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Managed Services Authors: Nick Basinger, Elizabeth White, Pat Romanski, Liz McMillan, Rajeev Gupta

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Response to Afgem's Press Release

Response to Afgem's Press Release

ANTWERP, BELGIUM -- (MARKET WIRE) -- 03/14/07 -- This is a response by Rex Mining Corporation Ltd ("Rex South Africa") and Rex Diamond Mining Corporation ("Rex Canada") to the press release issued by Afgem Ltd ("Afgem") on March 8, 2007.

On March 7, 2007, Afgem suspended trade in its shares on the JSE (Johannesburg Stock Exchange). At the beginning of December 2006, Afgem shares traded at ZAR 0.25 per share. Afgem then instituted urgent liquidation proceedings against Rex South Africa on the same ground it now claims is the cause of its "short term cash flow constraints". At the hearing in December 2006, the matter was struck-off the roll due to lack of urgency. Afgem re-enrolled its liquidation application for the end of January 2007. On February 13, 2007, Afgem's application was dismissed as an abuse of the procedures of the Court. On February 14, 2007, Afgem share price dropped to ZAR 0.12 per share on high trading volume. Afgem has not appealed the court's judgment. As far as Rex Mining is concerned, Afgem's allegation that Rex Mining owes Afgem ZAR 7.7 million (US$1.05 million - current exchange rate is ZAR 7.35 for one US$) is not true. In terms of an agreement (more fully set out below) Afgem agreed to pay Rex South Africa a minimum of US$ 700,000 per year during 16 years starting January 1, 2006, until December 31, 2021. Despite written demand, Afgem failed to make payment of the first instalment of US$ 700,000 which was due on January 1, 2007.

On August 5, 2004, Rex South Africa and Rex Canada entered into an agreement ("the Agreement") with Afgem in terms of which they sold their shares and claims in their three South African subsidiary diamond mining companies to Afgem. The Agreement can be downloaded on (June 29, 2006) and on In terms of the Agreement it was agreed that the purchase price of the sale of the shares and the claims will be discharged as follows:

- ZAR 2.5 million in cash on the closing date (the transaction closed on June 17, 2005);

- ZAR 25 million in Afgem shares at a price of ZAR 0.50 per share (the shares were suspended on March 7, 2007, at ZAR 0.13 per share);

- The balance by paying to Rex South Africa 4% of the gross revenue on rough diamonds of the companies for each of the periods commencing on January 1, 2006, and ending on December 31, 2021 ("Deferred portion of purchase price/royalties"). Afgem warranted minimum annual gross revenue on rough diamonds of US$ 17.5 million. Afgem therefore undertook to make a guaranteed minimum annual payment of US$ 700,000 (4% of US$ 17.5 million) to Rex South Africa. Consequently, Afgem calculated its outstanding liability to Rex South Africa at ZAR 32.5 million or US$ 5.0 million based on a discount factor of 11.5% on the guaranteed US$ 700,000 cash flow over a period of 16 years at an exchange rate of 6.5 ZAR/US$.

Without doing any development nor mining, the sale of the three subsidiary mining companies has benefited Afgem substantially:

- "As part of the process acquiring the mining assets, a Scheme of Arrangement in terms of section 311 of the Companies Act (Act no 61 of 1969) ("the Scheme") was entered into with the creditors of the mining assets. The approval of the Scheme resulted in the settlement of most creditors for 20cents in the Rand. The result of this was a net profit of ZAR 17.34 million which is reflected in full under "Other income" in the Income Statement and an impairment of a loan from Rex Mining of ZAR 11.62 million which is reflected in full in "Operating Expenses". The net effect is a profit on the Scheme of ZAR 5.72 before tax."

- Afgem consolidated reviewed interim results for the 6 months ended September 30, 2005.

- Afgem sold the tailings at Bellsbank for ZAR 5 million.

- Afgem sold the new recovery plant at Loxton mine for more than ZAR 2 million. This plant was acquired approximately 18 months earlier for approximately ZAR 10 million.

