|In a Nutshell|
An investment in the Central Kimberley Diamond shares is speculative due to the nature of the Company's business. The Board recommends that potential applicants consider the risks described below, as well as consulting with their professional advisors before deciding whether or not to apply for the Shares. The following is a non-exhaustive list of the risks that may have a material effect on the financial position and performance of the Company and the value of its securities, as well as the Company's exploration, development and mining activities, and ability to fund those activities.
General Economic and Political
The value of the Company's securities are likely to fluctuate depending on various factors such as general economic conditions including interest rates, inflation and growth), political conditions (including legislative change), metals and mining industry conditions and stock market conditions in Australia, South Africa and elsewhere.
Exploration, by its nature, contains elements of significant risk. Ultimate success depends on the discovery and delineation of economically recoverable mineral resources, establishment of an efficient exploratory operation and obtainment of necessary government, statutory and other approvals. The exploration activities of the Company may be affected by a number of factors including, but not limited to, geological conditions, seasonal weather patterns, technical difficulties and failures, availability of the necessary technical equipment and appropriately skilled and experienced technicians, adverse changes in government policy or legislation and access to the required level of funding.
There can be no assurance that the Company's exploration activities, or any other projects, tenements or databases that the Company may acquire in the future, will result in the discovery of a significant mineral resource. Even if a significant mineral resource is identified, there can be no guarantee that it can be economically exploited.
Development and Mining
Possible future development of a mining operation at any of the Company's projects is dependent on a number of factors including, but not limited to, the acquisition and/or delineation of economically recoverable ore bodies, favourable geological conditions, receiving the necessary approvals from all relevant authorities and parties, seasonal weather patterns, unanticipated technical and operational difficulties encountered in extraction and production activities, mechanical failure of operating plant and equipment, unexpected shortages or increases in the price of consumables, spare parts and plant and equipment, cost overruns, access to the required level of funding and contracting risk from third parties providing essential services.
In the event that the Company commences production, its operations may be disrupted by a variety of risks and hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, unusual or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions and other accidents. No assurance can be given that the Company will achieve commercial viability through the development and/or mining of its projects.
Resource estimates are expressions of judgment based on knowledge, experience and resource modelling. As such, resource estimates are inherently imprecise and rely to some extent on interpretations made. Despite employing qualified professionals to prepare resource estimates, such estimates may nevertheless prove to be inaccurate. Furthermore, resource estimates may change over time as new information becomes available. Should the Company encounter mineralisation or geological formations different from those predicted by past drilling, sampling and interpretations, resource estimates may need to be altered in a way that could adversely affect the Company's operations.
Commodity and Currency Price Volatility
Commodity prices inherently fluctuate, are difficult to forecast and are affected by numerous factors beyond the control of the Company, including world demand for particular commodities, forward selling by producers and the level of production costs in major commodity producing regions. Further, commodity prices are also affected by macroeconomic factors such as expectations regarding inflation, interest rates and global and regional demand for, and supply of, a commodity.
Commodities are principally sold throughout the world in US dollars. The Company's cost base is in Australian dollars. As a result, any significant and/or sustained fluctuations in the exchange rate between the Australian and US dollars and/or adverse movements in commodity prices, could have a materially adverse effect on the Company's operations, financial position (including revenue and profitability) and performance. The Company may undertake measures where deemed necessary by the Board to mitigate such risks.
Tenure and Access
There is no guarantee that current or future applications, conversions or renewals of the mineral tenements in which the Company has an interest or potential interest will be approved. Tenement applications may result in a requirement for the Company to commence negotiations with the relevant landholders and/or indigenous representative bodies to gain access to the underlying land. There is no guarantee that such negotiations will be successful.
Tenements are subject to a number of specific legislative conditions including payment of rent and meeting minimum annual expenditure commitments. The renewal of the term of a granted tenement is also subject to the discretion of the relevant Minister.
Reliance on Key Personnel
The Company's success largely depends on the core competencies of its Directors and management and their familiarisation with, and ability to operate in, the metals and mining industry and the Company's ability to retain its key executives.
The Company's projects are subject to Government laws and regulations regarding environmental matters and the discharge of hazardous wastes and materials. As with all mineral projects, the Company's projects are expected to have a variety of environmental impacts should development proceed. The Company intends to conduct its activities in an environmentally responsible manner and in accordance with all applicable laws, but may still be subject to accidents or other unforeseen events which may compromise its environmental performance and which may have financial implications.
Shortage of Capital
The funds raised by the Offer will be used to carry out the Company's objectives. The Company's ability to raise further capital (equity or debt) within an acceptable time, of a sufficient amount and on terms acceptable to the Company will vary according to a number of factors, including:
- prospectivity of projects (existing and future);
- the results of exploration, subsequent feasibility studies, development and mining;
- stock market and industry conditions; and
- the price of relevant commodities and exchange rates
No assurance can be given that future funding will be available to the Company on favourable terms (or at all). If adequate funds are not available on acceptable terms the Company may not be able to further develop its projects and this may impact on the Company's ability to continue as a going concern.
Changes in relevant taxes, legal and administration regimes, accounting practice and government policies may adversely affect the financial performance of the Company.
Limited Operational History
While the Company's management has significant experience and have previously carried out or been exposed to exploration and production activities while employed or engaged by other companies, the Company was not incorporated until 22nd December, 2004. Accordingly, the Company has limited historical, financial or operating information. The Company's ability to achieve its objectives depends on the ability of its Directors and officers to implement current plans and to respond to any unforeseen circumstances that require changes to those plans.
As part of its business strategy, the Company may make acquisitions of or significant investments in complementary companies or prospects, although no such acquisitions or investments are currently planned. Any such transactions would be accompanied by risks commonly encountered in making such acquisitions.
South Africa is regarded as a stable, developing country. However, it is not possible to guarantee that the current investment climate will prevail in the event of social or political upheaval or a change in government or leadership. Possible sovereign risks that could impact on the Company's activities include, but are not limited to, changes in the terms for acquisition and maintenance of exploration or mining permits, royalty conditions, taxation or conditions for foreign investment and ownership of equity in South African projects or entities.