Final Results

26 May 2015

DiamondCorp plc

AIM share code: DCP & JSE share code: DMC

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp", "the Group" or "the Company")

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

Highlights

· The net loss for the year was £3.25m (2013: loss of £2.61m). The loss includes administrative expenses of £1.60m (2013 £2.19m) which have fallen for the third year in a row as a result of careful attention to cost control.

· Cash on hand at 31 December 2014 was £2.53m (2013: £2.22m) and total assets rose from £23.28m to £32.41m.

· Development of the Upper K4 (UK4) mining block is on schedule for commencement of mining operations in H2 2015, several months ahead of the original development schedule.

· Underground core drilling of the UK4 block has delineated 2.6 million tonnes of K4 (high grade) kimberlite above the 370m level, an increase of more than 2 million tonnes over the original Lace geological model. The final resource statement will require grade data from the bulk testing currently scheduled to be completed by the end of Q2.

· Processing of K6 kimberlite recovered from the production level drives has commenced, including recovery of a 19.83 carat clear white gem diamond, being the largest gem diamond recovered from underground development so far and a 4.38 carat D Type IIA white. The recovery of a Type IIA diamond has value implications for the entire resource as it means Lace has the potential to produce large, very high value diamonds.

· The installation of the 400 tonnes per hour underground conveyor system which will bring ore to surface for the life of the mine is on schedule for commissioning ahead of the mining ramp-up.

· Delays resulting from industrial action combined with a 25% devaluation of the South African Rand since the Lace project finance was arranged resulted in the Company needing to secure additional working capital to complete the development of the UK4 mining block.

· Post year-end, the Company signed a term sheet with Acrux Resources, a South African resources financing group, for a royalty financing facility for the rand equivalent of US$7m (£4.5m), which would more than adequately cover the working capital requirement of between £1.8m in the Company's base case to £2.8m in the worst case. At the date of this report, the royalty financing facility is in its final stages of negotiation.

· Diamond recoveries from tailings for the year ended 31 December 2014 totalled 18,354 carats at a recovered grade of 5.96 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.

· Diamond sales for the year totalled 21,700 carats recovered from tailings at an average price of US$63 per carat, slightly ahead of budget. Income from diamonds sold has been credited to mine development as diamond recoveries are a result of fine tuning and testing of the processing plant ahead of kimberlite mining.

· The Lost Time Injury Frequency Rate (LTIFR) for 2014 was 0.72, slightly up on 0.55 in 2013, but still significantly below the average for mining operations in South Africa. Lace had two lost time injuries and 61,303 lost time injury free shifts during 2014.

A full version of the 2014 report and audited financial statements will shortly be posted to shareholders and available on the Company's website www.diamondcorp.plc.uk

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 216 1300

Euan Worthington, Chairman

Tel: +44 7753 862 097

UK Broker & Nomad

Panmure Gordon (UK) Limited

Dominic Morley/Adam James

Tel: +44 20 7886 2500

JSE Designated Advisor

Sasfin Capital (a division of Sasfin Bank Limited)Megan Young

Tel: +27 11 445 8068

SA Corporate Advisor

Qinisele Resources Proprietary Limited

Dennis Tucker / Andrew Brady

Tel: +27 11 883 6358

Letter from the Chairman

Dear Shareholder

This is a very exciting year for DiamondCorp as underground development progresses at the Lace Mine to extract high grade kimberlite from the UK4 Block in the coming months. We are all waiting in eager anticipation to see the diamonds which we believe will generate positive cashflow, and enable repayments for us all once the mine is in full commercial production.

It is now 10 years since DiamondCorp was formed to acquire the rights to the Lace Diamond Mine in the Free State of South Africa. Our first step was to secure two well established Black Empowerment partners in Shanduka Resources and Sphere Holdings which each own 13% of Lace Diamond Mine, our South African operating subsidiary and owner of 100% of the Lace Mine. Your company, DiamondCorp plc, through Soapstone Investments has arranged all the financing for the development of the Lace Project and is now owed ZAR 325,000,000 which will start accruing interest at SA Prime (9.25%) plus 2% when Lace Mine is in commercial production. As at 20 May 2015 this amounts to £17,015,707 compared to DiamondCorp's market capitalisation of £37,407,944.

