Drilling Report

Preliminary valuations of DO-27 diamonds in Canada 's NWT average US$59 -

    $78 per carat

 

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    TORONTO and LONDON, UK, Aug. 29 /CNW/ - SouthernEra Diamonds Inc. (the

"Company") (TSX: SDM, AIM: SRE) has received an encouraging report from the

operating partner of the DO-27 Joint Venture, Peregrine Diamonds Ltd., with

regards to the results of preliminary valuations of the diamonds obtained from

the 2005 mini-bulk sample of the southern lobe of DO-27. During the period

February - April 2005, Peregrine collected a total of 151.27 dry tonnes of

kimberlite from the southern lobe of the DO-27 pipe. The entire DO-27 complex

has a surface expression of approximately sixteen hectares and is located 23

kilometers southeast of the Diavik(TM) Diamond Mine in Canada's NWT.

    The diamonds from the mini-bulk sample were divided into two packages,

PDL-1 and PDL-2, according to the different kimberlite geology noted in the

drilling. Diamond parcel PDL-1, comprising approximately 103 carats, came from

the pyrope and chrome diopside-rich kimberlite facies intersected in holes 

RC-1, 2, 4, 5 & 6, all of which averaged 0.98 carats/tonne. Parcel PDL-2,

comprising approximately 29 carats, came from the olivine-rich facies of

kimberlite intersected in hole RC-3, which returned a grade of 0.70

carats/tonne.

    Three separate valuations were performed by BHP Billiton Diamonds Ltd.,

Rio Tinto Diamonds and Aber Diamond Corp., and were based on fair market

values in US dollars at the producer level, sometimes referred to as the

"Primary Market". This is the market value the seller would have expected to

receive for these goods if offered for sale on the date of the final viewing,

and also assuming a reasonable margin for the buyer either for manufacturing

or dealing on the secondary market. No size or value modelling was performed

due to the small sample size.

    The diamonds from each sample were sized to industry standard DTC sieve,

grainer and carat size classes. The diamonds in each size class were sorted

and valued based on each valuators current price book. As can be expected,

there was a range in values with the larger sample, PDL-1, returning average

values of, US$77.77 US$67.02 and US$58.54 per carat. PDL-2 returned average

values of US$35.36, US$34.31 and US$32.34 per carat although the very small

sample size of PDL-2 (29 carats) means that a low degree of confidence must be

attributed to the values from PDL-2. The average values for the total sample

(combining PDL-1 and PDL-2) were US$67.20, US$59.95 and US$53.21 per carat.

The highest value stone was a 1.85 carat stone, which was valued at between

US$1,591 and US$2,063.

    Due to the small size of the parcel of diamonds evaluated, these

valuations must be considered to be preliminary. The valuators have indicated

that "the size of the sample does not allow for an appropriate model of either

the size distribution or quality profile" of the diamonds and that "the sample

parcel presented contained a range of qualities, colours, shapes and sizes as

expected in exploration samples". The valuators also indicated that a larger

sample to better determine the value per carat and overall quality profile of

the project is necessary.

    The results from PDL-1 are substantially higher than the previous

valuations reported by Kennecott Canada Inc. ("Kennecott"), of US$21.70 per

carat, reported in November 1994, for the 1079 carats collected from

pyroclastic kimberlite from the north-east lobe of the DO-27 pipe, a zone now

known to have very complex geology that differs from the larger southern lobe

of DO-27. One valuator also noted that "the Peregrine samples contain less

grey piqued and dark brown stones than the Kennecott sample". The average

grade of Kennecott's underground bulk sample from the north-east lobe of DO-27

was 0.36 carats per tonne compared with the grade of 0.98 carats per tonne

from the southern lobe of DO-27, as reported by Peregrine on June 14, 2005.

    The values also compare favourably with published data for kimberlite

pipes at BHP Billiton's Ekati(TM) Diamond Mine. The Annual Information Form of

Dia Met Minerals, dated June 14, 2000, reported, as part of the feasibility

study, an average grade for five of the Ekati(TM) pipes (Fox, Sable, Panda -

underground and open pit, Misery and Koala - underground and open pit) of

1.09 carats per tonne. The average value was US$84 per carat.

    The Joint Venture is currently engaged in a program of core drilling the

DO-27 pipe and the DO-18 pipe located 700 meters north of DO-27. The core

drilling is necessary for geologic and geotechnical information, microdiamond

analysis, and as pilot holes to the large diameter RC drilling planned for

next winter. All information is being used in a scoping/pre-feasibility study

being prepared by SRK Consultants in Vancouver. Results are currently pending

on microdiamond values from these holes and three previous core holes drilled

during April - May, 2005, one of which reached a maximum depth of 465m below

surface and ended in kimberlite. Results on the first three core holes are

expected during October, 2005.

    The Joint Venture is also in the process of planning the next round of

large diameter RC drilling, scheduled to start during January, 2006, which is

designed to take a substantially larger sample than that collected during the

2005 program. Details of both the core and large diameter RC drilling programs

will be announced in September, 2005.

    The DO-27 Joint Venture comprises SouthernEra Diamonds Inc. (4.9%),

Peregrine Diamonds (54.475%), Archon Minerals Ltd. (13.275%), Aber Diamond

Corp. (7.35%), DHK Diamonds Inc. (20%).

 

    SouthernEra Diamonds is one of Canada's largest fully integrated diamond

companies with extensive diamond exploration in six countries, including

Canada, Gabon, the Democratic Republic of the Congo, South Africa, Zimbabwe

and Australia. This represents one of the most active global diamond

exploration programs. The Company also operates the Klipspringer Diamond Mine

in South Africa which is currently under care and maintenance, and maintains

an 18 percent free-carried interest in the Camafuca Diamond Project in Angola.

 

    

    For further information: PLEASE CONTACT: SouthernEra Diamonds Inc.,

Mr. Howard M. Bird, Senior Vice President, Global Exploration or

Ms. Sharon Allan, Investor Relations, Telephone: [phone], Fax:

[phone], E-mail: inbox(at)southernera.com, www.southernera.com

    (SRE)