minerals, resulting in the discovery of five potential kimberlite areas of low grade, & several likely to be "diamondiferous" & therefore worth further exploration. MPVI also has interests in other properties.

I like the De Beers tie. It minimizes both capital risk & operating risk, & demonstrates that the property has exceptional value. De Beers originally agreed to pay all costs up to $18 million, reached by 7/99. MPVI has been paying 44.1% of project expenses since 7/99, but from 3/10/2000 onward, De Beers has agreed to pay 100% of all exploration, development, & other project costs.

Program Expansion

Both MPVI & De Beers recognize the best way to enhance the potential economic viability of the project is by adding quickly to the resource base. De Beers will now embark on an aggressive exploration program. De Beers believes there is strong evidence for additional diamondiferous kimberlite bodies. The exploration program will involve the drilling of 16 targets in both the eastern & central parts of the lower half of the AK claims.

It is anticipated that a few additional targets will also be drilled in the southern part of Kennady Lake. These targets will depend on the results of the recently completed ground geophysics program. Additional ground & airborne geophysics surveys will be carried out on newly defined indicator mineral trains in the central & northern parts of the AK claims.

In parallel with the aggressive exploration program, De Beers will investigate several alternative mining scenarios in order to minimize capital & working costs associated with the mining of the Kennady Lake pipes. My interpretation of that published statement is that open pit mining, the cost model in determining probable production profits, is not the best method in some of the pipe locations.

I base my opinion on an analysis of De Beers' test results on the various pipes. In some cases, I noted that the number of carats per tonne in the levels below 200 meters of depth in the Tuzo pipe is much greater than the number of carats per tonne nearer the surface.

I drew the conclusion that underground mining, similar to that employed in many instances in South Africa, would take advantage of the higher content at the lower levels. Such a mining scenario, modified for the Kennady Lake location, would permit the cost of production to be substantially reduced, with attendant greater profit margins. It would also permit profitable operations in some pipes that would be commercially unattractive using open pit mining.

Historical Overview

Diamonds were discovered in the NorthWest Territories (NWT) in 1991, with production starting in 1998. By 2005,

Canada is expected to produce at least 10-15% of the world diamond production. MPVI/De Beers expects to be the third major diamond producer in the NWT, with expected production at about 3 million carats per year.

Actual diamond production in 1998 throughout the world included: 50.9 million carats in Africa, 40.8 million in Australia, 16.4 million in Russia, 2.4 million in South America, 2.5 million elsewhere, & none as yet in Canada. World total: 112.7 million carats.

The annual production prediction for the years 2000 through 2005 are: 61.5 million in Africa, 30 million in Australia (dropping significantly by 2005), 15 million in Russia, 4 million in South America, 15 million in Canada, & 1 million elsewhere. World total per year: 126.5 million carats.

Market

Of the present world production, about 20 million carats are Gem quality. De Beers accounted for about 75% of world supply (production & purchases from others) in 1998. The Russian stockpile of diamonds has been largely depleted. That has resulted in world supply & demand being about in balance this year.

From 2000 onward, it is expected that demand will outstrip supply. De Beers' diamond sales in 1999 were $5.3 billion paid to site holders. The value of diamond jewelry is about $50 billion. The U.S. accounts for about 48% of the consumer diamond market, Japan 18%, & the Asia Pacific area 10%.

Glenmore Highlands

On 2/29/2000, MPVI reached an agreement to acquire Glenmore Highlands Inc. (CDNX/GMH) in a share exchange estimated at one share of Glenmore for each 0.58 share of MPVI. Glenmore currently owns about 16.1 million, or 38% of the common shares of MPVI, & has a total of 27,868,582 of its own shares outstanding. Assuming the plan is consummated, it will result in MPVI having the benefit of a clearer, more widely-held ownership structure, & greater liquidity for its shares.

Management

Dr. Jan W. Vandersande is president & CEO. He is a widely published expert on the thermal & electrical properties of diamonds. He has published over 80 scientific papers in journals & conference proceedings. He was a financial & scientific consultant & mining analyst following his doctoral degree in solid state physics from the University of the Witwatersrand, South Africa. He has advised brokerage firms, money managers, & private clients on natural resource companies & commodities, & provided scientific consulting on solid state physics to NASA & the DOE. His other areas of expertise include energy conversion, diamond film technology, & thermal management.

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