Shanduka and Sphere have been influential shareholders in initially helping to secure the Mining Rights to Lace and negotiating with the relevant South African authorities. During last year's strike by workers belonging to the Association of Mineworkers and Construction Union (AMCU), our partners gave us full support on our refusal to agree to the appointment of two full time salaried shop stewards in the Lace workforce. The Board considered it was unrealistic and unnecessary for the AMCU members at Lace, totalling 157 out of a total of 254 employees to have such representation, particularly as they already had seven designated shop stewards to represent their members in any dispute. We stood firm and our AMCU members returned to work after the six week strike and wage negotiations began which resulted in a four year wage agreement.

The Lace workforce is not fully unionised, so underground operations at the mine were able to continue on a one shift basis as other employees and managers multi-tasked during this period. They were led by Paul Loudon, our Chief Executive Officer and Steve West, our Chief Operating Officer who both live on the mine and stayed throughout the strike. I would like to thank them all for their resilience and efforts.

I have visited Lace twice in the past few months and every time I go underground it reminds me what difficult work mining is. Development is a slow repetitive process of drilling, blasting and mucking out which is hard to illustrate in our regular update reports.

Diamond Market

Prices for rough diamonds were flat in 2014, with an average fall of around 7% in the final quarter as the reduced bank lending to the cutting and polishing sector bit into demand. Indications are that after a sluggish start to 2015, prices have recovered in the last few months and the market now has a more positive but not overly exuberant mood. However, we remain extremely optimistic for the future as global wealth growth supports demand at a time when global diamond production is forecast to peak.

After the world financial crisis of 2008, global output of gemstones, which had already been falling from a peak of over 175 million carats in 2005, dropped sharply to some 120 million carats in 2009. Production has since recovered and in 2014 reached an estimated 131 million carats. Further increases in supply are forecast in the next few years as mines such as Grib, Gahcho Kue, Liqhobong, Renard and of course Lace come on-stream while the world's largest mine Jwaneng raises output. Set against these new mines, output from major producers including Ekati, Diavik, Argyle and Marange are falling as they near the end of their lives or become sub-economic. All mineral resources have a finite life but the natural morphology of kimberlite pipes, usually carrot shaped, which may bottom out as thin feeders, means that at depth, the volume of ore per vertical metre falls. This explains why diamond resources are notably more finite than other minerals which occur in more homogenous orebodies. On the cost side, finding diamondiferous kimberlites is a very expensive business, mine operating costs increase as operations dig deeper and cutting and polishing stones takes much time and requires great skill. All these factors illustrate why diamonds are such a rare and valuable commodity.

I am often asked about the impact of synthetic diamonds on the market. These have been produced for the past 50 years but new Chemical Vapour Deposition Technology is now able to produce high quality stones. The market expects synthetics to add around 1.0 million carats suitable for use in jewellery manufacturing this year which is a tiny proportion of the mined gem quality diamonds. Producing large man made stones (+ 1 carat) is still expensive compared to mine production but no doubt technology will advance and costs fall, to help synthetics fill part of the growing mine supply deficit. Even when this level is reached, noted recently by one investment bank to be 10 - 15 years away, then I am not convinced that many men will be brave enough to palm off their girlfriends, fiancés, brides, wives or mistresses with synthetic goods.

On the demand side, after record global consumption of diamond jewellery amounting to US$79 billion in 2013 (De Beers, Sept 2014), demand is estimated to have hit another peak of some $81 billion last year. The US remains the largest consumer (now around 40%) of diamonds but China and India are the fastest growing markets. Jewellery and hence gem diamond demand is related closely to the growth of economic wealth and disposable incomes. It is therefore encouraging to note that a major investment bank, Credit Suisse (Global Wealth Report 2014), predicts total global wealth to rise 40% from US$263 trillion in 2014 to US$369 trillion in 2019 with increases of 37% in the US, 66% in China and 50% in India. China is expected to overtake Japan as the second wealthiest nation in 2019 and become the largest buyer of diamond jewellery ahead of the US by that year.

