PROPOSED MERGER OF TRANS HEX AND GEM

TRANS HEX GROUP LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 63/07579/06)
("TRANS HEX")
GEM DIAMOND MINING CORPORATION
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 86/04840/06)
("GEM")
PROPOSED MERGER OF TRANS HEX AND GEM
1. INTRODUCTION

FURTHER TO THE JOINT CAUTIONARY ANNOUNCEMENT DATED 19 NOVEMBER 1999, AN
AGREEMENT HAS BEEN REACHED SUBJECT TO THE FULFILMENT OF CERTAIN CONDITIONS
PRECEDENT AS SET OUT IN PARAGRAPH 6 BELOW, WHEREBY TRANS HEX WILL PROPOSE A
SCHEME OF ARRANGEMENT ("THE SCHEME") IN TERMS OF SECTION 311 OF THE COMPANIES
ACT, 1993 (ACT 61 OF 1973), AS AMENDED ("THE ACT"), BETWEEN GEM AND ITS
SHAREHOLDERS TO ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL OF GEM ("THE MERGER")
OR IN SUCH OTHER MANNER AS TRANS HEX AND GEM MAY CONSIDER TO BE MORE COST
EFFECTIVE AND HAVE THE SAME EFFECT AS THE PROPOSED SCHEME.
2. INFORMATION ON TRANS HEX AND GEM
2.1 TRANS HEX

TRANS HEX IS LISTED ON THE JOHANNESBURG STOCK EXCHANGE ("THE JSE") AND THE
NAMIBIAN STOCK EXCHANGE. THE CORE BUSINESS OF TRANS HEX IS THE MINING AND
MARKETING OF HIGH QUALITY DIAMONDS FROM ALLUVIAL AND MARINE DEPOSITS IN THE
NAMAQUALAND DISTRICT OF THE NORTHERN CAPE PROVINCE OF SOUTH AFRICA. TRANS HEX
HOLDS EXTENSIVE MINING RIGHTS OVER PROSPECTIVE AREAS ADJACENT TO THE ORANGE
RIVER AND HONDEKLIP BAY, AS WELL AS 11 MARINE MINING AND EXPLORATION

CONCESSIONS ON THE WEST COAST. INTERNATIONAL DIAMOND EXPLORATION ACTIVITIES IN
NAMIBIA, BRAZIL AND ZIMBABWE ARE UNDERTAKEN BY TRANS HEX INTERNATIONAL LIMITED,
A SUBSIDIARY WHOSE SHARES ARE TRADED ON THE TORONTO STOCK EXCHANGE. TOTAL
DIAMOND PRODUCTION FOR THE 1999 FINANCIAL YEAR WAS 114 502 CARATS. DIAMOND
MARKETING IS UNDERTAKEN BY TRANS HEX THROUGH ITS OFFICES IN CAPE TOWN AND
ANTWERP.
2.2 GEM

GEM OPERATES AN ALLUVIAL DIAMOND OPERATION ON THE ELEVATED PALAEO ALLUVIAL
TERRACES OF THE MIDDLE ORANGE RIVER ON THE FARM "SAXENDRIFT" AND IS INVOLVED IN
A JOINT VENTURE FEASIBILITY STUDY ON THE ADJOINING BRAKFONTEIN PROPERTY WITH
NEW MINING CORPORATION LIMITED. THE COMPANY IS ALSO ACTIVELY PROSPECTING AND
EVALUATING ALLUVIAL DEPOSITS ON FOUR OTHER PROPERTIES. ALL OF THESE PROPERTIES
ARE LOCATED ON THE LOWER VAAL RIVER AND MIDDLE ORANGE RIVER DRAINAGES BETWEEN
DOUGLAS AND PRIESKA AND SOUTH WEST OF KIMBERLEY. PRODUCTION FOR A TEN-MONTH
PERIOD FROM THE SAXENDRIFT MINERAL LEASE AREA AMOUNTED TO 5 271 CARATS OF HIGH
QUALITY GEMSTONE DIAMONDS IN THE LAST FINANCIAL YEAR. ADDITIONAL REVENUE WAS
GENERATED FROM CONTRACTOR OPERATED TERRACES AT SAXENDRIFT. IN ADDITION, GEM HAS
A CURTAILED KIMBERLITE PROPERTY LOCATED NEAR WELKOM (SAMADA).
3. RATIONALE FOR THE MERGER

