration license areas lie within the Central Kalahari and Khutse Game Reserves that are managed conservation areas with an associated indigenous population of San Bushmen. The Botswana Government views the Game Reserves as areas in which mine exploration and development is allowable alongside conservation initiatives under strict conditions. For any prospecting in these areas, KDL will implement Government of Botswana guidelines associated with “Prospecting in the Central Kalahari and Khutse Game Reserves” as well as applicable World Bank Policies and Guidelines.

Any future mine development resulting from KDL’s activities would be evaluated as a new project with a new environmental classification appropriate to its impacts. The company will then prepare a comprehensive Environmental and Social Impacts Assessment (ESIA) and Environmental Management Action Plan and undertake appropriate public disclosure and consultation. For any mine development, KDL has committed to achieve better than international best environmental practice and to ensure that project positive benefits outweigh negative impacts. IFC will play a positive role in ensuring that this occurs by for example, facilitating community partnerships and local economic development, building and/or monitoring environmental management capacity including that associated with resource utilization and conservation within the Game Reserves.

The Botswana Government has a successful record of using revenues from mining over last two decades to upgrade infrastructure and services and to improve educational and health standards and this provides a sound foundation for its economic diversification program.



Location of environmental documents in locally affected community
All available documents will be disclosed at: Kalahari Diamonds Limited. Plot 5035B, Fairground, Gaborone, BOTSWANA. Phone 267 391 2400, Fax 267 397 5281. Armstrongs, Attorneys, Notaries and Conveyancers. 5th Floor Barclays House, Khama Crescent, Gaborone, BOTSWANA. Phone 267 353 491 IFC Office – South Africa: 1st Floor Oxford Gate, Hyde Park Lane, Hyde Park, 2196, Johannesburg, SOUTH AFRICA.