Both the flattening supply curve and the growing demand outlook point to a healthy outlook for diamond price increases in coming years.

Financing

Delays resulting from the industrial action combined with a 24% devaluation of the South African Rand since the Lace project finance was arranged, resulted in the Company needing to secure additional working capital to complete the development of the first mining block at Lace. The funding requirement ranges from £1.8 million in the Company's base case to £2.8 million in the worst case. Post balance sheet date, the Company signed a term sheet with Acrux Resources, a South African resources financing group, for a royalty financing facility for the rand equivalent of US$7 million (£4.5 million), which more than adequately covers the working capital requirement. At the date of this report, the royalty financing is in its final stages of completion.

Company Strategy

In the past, we have talked of looking for other diamond mine opportunities and have assessed numerous projects. As it has become apparent that there are few if any projects available that can offer the attractive financial returns we forecast for Lace, our efforts in the past year have been focused on bringing the mine into production.

We currently believe that it is in the best interests of all stakeholders to repay a proportion of outstanding debt and then to apply free cash flow to capital returns or share buy-backs before the accumulation of distributable reserves allows the payment of dividends. We expect this to increase the value of DiamondCorp and when opportunities arise we will be in a stronger position to add new operations if they reach our target thresholds. At the current annual plant capacity of 1.2 million tonnes, Lace has a resource down to a depth of 850 metres which will sustain a mine life of over 25 years. We believe it very likely that diamonds are present well below this level but we will not need to expend funds exploring such depths for many years. The presently identified constraint on production levels at the Lace Mine is the availability of water but with progressively developing technology and our large resource, there is a good possibility that in the future we could consider increasing mine output.

In Conclusion

As Lace nears the start of commercial production, I would like to thank you all for your patience over the past decade. It may seem a long time since we started this venture but a new kimberlite discovery would probably take around 15 years to bring into production and I believe it is very unlikely that an underground mine of similar size to Lace could be brought on-stream for under the US$70 million capital cost which we aim to achieve.

All diamond mines are different and have specific geological and product characteristics. The Lace kimberlites are unique in that they contain over 70% gem quality diamonds of which a small proportion are special lilac and pink stones.

As a company, I believe that we also have some differentiating characteristics that benefit shareholders. These include the rebuilding and maintenance of our own mining fleet, limited use of contractors, senior executives living on site, local finance and audit functions and a small London office performing in-house IR/PR activities. Together, these actions help to keep our capital and operating costs low.

Euan Worthington

Chairman

22 May 2015

Letter from the Chief Executive Officer

Dear Shareholder

Financial year 2014 was a year of significant progress for DiamondCorp as we moved towards our goal of diamond production from underground mining operations at the Lace Mine in the Free State of South Africa.

Highlights for the year included:

· Development of the Upper K4 (UK4) mining block which is on schedule for commencement of mining operations in H2 2015, several months ahead of the original development schedule.

· Underground core drilling has delineated 2.6 million tonnes of K4 (high grade) kimberlite above the 370m level, an increase of more than 2 million tonnes over the original Lace geological model.

· The drilling of the UK4 block provides the volume data required for an updated resource statement. The final resource statement will require grade data from the bulk testing currently scheduled to be completed by the end of Q2.

· Processing of K6 kimberlite recovered from the production level drives has commenced, including recovery of a 19.83 carat clear white gem diamond, being the largest gem diamond recovered from underground development so far, and a 4.38 carat D Type IIA white. The recovery of a Type IIA diamond has value implications for the entire resource as it means Lace has the potential to produce large, very high value diamonds.

· Installation of the 400 tonnes per hour underground conveyor system which will bring ore to surface for the life of the mine commenced and is on schedule for commissioning ahead of the mining ramp-up.

· The Company took delivery of a new Sandvik 421 drill rig required for longhole drilling on the production levels in the UK4 and 47L block caves.

