Arafura Pearls Holdings Limited2008 AGMCEO Presentation

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DisclaimerThis presentation has been prepared by Arafura Pearls Holdings Limited (APB) and is supplied on the following conditions which are expressly accepted and agreed to by each interested party (Recipient).

The information in this presentation is not financial product advice and has been prepared without taking into account the objectives, financial situation or needs of any particular person.

This presentation is being provided to the Recipient as a person to whom a disclosure document is not required to be given under chapter 6D of the Corporations Act 2001, and in receiving a copy of this presentation the Recipient warrants that it is such a person. This presentation does not purport to contain all of the information that may be required to evaluate APB and the Recipient should conduct their own independent review, investigations and analysis of APB and of the information contained or referred to in this presentation.

None of APB or their representatives and their respective employees or officers (collectively, the Beneficiaries) make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained in this presentation or subsequently provided to the Recipient or its advisers by any other of the Beneficiaries, including without limitation, any historical financial information, the estimates and projections and any other financial information derived there from, and nothing contained in this presentation is, or shall be relied upon, as a promise or representation, whether as to the past or the future. Past performance is not a reliable indicator of future performance. The information in this presentation has not been the subject of complete due diligence nor shall all such information been the subject of proper verification by the Beneficiaries.Except insofar as liability under any law cannot be excluded, the Beneficiaries shall have no responsibility arising in respect of the information contained in this presentation or subsequently provided by them or in any other way for errors or omissions (including responsibility to any person by reason of negligence).

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Company overview

� Arafura Pearls Holdings Limited (“Arafura”) is an Australian South Sea Pearl producer with a farm/hatchery base in Arnhem Land (Northern Territory) and farm at Beagle Bay in Western Australia

� The company was founded in 1998 and completed its first developmental pearl harvest in 2001

� In 2001, Arafura converted to a public unlisted entity

� Listed on the ASX in December 2006 (ASX: APB)

� The IPO was fully subscribed and raised $4 mill at $0.25

� Arafura is currently in an expansionary phase, after completing a 7-8 year development phaseF

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Company overview

� Arafura’s original quota was 40,0000 shells, which has been increased to 235,000 through lease and acquisition over the past 3 years

� The company has acquired 2 neighbouring farms and entered into a joint venture with another pearling operator in the past 3 years

� As a result of the increase in quota, Arafura is now the largest pearl farmer in the Northern Territory and the 2nd largest in Australia by quota. Arafura controls approximately 20% of Australia’s current shell quota

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Company overview

� With lead times, production numbers will ramp up over coming years towards full production of 300,000 (including re-ops) pearls year in year out on current quota

� Watershed harvest expected next year in Sept 2009 of 100,000 pieces – Arafura expects to be cash flow positive from underlying operations from this point onwards

Part of Arafura’s2007 pearl harvest

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Corporate overview

� To fund operations, Arafura has raised approximately $20 million through MIS arrangements over the past 3 years� non dilutionary method of funding working capital for expansion� effectively “share farming”

� Arafura has spent approximately $55 - $60 million to date on establishing operations and developing the pearling project

� NPAT for FY2008 was $10.9 million, a significant improvement on the FY2007 NPAT of $4.5m

� Net assets in FY2008 are $46.5 million, compared to the FY2007 net assets of $33.6 million

� Arafura maintains low levels of gearing (plant & equipment finance, convertible notes and small bank facility)F

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Production process

Year 0Hatchery

Year 2Seeding

under quota

Year 41st Harvest& reseeds

Year 62nd Harvest

Years 0 – 2 Hatchery produce shell, grown out shell in ocean

Year 2 Seed shell (June – Sept) under quota system

Years 2 – 4 Shell husbandry

Years 4 - 5 1st Pearl Harvest (July – August)

Oysters which produce commercial pearl are re-seeded

Income from 1st harvest sales

Years 6 – 7 2nd Pearl Harvest (July – August)

Income from 2nd harvest sales

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Production process

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Production Profile

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2006 2007 2008 2009 (est) Full production

Quota available

Pearls seeded

Pearls harvested

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Sales & Marketing

WholesaleRetail

(Jewellery)Farmgate

Farm grading Arafura’s harvest

� Pearls are distributed on a wholesale basis, via auction and private negotiation

� Primary use for pearls is in jewellery - strands, necklaces, earrings and rings

� Main distributors for Australian production is Paspaley and Pearlautore� Arafura has a sales and distribution relationship with Pearlautore� Historically, Japan been largest export consumer of Australian pearls� Significant emerging markets are also participating in the export

volume, including China, India, Dubai and Eastern Europe

Mark up 3 – 4x

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Summary financials

Summary profit and loss

$ million Actual

Year end 30 June 6/2006 6/2007 6/2008

Revenue 4.5 8.6 6.9

EBITDA 3.0 5.4 16.2

EBIT 2.3 4.7 15.1

NPAT 2.0 4.5 10.9

Capex spend 0.7 1.1 1.4

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Australian Industry

� Competitive advantages

� Size & colour of product, from the Australian Pinctada maxima shell

� Pristine marine environment of Northern Australia

� Ability to re-operate shell

� Access to infrastructure and skilled workforce

� Stable political environment

� Australian South Sea pearling industry produces the world’s largest, best quality & most valuable cultured pearls

� Australian product sits alone at top of world production value pyramid

Arafura’s land base in ElizabethBay, North East Arnhem Land, NT

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Australian Industry

� The Australian industry accounts for less than 1% of the world’s volume of product, but 30% of world production by value

� Pearls are the 2nd largest aquaculture product in Aust by export value, approximately A$300 million pa (ABARE 2007)

� Industry & production is restricted by a quota system

� Paspaley (approx 55%) and Arafura (approx 20%) now control majority of the Australian quota

� The industry has historically been dominated by large, extremely wealthy private groups

Pearl being harvested in 2007

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Barriers to entry

� Strict quota system (restriction on production) for production of pearls in Australia

� Significant lead time (6-8 years) to establish hatchery operation and pearl production

� Lack of available sites within Australia

� Requirement for highly specialized farm management

� Capital intensive businessFor

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Risks

� Environment� Pollution is a risk which can have a detrimental impact on oyster mortality, pearl size and quality

� Arafura’s pearl farms are in very remote/isolated and vast areas minimising this risk

� Weather� Pearl farms are located in tropical areas that can experience cyclonic and other storm activity

� Arafura has farm procedures in place to mitigate this risk and also shell insurance covering this risk

� Commodity Prices� Current wholesale commodity prices for pearls are coming off historically low levels

� More upside than downside

� Currency Prices� Wholesale pearl prices denominated in Yen, Aus/Yen cross rate� Recently moved significantly in producers favour� Arafura will look at hedging as production increases

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www.arafurapearls.com.au

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