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Frontier Diamonds Limited

March 2017

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ContentsDiamonds Are Forever .................................................................................. 1

Key Points ..................................................................................................... 1

Swot Analysis ............................................................................................... 2

Overview ...................................................................................................... 3

Strategy and Project Overview ............................................................... 3

Financial Position ..................................................................................... 3

Sedibeng and Star Diamond Mines ........................................................ 4

Engineering Support and Capability ...................................................... 13

Forecast Operation Profile .................................................................... 14

Peer Group Analysis.................................................................................... 15

Capital Structure ......................................................................................... 16

Risks ........................................................................................................... 16

Board and Management ............................................................................. 16

Background – Diamond Markets ................................................................. 17

Background - South Africa .......................................................................... 19

Appendix 1 – Photographs .......................................................................... 21

1Independent Investment Research

Note: This report is based on information provided by the company as at March 2017. At the time of writing no prospectus had been issued by the Company.

Investment Profile

Share Price (A$) as at last raising $0.12

Issued Capital:

Ordinary Shares 163.2m

Implied Market Capitalisation as of Last Raising (A$m) $19.6m

Board and Management

Mr Jan Louw: CEO/COO

Mr Marco Möller: Chief Financial Officer

Mr Martin Van Zyl: Executive Legal and Compliance Officer

Mr Jacques Cillierss: Executive Commercial Officer and Marketing Manager


DIAMONDS ARE FOREVERFrontier Diamonds Limited (“Frontier” or “the Company”), is an unlisted public company, looking to list on the ASX. The Company’s current focus is largely on two operating diamond mines in South Africa – Star and Sedibeng. The Company is utilising their extensive expertise in engineering services and operations to make productivity improvements at these two operations, which have good grades, produce relatively high value diamonds and have resources to last at least 15 years. The Company is also actively looking at other opportunities in its strategy to grow into a significant producer of high quality diamonds.

KEY POINTSWell Understood, Long Life Operations: With its Sedibeng and Star operations, the Company has two very well understood mines that have a long history of consistently producing high quality, high value diamonds, and that still have resources to support a +15 year mine life.

Turnaround Story: Frontier is carrying out capital works and operating improvements to significantly enhance productivity, diamond recovery and to cut costs at Star and Sedibeng.

Upside Potential: There is significant upside potential, especially at Sedibeng - this includes extensions to the known fissures, the definition of resources at nearby fissures (including the Magasyn Fissure), plans to process existing tailings dumps (which contain some 124,000 carats, excluding fines), the nearby Bellsbank Pipe, on which a programme of bulk testing is underway and opportunities to pick up other historic assets, which could lead to a production of >100,000ctpa in the short to medium term.

Engineering Support: One key to cutting costs is the engineering capability that Frontier has through their associate company Frontier Mining Projects (Pty) Ltd (“FMP”) - 2nd hand equipment (ranging in size from pumps to articulated trucks and loaders) is refurbished at FMP’s engineering workshop and yard in Kimberley, which enables the cost of supplying equipment to be cut by 60-75%, and also ensures spares are ready to hand - there is a ready supply of good quality used mining equipment in South Africa that is suitable for refurbishment and use at Frontier’s projects.

Processing Plant Expertise: This follows on from the above - skills also extend to the design, construction and operating of processing plants - a case in point is the construction by FMP of a plant for the treatment of tailings at Petra Diamond’s (LON: PDL, “Petra”) Finsch mine a few years ago - this was done in house, and FMP is currently successfully operating this facility which has a nameplate capacity of 2,000tpd.

Close to Infrastructure: South Africa is an infrastructure rich country, with recent issues in the electricity sector being addressed - in addition, given the mining history, there are readily available skilled services and labour.

Experienced and Committed Personnel: Company personnel have extensive industry experience including in diamonds and also, post listing, will hold a large part of the Company, thus aligning their aims with those of the incoming shareholders.

Strong BEE Partnership: This is a key consideration when operating in South Africa - the Company’s BEE partner is a company associated with Mr. van Zyl, with whom other directors have had a long relationship.

Site Visit: IIR made a site visit to the Company’s operations in February, 2017.

Steady News Flow: We expect to see ongoing news flow once listed.

The investment opinion in this report is current as at the date of publication. Investors and advisers should be aware that over time the circumstances of the issuer and/or product may change which may affect our investment opinion.

Mark Gordon - Senior Analyst

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SWOT ANALYSIS

Strengths

� Experienced Personnel: Frontier personnel are very experienced in various facets of the South African minerals industry including in diamond operations.

� Engineering Capability: One of the key strengths is the engineering capability available to Frontier, with the capacity to build and refurbish plant and equipment, which is key in keeping costs low.

� Well Understood Operations: Having been in operation for a long time, the Star and Sedibeng operations are very well understood, and have returned consistent results.

� High Grade Resources: With minable reserve grades of 42.6 and 21.6 carats per hundred tonnes (“cpht”) respectively, the Star and Sedibeng fissures are relatively high grade deposits.

� Relatively High Value Diamonds: Both Star and Sedibeng produce relatively high value diamonds, with a high proportion (>90%) of stones being gem quality.

� Quality BEE Partner: This is vital in operating mining projects in South Africa, and in director Mr Martin Van Zyl and his associates Frontier has a BEE partner with whom they have worked with closely for many years and who has extensive contacts in Government.

Weaknesses

� Deep, Narrow Vein Mines: In our view this is the key weakness with regards to the current operations, which will result in them being relatively high cost; however on the flip side South Africans understand this style of mining very well.

Opportunities

� Productivity Turnaround: This opportunity is currently being addressed by Frontier with both capital development and operating changes being made, particularly at Star.

� New Resources: This largely applies at Sedibeng, with bulk sampling at the Bellsbank Pipe and the potential to discover and develop new fissures (including Magasyn and extensions to the currently mined ROM Fissure); there is also the potential to pick up the historically mined Bellsbank Mine assets - any addition to minable resources that can be treated through the existing Sedibeng plant mitigates potential expensive development costs.