THE PROPOSED MERGER COMBINES THE CORE COMPETENCIES OF TRANS HEX AND GEM WHICH
WOULD FURTHER TRANS HEX'S OBJECTIVE OF BECOMING A SIGNIFICANT, INTERNATIONALLY
RECOGNISED PRODUCER OF HIGH VALUE DIAMONDS, WITH EXCITING EXPLORATION

POTENTIAL. THE MERGER WILL THEREFORE RESULT IN THE FOLLOWING COMPETITIVE
ADVANTAGES:

- THE COMBINATION OF HIGHLY EXPERIENCED AND COMPETENT MANAGEMENT RESOURCES,
FINANCIAL, TECHNICAL AND MARKETING STRENGTHS WHICH WILL BETTER POSITION THE
MERGED ENTITY TO TAKE ADVANTAGE OF OPPORTUNITIES GLOBALLY;

- THE OPTIMISATION OF THE STRUCTURE OF THE MERGED ENTITY'S ASSETS AND

OPERATIONS WITH THE OBJECTIVE OF A REDUCTION IN ITS COST BASE;

- THE MERGED ENTITY WILL PROVIDE THE CRITICAL MASS TO ASSIST

INTERNATIONALISATION AND ACCESS TO GLOBAL CAPITAL MARKETS; AND

- THE ACCELERATION OF EXPLORATION TO INCREASE RESERVES.
4. TERMS OF THE MERGER

TRANS HEX HAS PROPOSED THE SCHEME, THE IMPLEMENTATION OF WHICH WILL RESULT IN
GEM BEING CONSTITUTED A WHOLLY-OWNED SUBSIDIARY OF TRANS HEX. THE SCHEME
CONSIDERATION COMPRISES 9,7 NEW TRANS HEX SHARES FOR EVERY 100 GEM SHARES HELD
PLUS A CASH CONSIDERATION OF 16 CENTS PER GEM SHARE HELD ON THE OPERATIVE DATE
OF THE SCHEME ("THE SCHEME CONSIDERATION"). THE EFFECTIVE DATE OF THE MERGER IS
30 APRIL 2000.
5. FINANCIAL EFFECTS OF THE MERGER
5.1 ON A TRANS HEX SHAREHOLDER

                                       PRIOR          AFTER       INCREASE/
                                       TO THE SCHEME  THE SCHEME  (DECREASE)
                               NOTES   (CENTS)        (CENTS)     (%)

HEADLINE EARNINGS PER SHARE    1       96             85          (11)
NET ASSET VALUE PER SHARE      2       424            505         19
NOTES:

1. BASED ON THE AUDITED FINANCIAL STATEMENTS OF TRANS HEX AND GEM ADJUSTED (IN
THE CASE OF GEM) FOR DEPRECIATION ON A UNITS OF PRODUCTION METHOD BASED ON
ESTIMATED QUANTITIES OF PROVEN AND PROBABLE RESERVES TO TAKE ACCOUNT OF
DIFFERENCES IN ACCOUNTING POLICIES WITH REGARD TO DEPRECIATION, FOR THE YEARS
ENDED 31 MARCH 1999 AND 30 JUNE 1999 RESPECTIVELY, AND ON THE ASSUMPTION THAT
THE MERGER HAD BEEN EFFECTIVE FOR THE FULL YEAR ENDED 31 MARCH 1999.

