Legal, contractual and factual support

1. Entities providing extraction and supply for the TANZANITER project

The TANZANITER project involves, among others, the CASCADE, AMODORIA and GemCode groups. All of these groups of companies are co-owned by the Mull family, which was at the origin of industrial tanzanite mining. Abudul Hakim Rahim Mulla was for 10 years the key person in Tanzanite One Limited, the company that exclusively carried out the industrial deep mining of tanzanite in the largest mining block C, which is currently already mined. During A. H. R. Mulla's tenure on the of Tanzanite One heads, the company was successfully listed on the London Stock Exchange.

2. Merelani Mining Area (Arusha region, Tanzania)

The Merelani tanzanite mining area is located on the western slopes of Mount Lelatema (Figure 1). The CASCADE Group has secured the rights associated with tanzanite mining for the TANZANITER project through licences in the Merelani mining area. The mining area covers a total area of approximately 8 hectares and is only accessible by tarmac road from Arusha. This road passes by the Kilimanjaro International Airport (KIA). The graphitic structures of the Mozambique metamorphic zone are the only host rock for tanzanite among the other metamorphosed rocks in the area. In other words, tanzanite is found only in the Meralani mining area.

The Merelani mining area is divided into 6 mining blocks. Two of the mining blocks (A" and D") are not yet mined and are intended as a future reserve after the depletion of blocks A, B, D (Figure 1).

Figure 1

3. Mining licenses

The Mererani mining area is state-owned. The Tanzanian Ministry of Energy and Mineral Resources issues mining licences. The land on which the licences permit mining is leased by the miners and the leases are transferable (among licensed miners).

Mining licenses are generally issued to corporate miners (Mining Licenses), small-scale mining licenses for open pit mining (Primary Mining Licenses) and prospecting licenses to determine the possibility of future expansion of mining (Prospecting Licenses) (Figure 2).

Only a Tanzanian company with a minimum 16% state equity participation can be a mining company in terms of a Mining Licence. This type of licence allows the miner to undertake industrial (underground) mining.

Only a Tanzanian citizen or a company owned 100% by individuals - Tanzanian citizens - can be a mining company under a Primary mining licence.

For this reason, corporate miners in Block D (and A in the future) have secured the rights to carry out physical mining by "transferring" them from the direct licensees through a contractual relationship - the Mining and Technical Services Agreement (MTSA) - which defines the mutual rights and obligations between the licensees and the organisations that carry out the actual mining.

Figure 2

4. Mining within individual mining blocks

There is no physical mining on the A block yet. The mining licence is held by Kilimanjaro Mines Limited. The mining right is reserved by option to the CASCADE group, which is participating in the TANZANITER project (Figure 3 on the next page).

In mining block B, open-pit mining is carried out by several dozen artisanal miners under Primary mining licences. These artisanal miners are not authorised to use industrial equipment that allows deep mining and therefore only extract from the overburden. Tanzanite raw material extracted in this way, whose jewellery use is mostly limited to beads, is not usable for the TANZANITER project.

Mining Block C (formerly Tanzanite One) has already been mined and only the local (mostly female) community is manually sifting the tailings piles. During such sifting, (with a few exceptions) only “beads” tanzanites are found. Therefore, even the tanzanite raw material from Block C is not usable for the TANZANITER project.

In mining block D, deep industrial mining is being carried out on the basis of stacked Primary mining licences and mining licenses. The CASCADE Group has secured the majority of the primary mining licences in Block D for the TANZANITER project (Figure 3).

5. Contract mining on the TANZANITER project side

The holder of the mining licence must always be a Tanzanian entity. In the case of the TANZANITER project, the mining rights on Block D are secured by the CASCADE group through the holder of the stapled primary licences, Glitter Gems Limited, which is 100% owned by the Mulla family. Going forward, the mining rights for the TANZANITER project on Mining Block A are secured by the CASCADE group through an option to the mining licensee Kilimanjaro Mines Limited.

The actual mining may also be carried out by a corporate entity with foreign participation, under a Mining Technical Services Agreement (MTSA) with the Tanzanian licensee.

In the case of the TANZANITER Project, the entity authorised to mine under the MTSA is CASCADE GROUP Limited, which entered into a Mining Technical Services Agreement - MTSA with the primary mining licensees Glitter Gems Limited and Kilimanjaro Mines Limited on 22 November 2019.

6. Contracting the supply of raw tanzanite for the TANZANITER project

For the TANZANITER project, it is important to secure a sufficient quantity of high-quality tanzanite raw material. The preferential right to the extracted raw material for the TANZANITER project is guaranteed through the GemCode and CASCADE groups in a Supply Agreement. In this agreement, CASCADE Group Limited has committed to supplying gem-quality raw tanzanite from mining blocks D (and, in the event of mining in block A). The supply of gem-quality raw tanzanite is contracted to meet the requirements of GemCode a.s. up to a maximum of 500 kg per year, from January 1, 2022, to December 31, 2026, with a delayed effective date of 2 years.

The agreed supply of raw tanzanite can be extended for an additional period of up to 6 years based on an option in favor of GemCode a.s., specifically for the TANZANITER project. This means that the supplies are currently secured until December 31, 2034. CASCADE Group Limited, in this agreement, has committed to ensuring that the mining operations are fully compliant with all legal requirements and meet high international standards for occupational safety and environmental protection.

7. Estimated volume of own production on the CASCADE side

This year, CASCADE Group presented a mining plan to its shareholders and the state supervisory authority (the Ministry of Energy and Natural Resources), which envisages the extraction of jewellery-grade tanzanite at a rate of 1.6 million carats per year (i.e. approximately 320 kg) over the next five years.

This mining plan is consistent with both CASCADE's contractual commitment to supply raw tanzanite to GemCode for the TANZANITER project and GemCode's strategic option to acquire up to 500 kg of jewellery-grade tanzanite annually from mining on Block D.

As a result of the above, GemCode has acquired effective control over the mining of almost all jewellery-grade tanzanite from Block D for the TANZANITER project for the years 2024 to 2034. Jewellery-grade tanzanite is mostly mined from Block D.

Documents on legal, contractual and factual support of the TANZANITER project are available for registered business partners of the TANZANITER project by prior arrangement at the legal department of GemCode a.s.