Pinnacle South Africa operations

Pinnacle Resources, Inc. had received an encouraging report from Chris Wilson, operator of the Company’s wholly owned South African subsidiary, Diamonaire.

The Diamonaire crew, utilizing a pair of newly designed Aqua-Tracks, over a four day period in February, uncovered and produced approximately 500 tons of gravel from the ocean floor underlying the surf zone at Bethel Bay located on the west coast of South Africa.

Ocean diamonds have been commercially recovered from the ocean floor underlying the deeper, calmer portions of the ocean having collected the discharge of rivers that over geologic time drained the inland diamond fields. The Aqua-Track mining method is a patented innovation that can recover diamonds from the previously inaccessible surf zone.

In March the mined gravel was delivered to concession owner Transhex for sorting at their De Punt processing plant for recovery of diamonds. The total yield was a spectacular 1,175 carats of gem-stone quality diamonds. This parcel of diamonds has been sent off for sizing, grading, and valuation. Management estimates that Diamonaire will realize a minimum of US$200,000 from its 55% cut of the gross selling price at the April diamond auction. Transhex, which owns the concession and is responsible for marketing the stones, receives 45 percent of the sales price. Transhex has advanced the Company Rand 600,000 (US$75,000) to cover Diamonaire’s operating expenses until after the diamonds are sold at auction.

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