· The additional water storage dam and surface drainage were constructed allowing sufficient water to be collected for 2015 processing requirements despite the third year of below average rainfall.

· Diamond recoveries from tailings for the year ended totalled 18,354 carats at a recovered grade of 5.96 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.

· Diamond sales for the year ended totalled 21,700 carats at an average price of US$63 per carat, slightly ahead of budget. Income from diamonds sold has been credited to mine development as this is incidental to the development and testing of the processing plant.

During 2014, a revised underground development schedule and budget was adopted which aimed to bring forward the ramp up of commercial production from underground kimberlite mining by six months. The main challenges to achieving this schedule and budget have been rising input costs, the more than 25% devaluation of the South African Rand against major currencies since budgets were planned in 2012, and a climate of industrial relations unrest in the South African mining industry. The former have been managed by careful attention to cost control, but the latter, regrettably, resulted in the mine suffering a six-week strike by members of the Association of Mineworkers and Construction Union in October and November.

However, a number of positives came out of the strike, including identification of underground workplace inefficiencies which were addressed when the workforce returned to work. As a consequence of these changes, a 15% improvement in development productivity has been achieved. Further, in February 2015, the Lace Mine signed a four-year wage agreement based around 8% annual increases in basic salary for most categories, along with a progressive lift in the lowest categories to ZAR 12,500 per month basic salary over the life of the agreement. This unprecedented long wage agreement will help provide industrial relations stability at the Lace mine during the critical mine start up years and demonstrates a solid maturing of relationships between the union and management.

Tunnel development costs to the year-end averaged ZAR 40,764 per month (and ZAR 38,961 per month as at end April 2015) against a revised budget of ZAR 37,000 per month. The over spend was the result of increased operating costs on the Company's underground mining fleet and delays resulting from the labour strike. The Company introduced a number maintenance and repair cost saving initiatives during the year, but these were largely offset by cost increases on spare parts resulting from the weaker South African Rand. As yet, the impact of international oil price falls has not been reflected in diesel costs in rand terms. The Company has not been affected by Eskom load shedding. Post year-end, VAT refunds are now being handled by the South African Revenue Service in a more timely manner and the overall mine development expenditure remains close to budget.

The Company is pleased to have taken delivery of its new Sandvik 421 longhole drill rig. This rig has the capacity to drill longholes up to 54m in length and 127mm in diameter and will be used to complete all the longhole drilling on the production levels in the UK4 and 47L block cave.

Workplace safety remains a priority for the Company. The Lost Time Injury Frequency Rate (LTIFR) for 2014 was 0.72, slightly up on 0.63 in 2013, but still significantly below the average for mining operations in South Africa. Lace had two lost time injuries and 61,303 lost time injury free shifts during 2014. Management aims for zero harm to its employees and targets a LTIFR of less than 0.5.*

Underground core drilling during the year delineated significant volumes of K4 (high grade) kimberlite above the 365m level. The drilling, bulk testing and release of an updated resource statement will take place by the end of Q2 2015. The Upper K4 block will be the first mining block at Lace, and will be mined at the rate of 30,000 tonnes per month, while the 47L block cave is established.

In the year ended 31 December 2014, the Company processed 308,047 tonnes of tailings. Diamond recoveries totalled 18,354carats at an average recovered grade of 5.96 cpht, compared with a budget recovered grade of 5 cpht. Tailings re-treatment processing stopped in September to allow the surface earth moving fleet to complete the construction of another 150,000 cubic metre surface process water storage dam in preparation for earlier than scheduled kimberlite mining. This activity was successfully completed in the dry winter months ahead of the summer rains. The construction of the new dam, plus additional surface drains has allowed the mine to capture all of the water required for 2015 kimberlite processing despite the current summer rains being the third year in a row with below average rainfall.

The Company's metallurgical consultants have commenced preliminary test work on the potential for installing a high volume optical and x-ray waste sorter ahead of the dense media separation plant. Such a unit could remove large volumes of internal waste from the kimberlite before processing. The K6 kimberlite contains up to 85% waste in places and the higher grade K4 kimberlite has up to 25% internal waste. Installation of a waste sorter has the potential to significantly reduce plant water and electricity consumption and could also allow the kimberlite to be processed faster than the current planned 220 tonnes per hour. If the test work is successful a unit could be installed before the mining ramp-up from the first block cave.