2. BASED ON THE NET ASSET VALUE AT 31 MARCH 1999 AND ON THE ASSUMPTION THAT THE
MERGER HAD BEEN EFFECTIVE ON THAT DATE.
5.2 ON A GEM SHAREHOLDER

THE TABLE BELOW SETS OUT THE FINANCIAL EFFECTS OF THE SCHEME IN TERMS OF MARKET
VALUE, EARNINGS AND NET ASSET VALUE ON A SCHEME MEMBER HOLDING 100 GEM SHARES
WHO RECEIVES THE SCHEME CONSIDERATION:

                                      PRIOR          AFTER        INCREASE/
                                      TO THE SCHEME  THE SCHEME#  (DECREASE)
                              NOTES   (CENTS)        (CENTS)      (%)

MARKET VALUE PER SHARE        1       9 655          8 256        (14)
EARNINGS PER SHARE

    - ATTRIBUTABLE            2       410            824          101
NET ASSET VALUE PER

    SHARE AT 30 JUNE 1999     3       11 900         49 030       312

# THE MARKET VALUE IN THE "AFTER" COLUMN INCLUDES THE CASH COMPONENT OF 16
CENTS PER SHARE, IN TERMS OF THE SCHEME CONSIDERATION.
NOTES:

1. BASED ON THE TRADE WEIGHTED AVERAGE OF THE CLOSING MARKET PRICES ON THE JSE
FOR TRANS HEX AND GEM SHARES FOR THE 30 TRADING DAYS UP TO AND INCLUDING 18
NOVEMBER 1999, BEING THE DATE PRIOR TO THE FIRST JOINT CAUTIONARY ANNOUNCEMENT
PUBLISHED ON 19 NOVEMBER 1999.

2. BEING THE AUDITED EARNINGS PER GEM SHARE ADJUSTED FOR DEPRECIATION ON A
UNITS OF PRODUCTION METHOD BASED ON ESTIMATED QUANTITIES OF PROVEN AND PROBABLE
RESERVES TO TAKE ACCOUNT OF DIFFERENCES IN ACCOUNTING POLICIES WITH REGARD TO
DEPRECIATION, FOR THE YEAR ENDED 30 JUNE 1999, AND THE AUDITED EARNINGS PER
TRANS HEX SHARE FOR THE YEAR ENDED 31 MARCH 1999 ASSUMING THE MERGER HAD BEEN
EFFECTED. NO ACCOUNT HAS BEEN TAKEN OF THE INCOME THAT MAY BE EARNED BY A
SCHEME MEMBER ON THE CASH COMPONENT OF THE SCHEME CONSIDERATION.

3. BASED ON THE AUDITED NET ASSET VALUE PER GEM SHARE ADJUSTED FOR DEPRECIATION
ON A UNITS OF PRODUCTION METHOD BASED ON ESTIMATED QUANTITIES OF PROVEN AND
PROBABLE RESERVES, AT 30 JUNE 1999, AND THE AUDITED NET ASSET VALUE PER TRANS
HEX SHARE AT 31 MARCH 1999 ASSUMING THE MERGER HAD BEEN EFFECTED PLUS THE CASH
COMPONENT OF THE SCHEME CONSIDERATION.
6 CONDITIONS PRECEDENT TO THE MERGER

THE MERGER IS SUBJECT TO THE FULFILMENT OF, INTER ALIA, THE FOLLOWING
CONDITIONS PRECEDENT:

6.1 THE SCHEME BEING APPROVED AT THE SCHEME MEETING BY A MAJORITY REPRESENTING
NOT LESS THAN THREE-FOURTHS OF THE VOTES EXERCISABLE BY SCHEME MEMBERS PRESENT
AND VOTING EITHER IN PERSON OR BY PROXY AT THE SCHEME MEETING;
6.2 THE COURT SANCTIONING THE SCHEME;

6.3 THE ORDER OF COURT SANCTIONING THE SCHEME HAVING BEEN REGISTERED BY THE
REGISTRAR OF COMPANIES IN SOUTH AFRICA IN TERMS OF THE ACT;

6.4 THE SATISFACTORY COMPLETION OF A DUE DILIGENCE REVIEW; AND

6.5 CERTAIN REGULATORY APPROVALS HAVING BEEN OBTAINED, INCLUDING THE APPROVALS
OF THE JSE, THE SECURITIES REGULATION PANEL ("THE SRP") AND THE COMPETITION
COMMISSION.
7. THE STOCK EXCHANGE LISTINGS

SUBJECT TO THE FULFILMENT OF THE CONDITIONS PRECEDENT SET OUT IN PARAGRAPH 6
ABOVE, APPLICATION WILL BE MADE FOR:

- THE LISTING OF THE 9 161 082 TRANS HEX CONSIDERATION SHARES ON THE JSE AND
THE NAMIBIAN STOCK EXCHANGE; AND
- THE DELISTING OF GEM FROM THE JSE.
8. SCHEME MEETING

A SCHEME MEETING WILL BE CONVENED AS SOON AS PRACTICABLY POSSIBLE. A FURTHER
ANNOUNCEMENT SETTING OUT THE SALIENT DATES AND TIMES WILL BE PUBLISHED IN DUE
COURSE.
9. RECONSTITUTION OF THE BOARD

MR TOKYO SEXWALE AND ONE OF HIS COLLEAGUES FROM THE GEM BOARD WILL JOIN THE
BOARD OF DIRECTORS OF THE MERGED ENTITY. MR SEXWALE WILL BE APPOINTED DEPUTY
CHAIRMAN OF THE MERGED ENTITY.
10. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS

10.1 BOE MERCHANT BANK HAS ADVISED THE BOARD OF DIRECTORS OF GEM THAT IT HAS
CONSIDERED THE TERMS AND CONDITIONS OF THE SCHEME AND IS OF THE OPINION THAT
THE SCHEME IS FAIR AND REASONABLE TO SCHEME MEMBERS.

10.2 THE DIRECTORS OF GEM HAVE CONSIDERED THE TERMS OF THE SCHEME AND ARE
UNANIMOUSLY OF THE OPINION THAT THEY ARE FAIR AND REASONABLE TO SCHEME MEMBERS.
ACCORDINGLY, THE BOARD OF DIRECTORS OF GEM RECOMMENDS THAT SCHEME MEMBERS VOTE
IN FAVOUR OF THE SCHEME. THE DIRECTORS OF GEM, IN RESPECT OF THEIR OWN HOLDINGS
OF GEM SHARES, INTEND TO VOTE IN FAVOUR OF THE SCHEME AT THE SCHEME MEETING.
10.3 TRANS HEX'S INVESTMENT BANKERS HAVE CONFIRMED TO THE SATISFACTION OF THE
SRP THAT IT HAS SUFFICIENT RESOURCES TO HONOUR ITS COMMITMENT IN TERMS OF THE
SCHEME.
11. DOCUMENTATION

A DOCUMENT CONTAINING FULL DETAILS OF THE SCHEME AS WELL AS THE NOTICE OF THE
SCHEME MEETING, WHICH WILL BE SUBMITTED TO THE JSE AND THE SRP FOR APPROVAL
WILL BE POSTED TO THE GEM SHAREHOLDERS IN DUE COURSE.
12. FURTHER CAUTIONARY ANNOUNCEMENT

SHAREHOLDERS OF TRANS HEX AND GEM, ARE ADVISED TO CONTINUE EXERCISING CAUTION
WHEN DEALING IN THEIR SHARES UNTIL A FURTHER ANNOUNCEMENT IS MADE.
JOHANNESBURG
14 DECEMBER 1999
SPONSORING BROKER TO TRANS HEX IN SOUTH AFRICA
DEUTSCHE BANK SECURITIES (SA) (PTY) LTD
(REGISTRATION NUMBER 95/11798/07)
SPONSORING BROKER TO TRANS HEX IN NAMIBIA
JOLYON IRWIN
MEMBER OF THE NSX
IJG (PTY) LTD

MERCHANT BANK TO GEM AND INDEPENDENT ADVISER TO SCHEME MEMBERS
BOE MERCHANT BANK
A DIVISION OF BOE BANK LIMITED
CO REG NO. 51/00847/06
SPONSORING BROKER TO GEM
BOE SECURITIES (PTY) LTD
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
CO REG NO. 96/15589/07
ATTORNEYS TO TRANS HEX
EDWARD NATHAN & FRIEDLAND INC
(REGISTRATION NUMBER 77/00525/21)
ATTORNEYS TO THE MERGER AND THE SCHEME
BRINK COHEN LE ROUX & ROODT ING ATTORNEYS
(REGISTRATION NUMBER 93/04501/21)