� Tailings Treatment: The Sedibeng mine has considerable tailings, with Frontier now having purchased a plant to treat these - the potential commercial value of the tailings has been demonstrated by previous and current sampling programmes.

� Other Acquisitions: The Company will consider other acquisition for growth when and if they become available.

Threats

� Costs and Pricing: Given the nature of Star and Sedibeng, they are both susceptible to adverse changes in costs and diamond pricing - on the cost side success in the current productivity improvements will be vital for the ongoing viability of the operations.

� Foreign Exchange: This is related to pricing, with diamond prices denominated in US Dollars - any devaluation of the Dollar against the Rand will adversely affect locally denominated diamond prices.

� Operational Issues: These are perennial threats in mining operations, however given the knowledge of the existing operations this should not be a major threat.

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OVERVIEW

STRATEGY AND PROJECT OVERVIEW

� Since acquiring the Sedibeng and Star Diamond Mines from Petra in 2014, Frontier’s strategy has been to restart operations and to make capital development and operational changes to cut costs and deliver strong improvements in operational efficiencies.

� Frontier is now looking to raise the funds (via an IPO) required for the ongoing “turnaround” programme to unlock the full production potential of the operating assets, particularly at Star, where bottlenecks to production are being removed.

� The mines were originally owned by the ASX-listed Crown Diamonds NL (ASX: CDR), and were operating at the time of the 2005 merger with Petra.

� Subsequently Petra acquired its major assets, including Finsch, Koffiefontein and Cullinan, and thus Sedibeng and Star become “non-core” assets.

� However, what can be considered “non-core” for a major producer can be considered valuable assets for a small group.

� In parallel Frontier is carrying out a bulk sampling programme at the Bellsbank Pipe (“Boytjies” pit) near Sedibeng – this has the potential, should the sampling prove successful, to add relatively cheap open cut production to Sedibeng.

� The Company has also recently purchased a plant to treat the mine tailings at Sedibeng, which has the potential to bring in significant short to medium term cash flow.

� Frontier will also assess other opportunities when they become available (there is the potential here to leverage on the close relationship with Petra) - the acquisition of current operations has the potential to increase cash generating capacity.

� As part of this organic growth strategy Frontier has also applied for the prospecting rights over the historically operated Bellsbank Mine adjacent to Sedibeng, and is carrying out exploration drilling on interpreted parallel fissures at Sedibeng, including the Magasyn Fissure.

� In running operations, it will draw on the operating and engineering experience of FMP – FMP has extensive experience in building and operating treatment plants, as well as refurbishing and maintaining mining equipment, largely carried out at its Kimberley workshop and yard.

Figure 1: Frontier diamond operations location map

Source: Frontier

FINANCIAL POSITION

� The Company has recently raised A$3 million in seed capital, issuing 25 million shares at a price of A$0.12/share.

� It is looking at raising A$5 - A$10 million in the planned IPO at a price of A$0.20/share.

4



SEDIBENG AND STAR DIAMOND MINES

Location, Ownership and Tenure

� The Company’s ownership structure is shown in Figure 2.

Figure 2: Frontier ownership structure

Source: Frontier

Sedibeng

� Sedibeng, which includes the merged Dancarl and Messina Mines is located approximately 40km north of Delportshoop and 80km west of Warrenton in the Northern Cape Province of South Africa.

� The mine is readily accessible on sealed highways and then 13km of all-weather dirt road.

� Sedibeng is held through Dancarl Diamonds (Pty) Ltd and Messina Diamonds (Pty) Ltd (Sedibeng Diamond Mine JV) under old order mining licences ML 12/94 and ML 1/1995 respectively – the ownership structure is shown in Figure 2, and tenure in Figure 3.

Figure 3: Sedibeng and Bellsbank tenure – prospecting rights outlined in red

Source: Frontier

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� New order rights were granted by the Department of Mineral Resources (“DMR”) in June 2013, but are yet to be executed and signed - the current old order rights remain in good standing until the execution of the new order rights.

� The Company also has the Bellsbank prospecting rights, which include the Bellsbank Pipe, previously assessed by De Beers and Petra, and currently the subject of a bulk sampling assessment by Frontier.

� The Company holds the surface rights over all assets.

Star

� The Star Diamond Mine is located some 12km NE of the town of Theunissen in the Free State Province of South Africa, adjacent to the R30 regional sealed road.

� The mine is held under new order right ML 11/1996, which was converted from the old order right on April 16, 2009, and valid until February 10, 2025 by which time an application for renewal will need to be lodged.

� The Company holds the surface rights over all assets.

Project History

� A history of the operations of both mines is shown in Table 1 – this covers until August 2016, the date of the resource report from which the table has been sourced.

� As can be seen both have a considerable history of operations, which has led a good understanding to the geology, mineralisation and any issues related to operations.

Table 1: Sedibeng and Star production and ownership history

Sedibeng and Star production and ownership history

Period Owner Tonnes Mined Grade Total Carats

STAR MINE

1926 - 1947 Unknown n/a n/a n/a

1948 - 1980 Gold Fields 2.0 Mt 40 cpht – 50 cpht 1.0 Mct

1980 - 1984 Ochta Diamonds

(1975 – 2003)

469,946 ton

(1975 – 2003)

40 cpht

(1975 – 2003)

187,497 ct

1984 - 1992 Golden Dumps

1992 - 1999 Minvest

1999 - 2003 Messina Diamonds

2003 - 2005 Crown Diamonds 33,599 (only 2004 ) 47 cpht (only 2004) 15,819 ct (only 2004 )

2005 - 2014 Petra Diamonds 197,672 ton 47 cpht 94,466 ct

2014 until Aug 2016 Sedi Diamonds 50,703 ton 37 cpht 19,033 ct

SEDIBENG JV

MESSINA MINE

1930 - 1981 Small-scale miners

Records incomplete, but reportedly 2.7Mt mined

until 199632 cpht (estimation) Records incomplete

1981 - 1996 Minvest

1996 - 1999 Messina Diamond Corp.