Diamond sales for the year ended 31 December 2014 totalled 21,700 carats for proceeds of $1,361,778. The average sales price was $63 per carat, slightly ahead of forecast for the year. Profit share on two diamonds which were beneficiated and the sale of fine diamonds added a further $58,544 to income for the year.

Short-term demand for rough diamonds continues to be soft in response to slower polished sales and tightening liquidity as a number of banks which finance the cutting and polishing sector continue to reduce their exposure to the sector. Longer-term, the outlook remains strong as world economies continue to recover.

The Company has not factored diamond price increases into its Lace project model since the 250 level bulk test diamonds were valued in 2012 at $160 per carat. Nonetheless, in light of the current market weakness, the Company now models the Lace project at $150 per carat. At the current rand-dollar exchange rate, this represents cash operating margins of 81% on the UK4 Block and 71% on the deposit overall.

In the next annual report, I look forward to reporting on the ramp up in production from the underground operations at Lace and the commencement of regular sales of diamonds recovered from kimberlite. As we move forward into positive cashflow, we will look to see how we can best maximise returns to our shareholders demonstrate the intrinsic value in the Lace operation.

Paul R Loudon

Chief Executive Officer

22 May 2015

* LTIFR is an industry standard calculation based on the number of lost time injuries multiplied by 200,000, divided by the number of lost time injuries multiplied by 9. PwC in their 2014 SA Mine Review show LTIFR in South African gold mines averaged 4.2, platinum 2.1, coal 1.2 and other commodities, including diamonds, 1.1.

Consolidated and Separate Income Statement

Consolidated and Separate Statement of Comprehensive Income

Note

Loss for the year

Other comprehensive expense:

Items that may be reclassified to profit or loss:

Exchange differences on translating foreign operations

Total comprehensive expense

Total comprehensive expense attributable to:

Owners of the parent Non-controlling interest

Consolidated and Separate Statement of Financial Position

Current Assets

Total Assets

Equity and Liabilities

Equity

Equity Attributable to Equity Holders of Parent

The financial statements on pages 25 to 73, of DiamondCorp plc, registered number 5400982, were approved by the Board of Directors and authorised for issue on 22 May 2015 and signed on behalf of the Board of Directors.

EA Worthington

Director

Consolidated and Separate Statement of Changes in Equity

Consolidated and Separate Statement of Changes in Equity

Consolidated and Separate Statement of Cash Flows

Cash flows from investing activities

Loans advanced to group companies

Outflow relating to other non-current asset

Interest Income

Net cash used in investing activities

Cash flows from financing activities

Net cash generated from financing activities

Total cash movement for the year

Cash at the beginning of the year

Effect of exchange rate movement on cash balances

Basis of Preparation and Accounting Policies

1. General information

DiamondCorp plc is a Company incorporated in England and Wales under the Companies Act 2006 and incorporated as an external company in South Africa under the Companies Act No 71 of 2008. The address of the registered office is given on page 2.

These financial statements are presented in pounds sterling because that is the functional currency of the parent Company as well as presentation currency of the Group. Foreign operations are included in accordance with the policies set out in this note.

These accounting policies are consistent with the previous period.

Statement of compliance

The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the IASB and in accordance with IFRS interpretations committee (IFRS IC) interpretations. The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

Basis of preparation

The financial statements have been prepared in accordance with the UK Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value, as explained in the accounting policies below. Historical cost is generally based on fair value of the consideration given in exchange for assets. The financial statements have been prepared on a going concern basis. The principal accounting policies adopted are set out below.

1.1 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating-decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.

The basis of segmental reporting has been set out in note 3 of the financial statements.

1.2 Consolidation

Basis of consolidation

The audited consolidated and separate financial statements incorporate the audited consolidated and separate financial statements of the group and all investees which are controlled by the Company (its subsidiaries).

