Transaction to acquire the Kamferdam dumps from Blain Capital Solutions and appointment of Blain as contractor MIDDLE EAST DIAMOND RESOURCES LIMITED (formerly Sable Metals and Minerals Limited) (Incorporated in the Republic of South Africa) (Registration number 2001/006539/06) (JSE code: MED ISIN: ZAE000211876) (“MEDR” or the “Company”) TRANSACTION TO ACQUIRE THE KAMFERSDAM DUMPS FROM BLAIN CAPITAL SOLUTIONS (PTY) LTD AND APPOINTMENT OF BLAIN AS CONTRACTOR 1. INTRODUCTION Shareholders are referred to previous announcements in this regard. The proposed transaction previously envisaged has been materially renegotiated. Shareholders are advised that Sable Platinum Holdings (Pty) Ltd (“SPH”), a wholly owned subsidiary of MEDR, has entered into an agreement on 8 August 2016 to acquire the sale assets of Blain Capital Solutions (Pty) Ltd (“Blain”) (“the transaction”). 2. RATIONALE AND BACKGROUND FOR THE TRANSACTION MEDR has expressed its intention to acquire assets in the diamond mining sector. It has been negotiating with Blain since December 2015 for the acquisition of certain assets. 3. TERMS AND CONDITIONS OF THE TRANSACTION 3.1 In terms of the agreement SPH will acquire the sale assets of Blain, consisting of equipment and the residue stockpile in situ on the dumps situated at remaining Extent of Portion 4 of the Farm Roode Pan No. 70, Kimberley (“the Property”) owned by Kamfersdam Diamond Mining (Pty) Ltd, known as the Kamfersdam dumps. 3.2. The purchase price of R14 000 000 (fourteen million Rand) will be subject to reduction if the profit target of R3.45 million every 6 months for a period of 24 months after the effective date, achieved through a sale of diamonds, is not met. Diamonds are defined as unpolished diamonds as determined in the Diamond Act, no 56 of 1986, which are recovered by Blain from the Property. 3.2 The purchase price will be payable by the issue to Blain of 40 000 000 shares in MEDR at a price of 35 cents per share, as follows: 3.2.1 10 000 000 shares will be issued on each fulfilment of the profit target at 6 monthly intervals for a period of two years calculated from the effective date; 3.2.2 in the event that a profit target is not achieved, there shall be a pro rata reduction of the purchase price to be paid relative to the profit actually achieved. 3.3 Blain will be appointed to render certain services to SPH (“Services”), which will include the proper treatment of the residue stockpile for the purposes of recovering diamonds therefrom, the provision of all vehicles, plant, equipment and capital required for the mining, removal and treatment of the stockpile and rehabilitation. Blain will employ the necessary staff to render the Services. Blain will utilise such plant and equipment as may be necessary. All costs will be borne by Blain. Blain undertakes to rehabilitate all land worked by it in rendering the Services. Blain will take out and maintain the necessary insurance policies. 3.4 The purchase price received from the sale of diamonds shall be paid to SPH less Blain’s costs, which shall be paid to Blain. 3.5 Within 90 days of the termination of this agreement, Blain shall comply with its rehabilitation obligations, dismantle the plant and remove it and all equipment from site, remove all concrete foundations and other infrastructure, and level and rehabilitate the surface of the site on the Property. 3.6 The parties warranted and gave reciprocal undertakings in respect of conflict diamonds and the Kimberley process. In addition, Blain warranted that it holds all the necessary statutory authorisations for the removal of diamondiferous ores from the property and the exploitation thereof. 3.7 The transaction is subject to the condition precedent that Blain satisfies SPH that any and all amounts owing to Friedshelf 1425 (Pty) Limited, the erstwhile owner of the sale assets, have been paid. Should the condition not be fulfilled prior to the effective date, the agreement shall lapse if not extended by SPH for a period of no longer than 30 days. 3.8 The effective date will be 1 September 2016. 4. FINANCIAL INFORMATION IN RESPECT OF THE ACQUISITION The net asset value of the sale assets is approximately R19 million. The Kamfersdam dumps were not exploited recently and it is therefore not possible to attribute any profit figure to it. 5. CATEGORISATION OF THE TRANSACTION The transaction is a category 2 transaction and does not require shareholders’ approval. 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