Despite written demand, Afgem failed to make its first instalment payment of US$ 700,000 to Rex. Afgem unilaterally restated its outstanding liability to Rex South Africa from an initially reported ZAR 32.5 million (based on the guaranteed yearly royalty stream of US$ 700,000 over a period of 16 years) to ZAR 18 million. In its modification to the preliminary results and notice of Afgem released, October 2, 2006, Afgem also adjusted the purchase price accordingly, thereby wiping out almost half of its liability towards Rex South Africa. Afgem unilaterally also reduced the repayment period from 16 to 15 years in its restatement of the purchase price.

Afgem press release and comments thereon:

"Shareholders are advised that negotiations are continuing on a regular basis as to the settlement of the long standing dispute with the NUM."

NUM has withdrawn its case in the Labour Court against Rex Mining Corporation Limited, thereby acknowledging that the workers at the mines were not employed by Rex South Africa but by one of Afgem's subsidiary mining companies it had acquired from Rex.

Afgem has reached an agreement of settlement in the Labour Court of South Africa with NUM (see settlement agreement on in terms of which:

- The matter between Afgem and NUM will be settled if Petra Diamonds Limited ("Petra") acquired the three Afgem subsidiary mining companies on or before March 31, 2007. Afgem subsidiary mining companies were acquired from Rex South Africa and Rex Canada.

- Should the acquisition not materialise, NUM has until April 18, 2007, to accept Afgem's offer to pay ZAR 4 million in full and final settlement of the claims of the workers.

- Should NUM reject the said offer, the matter will be referred to arbitration.

"A judgement has been obtained for R1.5 million plus interest from November 2005 against Rex Mining for this overdue payment, but this judgement has been appealed by Rex Mining and the appeal has not been heard as yet":

The matter regarding Afgem's claim of ZAR 1.5 million is pending final adjudication by the High Court of South Africa and therefore sub judice and not open for discussion.

"Further legal steps have been taken against Rex Mining for the recovery of an additional R6.2 million owed to Afgem":

Rex strongly denies that it is indebted to Afgem in an amount of ZAR 6.2 million, being the full amount Afgem is liable to pay to the South African Revenue Services ("SARS") in terms of the Scheme of Arrangement Afgem entered into with the creditors of Rex South Africa and the three subsidiary mining companies. The amount is based on a settlement amount negotiated by the chairman of the meeting of creditors with the SARS on behalf of Afgem. This settlement covers not only the tax liability of Rex South Africa, but the combined tax liability of Rex South Africa and the three subsidiary mining companies. On June 1, 2005, Rex South Africa and Afgem, represented by CEO Mr. Mike Nunn, reached a settlement agreement in terms of which Afgem and Rex agreed that the portion of the tax payment made on behalf of Rex South Africa to the SARS would be set-off, interest free, against the deferred payments/royalties of the purchase price. To date, Rex South Africa has had no official proof of the amount Afgem claims to have paid on its behalf.

During December 2006 Afgem applied to the High Court of South Africa for the liquidation of Rex South Africa based on the payment it alleges to have made to the SARS on behalf of Rex South Africa. The said application was dismissed with punitive costs awarded against Afgem for an abuse of the procedures of the court on February 13, 2007. From the court matter it transpired that Afgem has not fully complied with the terms of the settlement agreement it has with the SARS.

According to Afgem, in its consolidated reviewed interim results for the 6 months, ended September 30, 2005, the amount paid on behalf of Rex South Africa was ZAR 3.4. In the said interim results Afgem refers to the said payment as a loan and states: "The third is a further loan to Rex Mining of R 3,4 million which is secured against future royalties owing to Rex Mining in terms of the purchase price of the mining assets."