1999 - 2003 Messina Diamonds

2003 - 2005 Crown Diamonds 99,074 (only 2004) 25 cpht (only 2004) 24,970 ct (only 2004)

2005 - 2014 Petra Diamonds 922,579 22 cpht 204,319 ct

2014 until Aug 2016 Sedi Diamonds 149,479 16 cpht 23,628 ct

DANCARL MINE

1967 - 2004 De Beers (DBCM)

Records included with Messina’s



2004 - 2005 Crown Diamonds Cons.

2005 - 2014 Petra Diamonds

2014 until Aug 2016 Sedi Diamonds

Source: Sedi Diamonds 2016 Independent Resource Report

� Since the acquisition, Frontier has restarted operations (which were placed under care and maintenance by Petra), and is now carrying out works, including capital improvements and operating changes, to realise the full potential and increase production.

6



Geology and Mineralisation

� Both Star and Sedibeng are fissure diamond deposits, which form feeders to the higher level kimberlite pipes that readers would be more familiar with, as exemplified by the famous Big Hole in Kimberley.

� The fissures, which are ~120Ma in age, are narrow (generally up to 1m wide), sub-vertical kimberlite dykes, that are parts of systems that extend for many kilometres and have large vertical extents – mineralisation has been recognised to at least 700m depth at both Sedibeng and Star, and is still open, with no evidence of grade decrease at depth.

� Grade in the fissures is generally very consistent along strike and down dip.

� The fissure deposits form a series of en-echelon lenses that pinch and swell, with individual lenses being offset, with offsets generally in the order of a few to tens of metres.

� Differences in orientation, thickness and behaviour can be attributed to the country rocks into which they were intruded.

� At both mines the kimberlites intrude sub-horizontal units of the Archaean Witswatersrand Basin rocks and at Star also the basal units of the overlying Carboniferous to Jurassic Karoo Supergroup.

Sedibeng

� The mineralisation at Sedibeng is hosted in the 2,430m long, northeast striking Bobbejaan (“ROM”) Fissure, with the southern 700m comprising the Dancarl Mine and the northern 1,730m the Messina Mine.

� Mineralisation is cut off in the north by the Water Fault – a long section is shown in Figure 4.

� Stoped areas are shown in orange, with this as of 2013

Figure 4: Sedibeng long section looking northwest

Source: Petra (2013), in Sedi Diamonds 2016 Independent Resource Report

� The kimberlites intrude lavas of the Archaean Ventersdorp Supergroup and the unconformably overlying clastic and chemical sediments of the Transvaal Supergroup.

� The basal quartzite unit of the Transvaal Supergroup is shaly in its lower portions.

� The upper 50m of the Ventersdorp lavas have been affected by paleo-weathering, and thus causes some issues with dilution and wall rock competency; however below 580m below surface they are very competent.

� The fissure is a compound structure, which includes a series of en-echelon disc shaped lenses which generally range in width from 40cm to100cm at the centre, with an average thickness of 60cm – they taper to ~20cm thickness at the margins where they break into a series of horsetails.

� A number of parallel fissures have been identified at Sedibeng – the Company is currently drilling to test for these.

Star

� The Star Diamond Mine extends over a 4.5km section of the east-west trending Star fissure system, which can be traced for a length of some 15km.

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� Star consists of a number of en-echelon fissures, with these being separated by up to 150m in a north-south direction, with up to 40m jogs within individual fissure units.

� The five fissure units, from west to east, include Clewer, Micaceaous, Burns, East Star and Wynandsfontein.

� The kimberlites have been intruded into quartzites and sandstones of the Witwatersrand Supergroup, overlain by a 520m thick sequence of flat lying shales and sandstones of the Karoo Supergroup – the Karoo rocks are intruded by a thick dolerite sill (Figure 6).

� The fissure system, as is the case at Sedibeng, is remarkably consistent with depth, and has an average thickness of 58cm.

� There had previously been issues with methane collecting at the contact between the Karoo and Witwatersrand at the western end of Star which precluded development below the 12/13 Level at this end of the mine – this has now been controlled, however mining will not take place at the 12 and 13 levels at the western end.

Figure 5: Star Mine plan.

Source: Snowdon (2004), in Sedi Diamonds 2016 Independent Resource Report

Figure 6: Star Mine long section looking north, showing geology and mined area as of 2004

Source: Snowdon (2004), in Sedi Diamonds 2016 Independent Resource Report

Resources and Reserves

� The most recent resource and reserve update was completed in August 2016, and is presented in Table 2 below.

� Measured Resources are those down to one level (40m) below the level of current workings, Indicated Resources extend to two levels (80m) below the base of the Measured Resources and Inferred Resources extend to three levels (120m) below the base of the Indicated Resources – these are shown in Figures 7 and 8.

� Resource grades have been estimated from historic production, and at a screen cut-off size of +1mm.

� Diamond pricing estimates are the average price received for production over the period October 2015 to September 2016.

� 95% of the stones from Sedibeng and 90% of the stones from Star are gem quality, with Crown reporting two large stones from the mines – one of 56.6 carats sold of US$489,000 in November 2004, and one of 42.11 carats sold for US$282,000 in May 2004, and likewise Sedi Diamonds selling two large stones - a 41.23ct stone for $1,118,899 in May 2015 and a 25.61ct stone for $575,602 in June 2016.

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Table 2: Star and Sedibeng JORC 2012 compliant MRE 31 August 2016

Star and Sedibeng JORC 2012 compliant MRE 31 August 2016

Source Resource Classification Tonnes Mt

Grade cpht Carats Mct Value

(USD/ct)

Star Mine - 31 August 2016

Micaceous

Measured

0.057 79.7 0.046 295

Burns 0.065 79.7 0.052 295

East Star 0.000 79.7 0.000 295

Wynandsfontein 0.044 79.7 0.035 295

Star Measured Resource 0.167 79.7 0.133 295

Micaceous

Indicated

0.115 79.7 0.091 295

Burns 0.113 79.7 0.090 295

East Star 0.000 79.7 0.000 295


Star Indicated Resource 0.317 79.7 0.252 295

Micaceous

Inferred

0.172 79.7 0.137 295

Burns 0.245 79.7 0.195 295

East Star 0.000 79.7 0.000 295


Tailings stockpiles 0.307 5.0 0.015 150

Star Inferred Resource 0.856 52.9 0.453 291

Total Star Resource 1.340 62.6 0.838 293

Sedibeng Mine - 31 August 2016

MessinaMeasured

0.083 47.7 0.040 385

Dancarl 0.100 47.7 0.048 385

Sedibeng Measured Resource 0.183 47.7 0.087 385

MessinaIndicated

0.146 47.7 0.070 385

Dancarl 0.035 47.7 0.017 385

Sedibeng Indicated Resource 0.181 47.7 0.086 385

Messina

Inferred

0.208 47.7 0.099 385

Dancarl 0.150 47.7 0.072 385

Tailings stockpiles 2.488 5.0 0.124 150

Sedibeng Inferred Resource 2.847 10.4 0.295 286

Total Sedibeng Resource 3.212 14.6 0.469 323

Total Measured 0.350 62.9 0.220 331

Total Indicated 0.498 68.0 0.339 318

Total Inferred 3.703 20.2 0.749 289

Total Resource Star and Sedibeng 4.551 28.7 1.307 304


9



Figure 7: Star resource breakdown looking west


Figure 8: Sedibeng resource breakdown looking north


� Reserve estimates have been based on Measured and Indicated Resources, and incorporate mining dilution and an average 95% plant recovery.

Table 3: Star and Sedibeng Ore Reserves August 31, 2016

Star and Sedibeng Ore Reserves August 31, 2016

Source Reserve Class Tonnes Mt

Grade cpht

Carats Mct

Value (USD/ct)

Bottom Screen Size Cut-Off (mm) $/t

Star Ore Reserves

Micaceous

Proven

0.109 42.6 0.046 295

1.00mm

125.58

Burns 0.124 42.6 0.053 295 125.58

East Star 295 -

Wynandsfontein 0.084 42.6 0.036 295 125.58

Star Proven Reserves 0.316 42.6 0.135 295 1.00mm 125.58

Micaceous

Probable

0.218 42.6 0.093 295

1.00mm

125.58

Burns 0.215 42.6 0.092 295 125.58

East Star 295 -

Wynandsfontein 0.168 42.6 0.071 295 125.58

Star Probable Reserves

0.601 42.6 0.256 295 1.00mm 125.58

Star Ore Reserves 0.917 42.6 0.390 295 1.00mm 125.58

10



Star and Sedibeng Ore Reserves August 31, 2016

Source Reserve Class Tonnes Mt

Grade cpht

Carats Mct

Value (USD/ct)

Bottom Screen Size Cut-Off (mm) $/t

Sedibeng Ore Reserves

MessinaProven

0.162 21.6 0.035 3851.00mm

83.16

Dancarl 0.195 21.6 0.042 385 83.16

Sedibeng Proven Reserves

0.357 21.6 0.077 385 1.00mm 83.16

MessinaProbable

0.285 21.6 0.062 3851.00mm

83.16

Dancarl 0.069 21.6 0.015 385 83.16

Sedibeng Probable Reserves

0.354 21.6 0.076 385 1.00mm 83.16

Sedibeng Ore Reserves 0.711 21.6 0.154 385 1.00mm 83.16

Total Proven 0.674 31.4 0.212 3281.00mm

103

Total Probable 0.954 34.8 0.332 316 110

Total Star and Sedibeng 1.628 33.4 0.544 320 1.00mm 107


� Dilution at Sedibeng is calculated from an average fissure width of 60cm and an average stoping width of 130cm (this includes 10cm unplanned wall rock dilution); that at Star is based on an average fissure width of 58cm and a stoping width of 110cm (again including 10cm unplanned wall rock dilution).

� The reserves include no mining losses at Star, and 10% at Sedibeng, with the losses largely related to the requirement to leave sill pillars due to wall-rock stability issues.

Mining and Processing Operations

� Both mines are currently operating, and a summary of mining parameters and planned operations are presented in Table 4.

� Miners live on site at Sedibeng, and are bussed in daily to Star, although key personnel live on site in the existing mine town.

Table 4: Star and Sedibeng mining parameters

Star and Sedibeng mining parameters

Parameter Star Sedibeng

ROM Mining Rate 2,000tpm currently, increasing to 8,000tpm with haulage and hoisting improvements

Currently looking to mine 12,000tpm out of the ROM Fissure, with the potential to expand to 16,000tpm within 24 months.

Processing Type

3 stage sequential crushing and screening 30mm/+6mm, magnetic and DMS

separation, hand picking waste in ROM material

3 stage sequential crushing and screening 30mm/+6mm, magnetic and DMS

separation, hand picking waste in ROM material

Plant throughput 30tph/110,000tpa single shift, however can operate up to 50tph 70tph/250,000tpa single shift

Average Fissure Width 58 cm 60cm

Average Mining Width (including dilution) 110 cm 130cm

Resource Grade 79.7 cpht 47.7 cpht

Plant recovery 95% 95%

Reserve Grade 42.6 cpht 21.6 cpht

Diamond value US$295/ct US$385/ct

RoM Tonne Value US$126/RoM tonne US$83/RoM tonne

Estimated operating costs after efficiency improvements US$48/RoM tonne US$55/RoM tonne

Waste % 36% 21%

Mining Type Overhand open stoping Underhand shrinkage stoping

Support Timber poles, solid packs Sill pillars

Face muckingCurrently manual, however plan to convert to water jetting to improve efficiency and

reduce the potential for theftN/A - Drawn from drawpoints

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Star and Sedibeng mining parameters

Parameter Star Sedibeng

Haulage Tracked using 1.3t cocopans, planned tracked and conveyor Tracked and conveyor

Other haulage, development

Installing incline from 16 Level (main haulage) to 19 level

Planned 1.5m diameter raise bore for return airway from surface to 14 West -

R10 million, 560m, planned completion in November 2018

Planning a decline shaft from 24 level - as a sub-shaft for the Albertse Shaft

Mined depth

Mined down to 11 Level (440m) pre Petra, subsequent mining has been in the Burns

Fissure down to 16 Level (640m), with development down to 19 Level (760m).

Mined to 23 Level (680m) at Messina before 2004, with Petra and now Frontier mining

the Dancarl Section below 13 Level (430m)

Mining Areas Currently working 15 and 16 Levels

Currently working below 17 Level in the Dancarl Section and 23 Level in the Messina Section - the main focus is on Messina, with

Dancarl being on a side fissure.

Hoisting Single cocopan hoisting - converting to 3.5t skip hoisting - expected November Skip hoisting - 5t skips, Albertse Shaft

Shafts

Main Shaft - men, material, rock, downcast vent

No 7 Shaft (Wynandsfontein Fissure)- upcast vent and 2nd escape way

Currently using the 780m deep Albertse Shaft (Messina section) for all production

Looking at using the Hallidays Shaft for men (nth end of Messina), and planned sinking

of the No 1 Shaft to 26 Level for the Dancarl section

Level Interval 40m Originally 30m, now 40m

Development Sizes

Haulages 2.5m wide x 2.2m high 2.5m wide x 2.2m high

Crosscuts 2.5m wide x 2.2m high 2.5m wide x 2.2m high

Crosscut Interval 15m 15m

Crosscut length ~10m 6-8m

Raises 1.5m wide x 1.8m high 1.2m wide x 1.5m high

Travel Ways 1.5m wide x 2.0m high

Shaft Sinks 6.0m x 4.0m 6.0m x 5.0m

Source: Frontier, Sedi Diamonds 2016 Independent Resource Report

� A diagrammatic representation of the mining methods is presented in Figure 9.

Figure 9: Mining methods


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� Although more expensive, shrinkage stoping is required at Sedibeng due to wall support being required due to ground conditions.

� These styles of narrow vein mining are well understood, and in the past were commonplace in South Africa

� Underground drilling is carried out ahead of the haulage development to determine the position of fissures, and hence to guide the lateral development.

� Diamond recovery is by industry standard processes as shown in Table 3.

Planned Development and Operational Improvements

� The Company’s strategy is to significantly increase operational efficiencies, and reduce operating costs to US$48/tonne treated at Star and US$55/tonne treated at Sedibeng – these are the figures that have been used in the financial forecasting.

� Currently ore at Star is hand mucked, which is labour and time intensive – it is planned to change this to water jetting for two main reasons:

– Cut costs and time required to move material.

– Decrease the opportunity for theft of large stones.

� The Company is of the view that the recovered grade may be able to be increased from 40cpht to 55cpht through water jetting.

� The current key bottleneck at Star is hoisting, with only single 1.3t cocopans being able to be hoisted at a time – this again is labour and time consuming.

� The Company is installing a skip in the shaft and a skip loader at 16 Level (which is the main haulage level), with surface bins then to be converted to accept material from the skips which will then be connected to the plant by conveyor.

� In parallel an incline shaft is being dug from 16 Level to 19 Level for haulage purposes, with the shaft being deepened to the 17 Level.

� To facilitate operations at the western end at Star (with methane now actively managed) a 1.5m diameter raise bore is being installed from 14 Level to be used as a return airway.

� Planned improvements at Sedibeng include looking at using the Halliday Shaft for moving personnel, and deepening the No 1 Shaft to the 26 Level to facilitate operations in the Dancarl Section.

� Frontier has increased the plant capacity at Sedibeng to 250,000tpa which is more than sufficient to handle the planned 192,000tpa feed from the ROM Fissure - the mill throughput could potentially be increased further should the Magasyn Fissure prove viable, which as mentioned earlier is currently being assessed through drilling.

Tailings Treatment

� The tailings at Sedibeng have an Inferred Resource of 2.488Mt @ 4.5cpht, for 124,000ct at an estimated value of ~US$100/ct – the grade was estimated from some retreatment work completed by Petra which recovered 5.0cpht, however diamond values will not be determined until the first sale of stones.

� This does not include fines, which it is estimated could grade at up to 8-9cpht, however with lower quality stones, possibly <US$50/ct

� Frontier has recently bought a treatment plant that was being used to treat tailings at Kimberley – this will be moved to Sedibeng to be used for the treatment of the tailings, with this estimated to commence in September 2017, with an estimated final cost of A$1.8 million, and an estimated ROM throughput of 80.000tpa.

� Estimated operating costs for the Sedibeng tailings are, based on a 80,000tpm throughput - these are US$3.00/tonne, with estimated revenues of US$6.01/tonne.

Expansion Opportunities

Other Fissures – Sedibeng

� As mentioned earlier the Company is undertaking underground and surface drilling to test for both north and south strike expansions of the existing ROM Fissure and resource delineation of the Magasyn Fissure at the Dancarl Section – the Magasyn Fissure is apparently ~100m east of the ROM Fissure - there is also the potential for the discovery of additional side fissures.

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Bellsbank Pipe (Boytjies Pit)

� The Bellsbank pipe (Figures 3 and 10), located some 10km from the Sedibeng plant, is a 130m x 80m “blow” in an interpreted fissure system.

� The area is covered by up to 20m of calcrete, and was discovered through magnetics and gravity surveying.

� De Beers carried out some drilling, which returned 4.5cpht, including one stone of 1.5ct.

� Frontier is currently pre-stripping for a bulk sampling operation, with material to be treated through the Sedibeng plant.

� It is estimated, should the programme return a grade of 10cpht, that the bulk sampling programme could produce ~12,000ct over the next 21 months, and return a surplus of ~US$2 million.

� The operation is also aimed at exploring for the fissure that the pipe may be on – this has hitherto not been recognised due to the calcrete cover.

Figure 10: Bellsbank pipe

�Source: Frontier

Bellsbank Mine Prospecting Rights

� Frontier has applied for the prospecting rights over the historical Bellsbank Mine (these are not to be confused with those over the Bellsbank Pipe), located a few kilometres to the west of Sedibeng.

� Bellsbank, which operated until the 1990’s, had in-situ grades of ~50cpht, and was mined to a depth of 600m.

� The mine returned at least two large stones – one of 220ct and one of 125ct – the Company is still in the process of collating data, however reportedly produced some of the highest value stones in South Africa.

� The mine included two blows and the fissure.

� The headframe and shaft could potentially be refurbished, with material to be treated at the Sedibeng plant.

Other Opportunities

� Frontier will assess any other opportunities when and if they arise.

ENGINEERING SUPPORT AND CAPABILITY

� One of the key planks of the Company’s strategy is being able to source engineering services to the mining operations through FMP.

� This includes building and installing plant and refurbishing and maintaining equipment.

� Frontier has, through its association with FMP access to a dedicated engineering facility, including workshops, in Kimberley, which includes specialised tools, including lathes and metal presses.

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� Used equipment is actively sourced from closed operations, which is then refurbished for use in the mining operations at Star and Sedibeng – this equipment ranges in size from small scale equipment (for instance pumps), to major items, including trucks, loaders and hoisting equipment.

� This allows for capital costs to be cut by 60% to 75%, and also means that spares are readily available when they are required.

� FMP also has a background in process engineering services – this includes the construction, installation and operating of a 2,000tpd tailings treatment plant at Petra’s Finsch Mine, and also with Mr Jan Louw being in charge of construction of the plant at the Navachab Gold Mine in Namibia in the late 1980’s.

� The Finsch plant was constructed for some ZAR70-80 million around 2014, and took ~18 months to design, construct and install – the construction used a large proportion of recycled materials.

� This was originally owned and operated by Frontier under a profit sharing arrangement, however has subsequently been sold to Finsch with Frontier still operating it.

� Material is crushed to 9mm, scrubbed and then treated using a mixture of magnetic separation and DMS – the material was originally considered impossible to treat by De Beers, but the current operation is apparently giving excellent results, however the details are commercial in confidence.

FORECAST OPERATION PROFILE

� Figure 11 includes the Company’s forecast of production from Sedibeng and Star.

� This includes a ramp up to 96,000tpa at Star and 192,000tpa from Sedibeng.

� Sedibeng production is predicated from the ROM fissure only - should Magasyn prove viable this could provide additional production at Sedibeng.

� The Company forecasts diamond production to reach 82,962ctpa, which, allowing for 85% plant recovery results in annual sales of 70,517ctpa.

� This does not include any production from the Sedibeng tailings dumps, or the potential for an estimated 12,000ct production from the Bellsbank bulk sampling programme.

� The tailings treatment has the potential to be a lucrative operation - the Company estimates operating costs in the order of US$3/tonne, and potential revenues of US$6/tonne.

Figure 11: Forecast production

Source: Frontier

� Figure 12 presents un-escalated financial figures adapted from those presented in the Company presentation –these are based on operating costs, production figures and sales prices as presented earlier – this does not include estimated annual capital and development costs in the order of $4-5 million.

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� Again, these only include Star and the ROM Fissure at Sedibeng,

� Diamond prices have enjoyed an escalation of 3.3% real per annum over the past 12 years, assuming a US CPI of 2.5%pa over the same period - the Company’s figures include this as well a cost ecalation of 5.5%, with this not being included in our graph.

Figure 12: Forecast indicative financials

Source: Frontier

PEER GROUP ANALYSIS � Strictly speaking Frontier has no peers listed on the ASX - the only other diamond

producer is Lucapa, which however is an alluvial, and not a hard rock miner.

� Table 4 presents some listed diamond companies and examples of sales prices achieved – given the current operations Frontier is not directly comparable, however this shows the values that are ascribed to listed diamond producers.

� However, in the precious stones space Mustang Resources (ASX: MUS, and not included in our comparison) is developing its alluvial ruby operations at Montepuez in Mozambique, adjacent to the project owned by the LSE listed Gemfields, with Gemfields now having a market capitalisation in the order of £250 million.

� Mustang has enjoyed a considerable increase in value over the last few months, reaching a peak of $0.11 on February 22, after being at $0.02/share in early January.

� The price has subsequently settled back to $0.08/share, and it now has a market capitalisation of $38 million, whilst still being in the bulk sampling phase.

� While not directly comparable to Frontier, Mustang is a precious stones development/production asset in Southern Africa, and could be considered in looking at market perceptions of the precious stones space.

� When the Frontier assets were previously listed on the ASX in Crown Diamonds, they were given an implied valuation in the order of $80 million by virtue of the terms of the merger with Petra.

� The stand out performer over the past 10 years has been Petra, given the merger with Crown that introduced the Frontier assets, and then the subsequent acquisition of the De Beers mines.

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Table 4: Diamond company comparison

Diamond company comparison

Company Operations EV (m) Sales Ct Revenue (US$m) US$/ct Basis/

Sale Tonnage cpht US$/ct

Petra Diamonds Various £1,077 3,700,000 US$431 m $116 2016

results1,876

mt 16.6 N/A

Lucara Diamonds Karowe $971 358,806 US$296 m $824 2016

results 67 mt 16 $400

Stornoway Diamonds Renard $885 38,913 US$8 m $195 First sale 64 mt 59.5 $112

Firestone Diamonds Liqhibong £172 75,936 US$8 m $105 First

sales 83 mt 28 $165

Gem Diamonds Letseng £148 108,945 US$185 m $1,698 2016

results 285 mt 1.74 $2,083

Gem Diamonds Ghaghoo £148 47,266 US$8 m $150 2016

results 108 mt 18.98 $241

Lucapa Diamonds Lulo, Mothae $99 17,000 US$51 m $2,983 2017

sale N/A N/A N/A

Frontier Star N/A 31,000 US$9 m N/A Est. 1.34 mt 62.6 $291*

Frontier Sedibeng N/A 51,000 US$20 m N/A Est 3.21 mt 14.6 $323*

Source: IRESS, Company reports, * Frontier figures include tailings resources

CAPITAL STRUCTURE � Frontier currently has 163.2 million shares on issue.

� This includes 25 million shares raised at the last issue at A$0.12/share.

RISKS � Operating: Given that the Company is operating mines, operating risks are key,

particularly given the narrow vein nature of the mines. However this mitigated by the fact that these have been in operation for a considerable period of time, and that Company personnel have extensive experience in operations.

� Operating Costs: We believe that this to be the key risk at the Star and Sedibeng operations, given the nature of the mines, and the need to keep costs down to maintain a healthy margin – in the past these have been marginal operations, particularly given the depth, and thus the mines will need the cost cutting measures currently being implemented to be successful.

� Cost Inflation: This is associated with the above, with the mining industry in South Africa suffering high (annual (+10%) cost inflation over recent years.

� Diamond Prices and Exchange Rates: These, given the nature of the operations, are risks that need to be considered, but that the Company has no control over – having reached a peak of ~17 in early 2016, the ZAR has steadily appreciated against the USD since, and is now at trading at under 13.

� Labour Disputes: Relationships with the mining unions can sometimes be awkward in South Africa, however to our knowledge the Company does enjoy good relationships with their workforce.

� Exploration: This particularly applies to the Magasyn Fissure at Sedibeng and the Bellsbank Pipe.

BOARD AND MANAGEMENT � Mr Jan Louw – Chief Executive and Operations Officer: Mr. Jan Louw serves as

the Chief Executive Officer of the Frontier Mining Group with more than 30 years’ experience in the mining sector in Southern Africa. He previously served as the Director of Operations at Firestone Diamonds Plc with responsibility for managing all aspects of mining operations in South Africa and Botswana. Mr. Louw has extensive experience in planning, developing and managing large scale open cast and underground mining operations, having worked in senior management positions for Anglo American for

17



16 years in South Africa and Namibia. Mr. Louw served as Mine Manager at Anglo American’s Namakwa Sands mining operation in South Africa. Mr. Louw is a graduate in Mechanical Engineering from Stellenbosch University, South Africa.

� Mr Marco Moller – Chief Financial Officer: Marco Moller has over 15 years‘ experience in diamond mining, mineral exploration and development projects, as well as export and cross border transaction in the energy sector. He has served on various executive Boards that include CEO and Director of Tango Mining Ltd (TSXV: TGV), CEO of African Star Minerals and Group Finance Manager to Firestone Diamonds PLC (AIM: FDL). His current appointment as the CFO also supports his role on strategic, operational and corporate matters of the Frontier Mining Group. Marco holds an MBA from UCT, a B.Com postgraduate degree and has completed the SAICA training with PWC.

� Mr Martin van Zyl – Executive Legal and Compliance Officer: Martin van Zyl has previously been appointed in various executive position with South African regulatory agencies that include Advisor to the Minister of Minerals and Energy and the Premier of the Northern Cape, Director-General of the Northern Cape Provincial Government, and Head of Public Health at the Cape Town University of Technology. He also served as Director to various mining companies and trustee of trusts that served more than 27 rural communities. He pioneered the Inter- institutional School of Public Health with the Kellogg Foundation and has been the recipient of various honorary awards: i.e. Jimmy Liston Memorial Award in Public Health. Martin holds a Masters degree of Public Health from Boston University (USA) and Hons B Admin (cum laude) degree from Stellenbosch University.

� Mr Jacques Cilliers – Executive Commercial Officer & Marketing Manager: Jacques Cilliers held senior management positons with various South African banking institutions for more than 8 years before venturing in to the retail and wholesale sector as Director and owner for 10 years. His current responsibilities as executive director of the Frontier Mining Group includes oversight and management of gem diamonds trade, State Diamond Trader regulatory compliance, route to market and cross border transactions. He holds various executive positions and business interests in diamond mining and engineering concerns, and has an comprehensive understanding of the diamond trade environment..

BACKGROUND – DIAMOND MARKETS

Global Production and Markets

� In 2014 global product was in the order or 127 million carats, as shown in Table 5, and which includes both gem and industrial diamonds.

� Approximately 44% is industrial production, with major producers of industrial stones being Russia, Congo (Kinshasa), Australia and Botswana.

� The demand and pricing for gem diamonds is related to global economic conditions, with diamonds being a luxury and discretionary item.

� The largest producer was the Russian Federation, which produced close to 42 million carats, or 33% of the total – the country was also the largest producer by value.

� South Africa is the fourth largest producer by value.

� Estimated production for 2016 was similar, with average rough diamond prices at the same level.

Table 5: Global diamond production, 2014

Global diamond production, 2014

Country Name Volume, cts Value, US$ US$ / cts

Russian Federation 41,912,390 $4,239,585,340 $101.15

Botswana 20,778,642 $2,986,469,130 $143.73

Congo, Democratic Republic of 16,016,332 $132,539,972 $8.28

Australia 13,563,935 $308,356,848 $22.73

Canada 11,677,472 $1,675,936,000 $143.52

Angola 9,016,343 $1,182,128,882 $131.11

South Africa 7,218,463 $1,390,033,447 $192.57

Zimbabwe 3,490,881 $174,544,058 $50.00

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Global diamond production, 2014

Country Name Volume, cts Value, US$ US$ / cts

Namibia 2,053,095 $1,213,539,148 $591.08

Sierra Leone 500,000 $154,253,129 $308.51

Lesotho 304,232 $283,359,306 $931.39

Tanzania 216,897 $58,767,994 $270.95

Ghana 174,218 $6,424,889 $36.88

Guinea 166,881 $14,765,508 $88.48

Guyana 118,451 $19,077,192 $161.06

Liberia 68,576 $31,459,636 $458.76

Congo, Republic of 40,057 $1,006,269 $25.12

India 33,503 $6,966,766 $207.95

Brazil 31,826 $1,416,158 $44.50

Cote D'ivoire 14,925 $497,540 $33.34

Cameroon 2,245 $498,871 $222.25

Totals 127,399,363 $13,881,626,083 $108.96

Source: Kimberley Certification Process

� Prices are quoted per carat, with a carat equalling 0.2 grams.

� Diamond pricing is based on a number of factors, including size, colour and clarity, with higher quality and larger stones enjoying often substantial premiums per carat.

� Around 20 operations had average prices of >US$150/ct in 2016, as shown in Figure 13.

� Amongst the highest value diamonds are those from Lesotho, as well as the Orange River alluvial and Namibian marine operations.

� At current estimated values Star and Sedibeng compare well, as also shown in Figure 13.

Figure 13: Diamond sales price by operation

Source: Paul Zyminsky.com

� As shown in Figure 14 diamond prices have enjoyed a real escalation of 3.3% per annum over the past 12 years, assuming a US CPI of 2.5%pa over the same period.

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Figure 14: Diamond price index, January 2014 to May 2016

Source: Petra Diamonds website image

� Despite falls in 2014-2015, some forecasts have the price recovering over the next few years.

BACKGROUND - SOUTH AFRICA

Introduction

� The 22 years since the transition from Apartheid to Majority Government has seen uncertainty and some tumultuous times in South African politics, which has deterred significant foreign investment, particularly in mining.

� None the less, the country has a rigorous legal framework, including a Constitution, Bill of Rights and court system.

� However recent events point to the possibility of increasing stability and political maturity – the 2016 local elections were contested by some 61, 014 candidates from over 200 parties, with by all accounts the election being free and fair.

� There are still a number of serious socio-economic and infrastructure issues facing the country, including crime, corruption, inflation and, importantly for the mining sector problems with a run-down electricity generation and distribution network, however the Government is actively seeking solutions to the electricity issues.

Mining Industry

� South Africa is undeniably the industrial powerhouse of Sub-Saharan Africa, and a major global miner, with mining contributing 7.6% to GDP and 25% of exports.

� The country is a major global producer of PGE’s, gold, coal, manganese and diamonds, being the world’s single largest producer of PGE’s (40%) and chrome (56%), and the 6th largest producer of gold, (5% of global production) – historically it has been the largest global producer, providing as much as 30% of global production in 1993.

� Given the mining industry, skills and services are abundantly available at a reasonable cost, and there is no need for expensive FIFO expat expertise.

� There has been media attention on the mining, partly due to the decline in production from the gold and platinum operations – this has largely been due to increasing costs, particularly in the very deep mines. Also at times militant strike action by the NUM and the AMCU has gained media attention – strike action has largely targeted the major miners and long established operations.

� The perception of creeping nationalism has challenged the mining industry, however the Mineral and Petroleum Resources Development Act (2002) and associated regulations (including the HDSA ownership requirements) now seem to be working, with the mechanics of the Act and royalty rates similar to those in a number of countries worldwide; it needs to be noted however that processing times for applications under the act can be slow.

20



� South Africa is a highly prospective country, however due to issues as mentioned above it has missed out on the recent global exploration boom, and thus there are many high quality areas that can benefit from the application of modern exploration techniques.

� The country also has relatively low unit labour costs; this, allied with largely well-developed infrastructure means that it is a relatively cheap place to carry out exploration and mining activities compared to a number of third world and other African countries.

� In the 2016 Fraser Institute Survey, the country ranked at 74/104 in the Investment Attractiveness Index, 66/104 in the Best Practices Mineral Potential Index and 84/104 in the Policy Perception Index.

The MPRDA and Associated Acts

� The adoption of the MPRDA brought in the New Order Rights, where ownership of minerals is vested in the State and not with the landholder as was the case under the Old Order Rights – transitional arrangements were put in place at the time of change.

� Prospecting Rights are generally granted for an initial period of five years, and can be renewed for a further three year term.

� Should a feasible operation be delivered Mining Rights can then be applied for, which are granted for an initial term of 30 years, and renewable for additional 30 year terms; retention leases can also be granted for a single three year term only.

� As for the Old Order Rights, the boundaries of New Order Rights generally follow the boundaries of surface rights, with the rights described as per the names of the surface rights – this is different to the graticular system as used in Australia and many other jurisdictions.

� As part of the provisions of the MPRDA, a Mining Charter was signed on October 12, 2002 between the Government, mining representatives and civil society, which defined additional conditions under which rights could be granted.

� One key provision regards the ownership of mining assets by HDSA’s, with 15% ownership mandated by May 1, 2009, and 26% by May 1, 2014, as is the situation now. This ownership is commonly through the participation of BEE’s. Other charter provisions relate to community development, human resources development and equitable employment.

� The Mineral and Petroleum Royalty Act embodies a formula based royalty regime, which takes into account revenue and EBIT, and thus accounts for capital expenditure through taking into recognising depreciation and amortisation, with two royalty formulae.

– For refined minerals: 0.5% + [EBIT/(gross sales in respect of refined mineral resources x 12.5)]

– For unrefined minerals: 0.5% + [EBIT/(gross sales in respect of unrefined mineral resources x 9)]

� The maximum royalty rate is 5% for refined minerals and 7% for unrefined, broadly in line with a number of jurisdictions, including Australia, and could be considered a fair system.

Environmental Legislation

� Environmental requirements relating to resource developments are broadly similar to those in other mining jurisdictions, and responsibility for implementation of the National Environmental Management Act (“NEMA”) is vested in the relevant provincial administrations.

� Other acts and authorities affecting resources include the National Water Act and the

National Heritage Resources Act amongst others.

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APPENDIX 1 – PHOTOGRAPHS � The following are a few photographs from IIR’s February 2017 site visit to Kimberley,

Finsch, Sedibeng and Star.

Photograph 1 – Tailings treatment plant – Finsch Mine

Photograph 2 – Sedibeng Mine – Albertse Shaft head frame

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Photograph 3 – Bellsbank Pipe

Photograph 4 – Star Plant

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Photograph 5 – Diamonds, Star, including a 7.8 carat stone

�

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