Mountain Lake - Etruscan Diamonds

Etruscan Diamonds Limited

Current Status

Etruscan Diamonds Ltd. (“EDL”) recently reported diamond recoveries of 5,465 carats from 209,231 cubic meters (m³) of gravel with an average rough tender value of US$613 per carat, aggregating US$3,350,000 for the period December 2007 to May 2008. The US$613 per carat price is well in excess of the US$466 per carat value ascribed in the latest National Instrument 43-101 (“NI 43-101”) compliant resource estimate for the Blue Gum Project and confirm the significantly higher grades and value of diamonds in the deeper gravel packages.

The latest independent resource update, estimates that the Blue Gum Project contains 20,500,000 cubic meters (m³) of indicated diamond resource and 17,000,000 m³ of inferred diamond resource.

EDL recommenced mining at Tirisano in December 2007 and cost of production figures during this transition phase to full production have yet to be determined.

Mining Operations

The Tirisano Mine DMS (dense media separation) plant is rated to treat 40,000 m³ of gravel per month. EDL has also installed four 16 foot pan plants, which will add an additional 60,000 m³ per month capacity to the Tirisano operations. The 100,000 m³ per month capacity from the two processing facilities is anticipated to recover over 2,500 carats per month.

The ramp up at the Tirisano DMS plant and the new pan plants continued during the second quarter and the facility is targeted to achieve the forecast production rate of 100,000 cubic meters per month in the third quarter of 2008. Pre-screening capacity during the second quarter was limited to 1,000 cubic meters per day which limited the pan plant throughput. The installation of a larger pre-screening unit is now nearing completion and will improve plant throughput by increasing pre-screening capacity from 1,000 cubic meters per day to 10,000 cubic meters per day.

Ownership

Mountain Lake owns 16.2% (5,250,000 shares) of Etruscan Diamonds, Etruscan Resources Inc. owns 53.7% and various third parties own the remaining 30.1%.

Location & Background

The Ventersdorp Alluvial Diamond District is located approximately 150 kilometers (kms) west of Johannesburg and covers over 5,000 square kms. The area has never been commercially exploited on a large scale basis.

Over the past six years, EDL has been acquiring strategic properties (covering over 2,100 square kms throughout the District and presently has 1 active mining permit and 13 exploration permits, with applications for 2 additional exploration permits pending.

EDL's efforts to prioritize its land holdings have been assisted by the results of a 4,000 square kms airborne gravity survey. The survey identified a number of prospective sinkhole features that are known to be associated with diamondiferous gravels in the Ventersdorp District.

Geology

Alluvial diamonds in the Ventersdorp District are found in diamondiferous gravel runs related to palaeo-drainage systems which drained generally from north to south. Many gravel runs are covered by reddish alluvial sandy soil, mainly derived from weathering and erosion of the dolomites. The gravel deposits extend for distances in excess of 12 kms with widths up to 1,000 meters (m).

The alluvial diamonds from the Ventersdorp District typically average one carat in size. Alluvial diamonds, unlike the majority of diamonds recovered from kimberlite pipes, retain both their quality and size resulting in a high percentage of gem quality stones. The diamonds contained in kimberlites are typically smaller stones ranging from 0.05 to 0.5 a carat with a high percentage of industrial grade diamonds.

Blue Gum Project - Status of Resources

The independent resource update, estimates that the Blue Gum Diamond Project contains 20,500,000 m³ of indicated diamond resource and 17,000,000 m³ of inferred diamond resource.

Volume calculations were based on 2,305 boreholes which have been drilled on the property, totalling 51,542 meters. The deepest drilling indicates that the lower gravels extend down at least to 117m (without intersecting bedrock). Geophysical interpretation, however, indicates that final depths of the sinkholes may be in excess of 120m and, potentially, up to 200m in places.

Potential

Kevin MacNeill, President of Etruscan Diamonds Limited., recently stated:

“We are pleased with the way operations are currently ramping up at the Blue Gum Project. We are looking forward to completing the pre-feasibility study which will lay the groundwork for expanding our present processing facilities from a 100,000 cubic meter per month capacity to 260,000 cubic meters per month.

However, what is most exciting to me about the Blue Gum Project is the potential for additional resource beyond that identified in the National Instrument 43-101 Report prepared in January of this year by Dr. Tania Marshall of Explorations Unlimited. As Dr. Marshall states in her report, a large area of exploration potential exists on the Blue Gum Project beyond the resource that has been identified to date. This includes the gravels below and adjacent to the existing defined resource as well as the gravels located in other sink holes located on the Blue Gum property. And these gravel bearing sink hole features are not limited to the Blue Gum property. We have already identified sink hole features on other properties which appear to be larger in size than the current sink holes being mined on Blue Gum. Over the coming months we will continue to explore and drill these sink hole features to determine the size of the gravel content.”

NI 43-101 Blue Gum Project Technical Report