"The non-payment of these debts owing to Afgem has resulted in short term cash flow constraints in the Company ("Afgem"):

No debts are owing to Afgem and the cash flow constrains in Afgem are not short term but acute. As far as Rex is concerned, the actual reason for Afgem's acute cash flow problem is the result of Afgem's failure to fulfil its commitment and invest the required ZAR 100 million into Rex's former South African diamond mines. Mr. Mike Nunn, then CEO of Afgem, represented to Rex that this amount would be invested. During the negotiations Mr. Nunn produced a letter of comfort from ABSA Bank as proof that a ZAR 100 million credit line would become available upon completing of the transaction. This induced Rex to sell its three South African subsidiary diamond mining companies to Afgem. It was important for Rex that the purchaser would have sufficient financial means to develop and operate the mines efficiently because that a major part of the purchase price consisted of deferred payments and royalties spread over a period of 16 years.

A year ago, Afgem gave another reason for its cash flow constraints. In its "Preliminary Consolidated Annual Results for the Year End 31 March 2006" Afgem states that: "Shortly after re-opening in January, a sudden cloud burst produced unusually high levels of rainfall and partially flooded the mine. Production was temporarily stopped and resulted in high capital replacement costs with much of the electrical installations needing to be replaced. Production resumed after a fortnight; although the water level at the No 2 shaft took several weeks to lower to below mining levels. This together with minor electrical problems associated with the new winder, resulted in a delay in the commissioning of the No 2 Shaft. Although production from No 1 Shaft rapidly returned to normal, the financial viability of Simolotsi Mine always relied on the levels of production anticipated from the commissioning of No 2 Shaft. Unfortunately this delay in commissioning strained the Company's financial resources and threatened to compromise the safety of employees. Accordingly mining was suspended at the end of March 2006."

"Management is actively seeking purchasers for these assets and is currently engaged in discussions with various parties in respect of the disposal of the mines":

In its press release Afgem fails to mention that Afgem is in negotiations with Petra Diamonds Ltd. as it appears in the NUM settlement Agreement. From the announcements made by Petra, from March 1, 2007 on, it has emerged that Petra is in the process of acquiring Frannor Investments and Finance Limited ("Frannor"), a fully owned subsidiary of Xceldiam Limited ("Xceldiam"). Messrs. Mike Nunn and Mark Summers (CFO of Afgem) are both directors and shareholders of Xceldiam and after the takeover, they will be the only directors of Xceldiam. In the past Afgem has also extended a loan of ZAR 3 million to Xceldiam. According to the press releases of Petra and Xceldiam, Messrs. Nunn and Summers will both be shareholders of Petra after the take over of Frannor.

Mr. Mike Nunn resigned as CEO of Tanzanite One Ltd (Bermuda - an AIM listed company) on May 1, 2006. Mr. Mike Nunn also resigned as CEO of Tanzanite One (SA) Ltd and as CEO of Afgem. He is still a director of Xceldiam Ltd and according to the 2005 annual report a shareholder in Tanzanite One Ltd (Bermuda).

In spite of a written demand to Afgem for information, Rex as major shareholder of Afgem, has not been informed of any of the particulars of the negotiations between Afgem and Petra.

Although Mr. Nunn is no longer a director of Afgem, he remains the single largest shareholder of Afgem and has been its CEO since its inception. Mr. Summers is a director and CFO of Afgem. Based on legal opinion, it can be stated that the intended sale of Afgem's three subsidiary mining companies to Petra will therefore not be to a bona fide and independent third party. Had Petra been a bona fide and independent party, Afgem would have had the option to terminate its obligation to pay the deferred portion of the purchase price/royalties by paying an amount equal to 8% of the selling price of the subsidiary mining companies to Rex South Africa. In the Agreement it is clearly stated that "should Afgem not terminate the said obligation in terms of clause 6.2.3 that obligation shall remain in full force and effect notwithstanding the fact that the shares in the relevant company and/or assets and/or mines in the relevant company have been sold." Based on legal opinion it can be stated that Petra and Afgem can be held liable to perform the said obligation in terms of the Agreement. If necessary, legal action shall be taken to protect the interests of Rex.

Rex South Africa and Rex Canada will support a disposal of Afgem's subsidiary mining companies to Petra under conditions that would protect the payment of the deferred portion of the purchase price/royalties payable in terms of the Agreement to Rex South Africa.

Rex Diamond Mining Corporation
Antwerp - Toronto
Serge Muller, CEO
+32 3 205 9060

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