The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the investor's returns.

The results of subsidiaries are included in the audited consolidated and separate financial statements from the effective date of acquisition to the effective date of disposal.

Adjustments are made when necessary to the audited consolidated and separate financial statements of subsidiaries to bring their accounting policies in line with those of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.

Changes in the Group's ownership interests in existing subsidiaries

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition of the financial asset in accordance with IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to the Group's cash-generating unit expected to benefit from the synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is translated to the presentation currency of the group at the end of each reporting period with the adjustment recognised in equity through other comprehensive income.

1.3 Significant judgments and sources of estimation uncertainty

In preparing the audited consolidated and separate financial statements, management is required to make estimates and assumptions that affect the amounts represented in the audited consolidated and separate financial statements and related disclosures. Use of available information and the application of judgment is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the audited consolidated and separate financial statements. Significant judgments include:

Impairment testing

Impairment of goodwill - Judgment is applied in determining appropriate assumptions to be used in testing for and calculating impairment. See policy regarding Goodwill.

Provisions

Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 18 - Provisions - of the financial statements.

Provisions are recognised when:

the group has a present obligation as a result of a past event;

it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

Valuations

* Valuation of inventory - Judgment was applied in calculating the initial carrying value of inventory and judgment continues to be applied in assessing the net realisable value. See accounting policy regarding Inventories.

* Valuation of warrants, share options and ordinary shares issued as consideration - Judgment is applied in determining appropriate assumptions to be used in calculating the fair value of warrants, shares and share options issued. See notes 14 and 15 of the financial statements.

* Valuation of the bifurcated embedded derivative in the convertible bonds - Judgment is applied in determining appropriate assumptions to be used in calculating the fair value of convertible bonds. See note 16 of the financial statements.

Going concern

Judgment is applied in assessing the likelihood and timing of future cash flows associated with the Group's activities. Judgment is also applied in assessing the likelihood of receiving future funding.

1.4 Property, plant and equipment

Initial recognition

The cost of an item of property, plant and equipment is recognised as an asset when:

it is probable that future economic benefits associated with the item will flow to the company; and the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, service it, the initial estimate of the rehabilitation obligation, and for qualifying assets (where relevant), borrowing costs. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The purchase price or construction cost is the aggregate amount paid and the fair value any other consideration given to acquire the asset. The capitalised value of a finance lease is also included within property, plant and equipment.

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve development.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Upon completion of mine construction, the assets are transferred into "Property, plant and equipment". Items of property, plant and equipment and mining properties are stated at cost, less accumulated depreciation and accumulated impairment losses.

Mines under construction

Upon transfer of "Exploration and evaluation assets" into "Construction in progress" within "Property, plant and equipment", all subsequent expenditure on the construction, installation or completion of infrastructure facilities is capitalised within "Construction in progress". Development expenditure is net of proceeds from the incidental sale of diamonds extracted during the development phase. After production starts, all assets included in "Construction in progress" are transferred to "Mining properties" within "Property, plant and equipment".

Depreciation/amortisation

Mining properties are depreciated/amortised on a unit-of-production basis over the economically recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case the straight-line method is applied. Only proven and probable reserves are included in the unit of production calculation.

Other plant and equipment such as mobile mine equipment is generally depreciated on a straight-line basis over their estimated useful lives to their residual values.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Land N/A

Buildings 20 years

Plant and machinery 5 - 20 years

Mining rights 25 years (life of mine)

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Assets which the (company/group) holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.

Major maintenance and repairs

Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it is probable that future economic benefits associated with the item will flow to the Group through an extended life, the expenditure is capitalised.

Where part of the asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the replaced asset(s).

1.5 Financial liabilities / assets

Initial recognition and measurement

Financial liabilities are classified as either financial liabilities at fair value through profit or loss ("at FVTPL") or 'other financial liabilities'.

Other financial liabilities

Other liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

A financial liability is classified as held for trading if:

it has been incurred principally for the purpose of repurchasing it in the near term; or

on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss.