Final Results

2nd Oct 2006 07:02

Dwyka Diamonds Limited02 October 2006 Dwyka Diamonds Limited Income Statements Dwyka Diamonds Limited2 October 2006 Dwyka Diamonds Limited ("Dwyka" or "the Company")(AIM/ASX:DWY) Annual accounts for year ended 30 June 2006 HIGHLIGHTS * Increased revenues to $8,5 million from $5.8 million* First diamonds extracted from De Beers Tailings plant, SA* First diamond sales from hard rock diamond projects Newlands and Blaauwsbosh, SA* Five revenue producing assets established* Exploration agreement signed with De Beers, Tanzania* Bosele exploration project to be fast tracked following additional funding* Adrian Griffin appointed as CEO- 30 years of exploration, development and operational experience within the mining industry Commenting today Melissa Sturgess, Chairman, of Dwyka Diamonds said: "This is the third year in a row we have enhanced revenues and I am extremely pleased with the successful bedding down of the three additional production assets brought into the company over the period. Our skill at developing and operating extraction projects has allowed Dwyka to build revenues and form partnerships with industry majors such as De Beers. In addition to building value from existing assets over the course of next year we will be looking at the possibility of engaging in new joint ventures that will results in near-term cashflow." Please find attached the Chairman's statement and financial results accompanying this highlights page. The company's annual report and accounts will be distributed to shareholders in late October and will be available on our website shortly. For further information please contact: In Australia: In United Kingdom:-------------------------- -------------------------Melissa Sturgess Laurence Read/ Leesa Peters-------------------------- -------------------------Dwyka Diamonds Limited Conduit PR-------------------------- -------------------------(+618) 9324 2955 +44 (0)20 7429 6605 +44 (0)7979 955 923 Or visit: http://www.dwykadiamonds.com DWYKA DIAMONDS LIMITED INCOME STATEMENTS Chairman's Statement This financial year has seen Dwyka bring on line its fifth revenue producingasset whilst continuing to progress our exploration portfolio. In terms ofDwyka's growth the commencement of operations at the De Beers Tailingretreatment project in Kimberly is significant. With the first diamondsextracted from the plant in July of this year the project is underpinned by twokey imperatives; in-house ability to develop projects into production and theability to secure joint venture agreements with industry majors. The tailings plant, now running at 50,000 tonnes, was not the only project to bebrought into production during the period. The hard rock diamond projectsNewlands and Blaausbosh saw their diamond first sales in October 2005. The rapidpace of development of these projects has been realised through the expertise ofour team and a regional focus. Concentrating our attention on producing assetswithin South Africa has seen clear cost and infrastructure benefits at all fiveof our revenue generating projects and gives our exploration teams a solid basefrom which to pursue our earlier stage assets. Success at our four diamond extraction projects has also been complemented bythe continued strong performance of the Company's Industrial Division supplyingbuilding products to the South African construction industry. In addition to the success in securing the De Beers tailings project our ongoing relationship with industry majors has reaped benefits within in our exploration portfolio. During the year we signed a new agreement with De Beers to acquire and undertake exploration on two diamondiferous kimberlite pipes in Tanzania. Our exploration and development activities have been substantially strengthened with the appointment of Adrian Griffin as CEO in December of last year. Adrian has spent 30 years in the mining industry with responsibilities including exploration, feasibility, financing and development of a wide range of commodities. His exposure includes professional involvement in Africa, Asia, Eastern Europe, Australia and Antarctica. He has been instrumental in the development of operations exploring for and producing a range of commodities which include gemstones, iron ore, base metals, mineral sands, platinum group metals and gold. Over the next twelve months we shall continue to aggressively progress Dwyka's exploration projects and look to optimize production from our portfolio of revenue producing assets. The management of Dwyka is also currently looking at ways in which we can bring our expertise in successfully operating mines to bear on new projects in South Africa and thus secure further cashflow for the Company. The Dwyka team is a cohesive and committed group of professionals and I thank them for their continued and unwavering commitment. M J SturgessChairman DWYKA DIAMONDS LIMITED INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Notes Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Revenue 5 7,402 5,164 - -Cost of sales 6 (5,093) (3,922) - - ______________________________________ Gross profit 2,309 1,242 - - Other revenue 5 1,068 628 906 1,274 Administration 6 (4,988) (5,218) (2,825) (2,901)Impairment of assets 6 (3) (212) (4,400) (2,276)Impairment of exploration, (2,130) (580) - (552)evaluation and miningpropertiesFinance costs (38) (8) (7) - ______________________________________ Net Loss before income tax (3,782) (4,148) (6,326) (4,455)expense Income tax benefit 7 168 - 28 - ______________________________________ Net Loss after income tax (3,614) (4,148) (6,298) (4,455)expense Net profit attributable to 67 - - -minority interest ______________________________________ Net Loss attributable to (3,681) (4,148) (6,298) (4,455)members of Dwyka DiamondsLimited ______________________________________ Cents Cents Basic loss per share 37 (4.4) (5.5)Diluted loss per share 37 (4.4) (5.5) The above income statements should be read in conjunction with the accompanyingnotes. DWYKA DIAMONDS LIMITED BALANCE SHEETS AS AT 30 JUNE 2006 Notes Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000ASSETSCurrent assets Cash and cash equivalents 8 6,286 9,582 6,051 7,270Trade and other receivables 9 977 1,003 56 319Inventories 10 484 542 - - ______________________________________ Total current assets 7,747 11,127 6,107 7,589 ______________________________________ Non-current assets Receivables 11 4,536 1,804 12,681 6,313Other financial assets 13 103 76 103 2,546Property, plant and 14 3,597 1,773 139 147equipmentExploration, evaluation and 8,709 1,092 - -mining properties 15Other 16 308 320 - - _______________________________________ Total non-current assets 17,253 5,065 12,923 9,006 _______________________________________ Total assets 25,000 16,192 19,030 16,595 _______________________________________ LIABILITIESCurrent liabilities Trade and other payables 18 1,649 1,101 257 284Provisions 19 249 425 5 3Borrowings 20 76 - - - _______________________________________ Total current liabilities 1,974 1,526 262 287 _______________________________________ Non-current liabilities Payables 21 - - - 710Provisions 22 305 97 - -Borrowings 23 2,611 - 2,183 -Deferred tax liability 24 1,601 - - - _______________________________________ Total non-current 4,517 97 2,183 710liabilities _______________________________________ Total liabilities 6,491 1,623 2,445 997 _______________________________________ Net assets 18,509 14,569 16,585 15,598 ======================================= EQUITY Contributed equity 25 56,912 50,726 56,912 50,726Reserves 26 2,217 913 1,535 519Accumulated losses 26 (40,669) (37,070) (41,863) (35,647) _______________________________________ Parent entity interest 18,460 14,569 16,584 15,598 _______________________________________ Minority interest 27 49 - - - _______________________________________ Total equity 18,509 14,569 16,584 15,598 ======================================= The above balance sheets should be read in conjunction with the accompanyingnotes. DWYKA DIAMONDS LIMITED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006 Notes Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Total equity at thebeginning of the financialyear 14,569 7,603 15,598 9,333 Adjustment on adoption ofAASB 132 and AASB 139, netof tax, to: Retained profits 26 82 - 82 -Reserves 26 (82) - (82) - _______________________________________ Restated total equity atbeginning of financial year 14,569 7,603 15,598 9,333 _______________________________________ Exchange differences on translation of foreignoperations 26 288 394 - -Changes in fair value ofavailable-for sale financialassets, net of tax 26 41 - 41 - _______________________________________ Net income recognised 329 394 41 -directly in equityLoss for the year (3,614) (4,148) (6,298) (4,455)Adjustment for prior yearlosses recouped on minorityinterest (18) - - - _______________________________________ Total recognised income andexpense for the year (3,303) (3,754) (6,257) (4,455) Transactions with equityholders in their capacity asequity holders Contributions of equity, net of transaction costs 25 5,967 10,374 5,967 10,374 Share based compensation 26 428 346 428 346 Value of conversion rights of 8% convertible notes, net of tax 25 219 - 219 -Deferred share considerationon purchase of business unit 26 629 - 629 - _______________________________________ 7,243 10,720 7,243 10,720 _______________________________________ Total equity at end of the financial year 18,509 14,569 16,584 15,598 ======================================= Total recognised income andexpense for the year isattributable to: Members of Dwyka Diamonds (3,369) (3,754) (6,274) (4,455)LimitedMinority interest 27 49 - - - _______________________________________ (3,320) (3,754) (6,274) (4,455) ======================================= The above statements of changes in equity should be read in conjunction with theaccompanying notes. DWYKA DIAMONDS LIMITED CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Notes Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000Cash flow from operatingactivities Receipts from customers 7,253 5,084 202 132(inclusive of goods andservices tax)Payments to suppliers and (8,680) (7,682) (2,562) (2,720)employees (inclusive of goodsand services tax)Interest received 373 576 276 491Other income received 396 52 - -Interest paid (7) - - - _______________________________________ (665) (1,970) (2,084) (2,097) _______________________________________ Net cash flow used in 36operating activities Cash flow from investingactivities Payments for exploration, (3,405) (1,672) - (552)evaluation and miningpropertiesPayments for purchase of (375) - (375) -unrelated investmentsPayments for property, plant (1,471) (1,083) (41) (113)and equipmentProceeds from sale of 223 - - -property, plant and equipmentLoans to controlled entities - - (5,086) (4,889)Loans to other parties (3,220) (2,253) - (251)Loans to other parties repaid 250 61 250 61Payment for acquisition of (1,021) - - -business unit, net of cashacquiredProceeds from the sale of 372 - 372 -unrelated investmentsRehabilitation security bond (8) (175) - - _______________________________________ (8,655) (5,122) (4,880) (5,744) _______________________________________ Net cash flow used ininvesting activities Cash flow from financingactivities Proceeds from issue of shares 3,204 10,856 3,204 10,856Payments for equity issue (107) (543) (107) (543)costsProceeds from borrowings 2,489 - 2,489 - _______________________________________ 5,586 10,313 5,586 10,313 _______________________________________ Net cash flow from financingactivities Net increase/(decrease) in (3,734) 3,221 (1,378) 2,472cash held Cash at the beginning of the 9,582 6,632 7,270 4,798financial yearEffects of exchange rate 438 (271) 159 -changes on cash _______________________________________ Cash and cash equivalents 6,286 9,582 6,051 7,270held at the end of thefinancial year 8 =======================================Non-cash financing and 36investing activities The above cash flow statements should be read in conjunction with theaccompanying notes. DWYKA DIAMONDS LIMITED NOTES FOR THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financialreport are set out below. These policies have been consistently applied to allthe years presented, unless otherwise stated. The financial report includesseparate financial statements for Dwyka Diamonds Limited as an individual entityand the consolidated entity consisting of Dwyka Diamonds Limited and itssubsidiaries. (a) Basis of preparation of financial report This general purpose financial report has been prepared in accordance withAustralian equivalents to International Financial Reporting Standards (AIFRSs),other authoritative pronouncements of the Australian Accounting Standards Board,Urgent Issues Group Interpretations and the Corporations Act 2001. Compliance with IFRSs Australian Accounting Standards include AIFRSs. Compliance with AIFRSs ensuresthat the consolidated financial statements and notes of Dwyka Diamonds Limitedcomply with International Financial Reporting Standards (IFRSs). The parententity financial statements and notes also comply with IFRSs except that it haselected to apply the relief provided to parent entities in respect of certaindisclosure requirements contained in AASB 132 Financial Instruments:Presentation and Disclosure. Application of AASB 1 First-time Adoption of Australian Equivalents toInternational Financial Reporting Standards These financial statements are the first Dwyka Diamonds Limited financialstatements to be prepared in accordance with AIFRSs. AASB 1 First-time Adoptionof Australian Equivalents to International Financial Reporting Standards hasbeen applied in preparing these financial statements. Financial statements of Dwyka Diamonds Limited until 30 June 2005 had beenprepared in accordance with previous Australian Generally Accepted AccountingPrinciples (AGAAP). AGAAP differs in certain respects from AIFRS. When preparingDwyka Diamonds Limited 2006 financial statements, management has amended certainaccounting, valuation and consolidation methods applied in the AGAAP financialstatements to comply with AIFRS. With the exception of financial instruments,the comparative figures in respect of 2005 were restated to reflect theseadjustments. The Group has taken the exemption available under AASB 1 to onlyapply AASB 132 and AASB 139 from 1 July 2005. Reconciliations and descriptionsof the effect of transition from previous AGAAP to AIFRSs on the Group's equityand its net income are given in note 39. Historical cost convention These financial statements have been prepared under the historical costconvention, as modified by the revaluation of available-for-sale financialassets. Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires theuse of certain critical accounting estimates. It also requires management toexercise its judgement in the process of applying the Group's accountingpolicies. The areas involving a higher degree of judgement or complexity, orareas where assumptions and estimates are significant to the financialstatements are disclosed in note 3. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities ofall subsidiaries of Dwyka Diamonds Limited (''company'' or ''parent entity'') asat 30 June 2006 and the results of all subsidiaries for the year then ended.Dwyka Diamonds Limited and its subsidiaries together are referred to in thisfinancial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) overwhich the Group has the power to govern the financial and operating policies,generally accompanying a shareholding of more than one-half of the votingrights. The existence and effect of potential voting rights that are currentlyexercisable or convertible are considered when assessing whether the Groupcontrols another entity. Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are de-consolidated from the date that controlceases. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group. Intercompany transactions, balances and unrealised gains on transactions betweenGroup companies are eliminated. Unrealised losses are also eliminated unless thetransaction provides evidence of the impairment of the asset transferred.Accounting policies of subsidiaries have been changed where necessary to ensureconsistency with the policies adopted by the Group. Minority interests in the results and equity of subsidiaries are shownseparately in the consolidated income statement and balance sheet respectively. Investments in subsidiaries are accounted for at cost in the individualfinancial statements of the company. (ii) Associates Associates are all entities over which the Group has significant influence butnot control, generally accompanying a shareholding of between 20% and 50% of thevoting rights. Investments in associates are accounted for in the parent entityfinancial statements using the cost method and in the consolidated financialstatements using the equity method of accounting, after initially beingrecognised at cost. The Group's share of its associates' post-acquisition profits or losses isrecognised in the income statement, and its share of post-acquisition movementsin reserves is recognised in reserves. The cumulative post-acquisition movementsare adjusted against the carrying amount of the investment. Dividends receivablefrom associates are recognised in the parent entity's income statement, while inthe consolidated financial statements they reduce the carrying amount of theinvestment. When the Group's share of losses in an associate equals or exceeds its interestin the associate, including any other unsecured receivables, the Group does notrecognise further losses, unless it has incurred obligations or made payments onbehalf of the associate. Unrealised gains on transactions between the Group and its associates areeliminated to the extent of the Group's interest in the associates. Unrealisedlosses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. (c) Segment reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are different tothose of other business segments. A geographical segment is engaged in providingproducts or services within a particular economic environment and is subject torisks and returns that are different from those of segments operating in othereconomic environments. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates ('the functional currency'). The consolidated financialstatements are presented in Australian dollars, which is Dwyka DiamondsLimited's functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. (iii) Group companies The results and financial position of all the Group entities (none of which hasthe currency of a hyperinflationary economy) that have a functional currencydifferent from the presentation currency are translated into the presentationcurrency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of any netinvestment in foreign entities, and of borrowings and other currency instrumentsdesignated as hedges of such investments, are taken to shareholders' equity.When a foreign operation is sold or any borrowings forming part of the netinvestment are repaid, a proportionate share of such exchange differences arerecognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. (e) Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable, while interest revenue is measured on an effective interest ratebasis. Amounts disclosed as revenue are net of returns and trade allowances.Revenue is recognised for the major business activities when the followingspecific recognition criteria are met: Sales Risks and rewards of the goods has passed to the buyer, which occurs ondelivery. Interest income Time proportionate basis using the effective interest rate method. (f) Income tax The income tax expense or revenue for the period is the tax payable on thecurrent period's taxable income based on the national income tax rate for eachjurisdiction adjusted by changes in deferred tax assets and liabilitiesattributable to temporary differences between the tax bases of assets andliabilities and their carrying amounts in the financial statements and to unusedtax losses. Deferred tax assets and liabilities are recognised for temporary differences atthe tax rates expected to apply when the assets are recovered or liabilities aresettled, based on those tax rates which are enacted or substantively enacted foreach jurisdiction. The relevant tax rates are applied to the cumulative amountsof deductible and taxable temporary differences to measure the deferred taxasset or liability. An exception is made for certain temporary differencesarising from the initial recognition of an asset or a liability. No deferred taxasset or liability is recognised in relation to these temporary differences ifthey arose in a transaction, other than a business combination, that at the timeof the transaction did not affect either accounting profit or taxable profit orloss Deferred tax assets are recognised for deductible temporary differences andunused tax losses only if it is probable that future taxable amounts will beavailable to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differencesbetween the carrying amount and tax bases of investments in controlled entitieswhere the parent entity is able to control the timing of the reversal of thetemporary differences and it is probable that the differences will not reversein the foreseeable future. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to offset current tax assets and liabilities and when thedeferred tax balances relate to the same taxation authority. Current tax assetsand tax liabilities are offset where the entity has a legally enforceable rightto offset and intends either to settle on a net basis, or to realise the assetand settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly inequity are also recognised directly in equity. The Australian tax consolidation regime does not apply to the company becausethere are no Australian incorporated subsidiaries. (g) Business combinations The purchase method of accounting is used to account for all businesscombinations, including business combinations involving entities or businessesunder common control, regardless of whether equity instruments or other assetsare acquired. Cost is measured as the fair value of the assets given, sharesissued or liabilities incurred or assumed at the date of exchange plus costsdirectly attributable to the acquisition. Where equity instruments are issued inan acquisition, the fair value of the instruments is their published marketprice as at the date of exchange. Transaction costs arising on the issue ofequity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumedin a business combination are measured initially at their fair values at theacquisition date, irrespective of the extent of any minority interest. Theexcess of the cost of acquisition over the fair value of the Group's share ofthe identifiable net assets acquired is recorded as goodwill. If the cost ofacquisition is less than the Group's share of the fair value of the identifiablenet assets of the subsidiary acquired, the difference is recognised directly inthe income statement, but only after a reassessment of the identification andmeasurement of the net assets acquired. Where settlement of any part of cash consideration is deferred, the amountspayable in the future are discounted to their present value as at the date ofexchange. (h) Leases Leases in which a significant portion of the risks and rewards of ownership areretained by the lessor are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessor) are charged tothe income statement on a straight-line basis over the period of the lease. (i) Impairment of assets Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation arereviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset's carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset's fairvalue less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there areseparately identifiable cash flows (cash generating units). (j) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalentsincludes cash on hand, deposits held at call with financial institutions, othershort-term, highly liquid investments with original maturities of three monthsor less that are readily convertible to known amounts of cash and which aresubject to an insignificant risk of changes in value, and bank overdrafts. (k) Trade receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost, less provision for doubtful debts. Trade receivablesare due for settlement no more than 30 days from the date of recognition. Collectibility of trade receivables is reviewed on an ongoing basis. Debts whichare known to be uncollectible are written off. A provision for doubtfulreceivables is established when there is objective evidence that the Group willnot be able to collect all amounts due according to the original terms ofreceivables. The amount of the provision is the difference between the asset'scarrying amount and the present value of estimated future cash flows, discountedat the effective interest rate. The amount of the provision is recognised in theincome statement. (l) Inventories Inventories, which include rough diamonds, finished goods and raw materials, arestated at the lower of cost and estimated net realisable value. Cost isdetermined on a first-in, first-out basis. Net realisable value is the estimatedselling price in the ordinary course of business, less the cost of completionand selling expenses (m) Investments and other financial assets From 1 July 2004 to 30 June 2005 The Group has taken the exemption available under AASB 1 to apply AASB 132 andAASB 139 only from 1 July 2005. The Group has applied previous AGAAP to thecomparative information on financial instruments within the scope of AASB 132and AASB 139. Under previous AGAAP, interests in listed and unlisted securities,other than controlled entities and associates in the consolidated financialstatements, were brought to account at cost and dividend income is recognised inthe statement of financial performance when receivable. Adjustments on transition date: 1 July 2005 The nature of the main adjustments to make this information comply with AASB 132and AASB 139 are that, with the exception of loans and receivables which aremeasured at amortised cost (refer below), fair value is the measurement basis.Changes in fair value are either taken to the income statement or an equityreserve (refer below). At the date of transition (1 July 2005) changes tocarrying amounts are taken to retained earnings or reserves. From 1 July 2005 The Group classifies its investments in the following categories: loans andreceivables and available-for-sale financial assets. The classification dependson the purpose for which the investments were acquired. Management determinesthe classification of its investments at initial recognition and re-evaluatesthis designation at each reporting date. (i) Loans and receivables Loans and receivables are non derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arise whenthe Group provides money, goods or services directly to a debtor with nointention of selling the receivable. They are included in current assets, exceptfor those with maturities greater than 12 months after the balance sheet datewhich are classified as non-current assets. Loans and receivables are includedin receivables in the balance sheet. (ii) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equitysecurities, are non-derivatives that are either designated in this category ornot classified in any of the other categories. They are included in non-currentassets unless management intends to dispose of the investment within 12 monthsof the balance sheet date. Purchases and sales of investments are recognised on trade-date - the date onwhich the Group commits to purchase or sell the asset. Investments are initiallyrecognised at fair value plus transaction costs for all financial assets notcarried at fair value through profit or loss. Financial assets are derecognisedwhen the rights to receive cash flows from the financial assets have expired orhave been transferred and the Group has transferred substantially all the risksand rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.Loans and receivables are carried at amortised cost using the effective interestmethod. Unrealised gains and losses arising from changes in the fair value ofnon monetary securities classified as available-for-sale are recognised inequity in the available-for-sale investments revaluation reserve. Whensecurities classified as available-for-sale are sold or impaired, theaccumulated fair value adjustments are included in the income statement as gainsand losses from investment securities. The fair values of quoted investments are based on current bid prices. If themarket for a financial asset is not active (and for unlisted securities), theGroup establishes fair value by using valuation techniques. These includereference to the fair values of recent arm's length transactions, involving thesame instruments or other instruments that are substantially the same,discounted cash flow analysis, and option pricing models refined to reflect theissuer's specific circumstances. The Group assesses at each balance date whether there is objective evidence thata financial asset or group of financial assets is impaired. In the case ofequity securities classified as available for sale, a significant or prolongeddecline in the fair value of a security below its cost is considered indetermining whether the security is impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss - measured as thedifference between the acquisition cost and the current fair value, less anyimpairment loss on that financial asset previously recognised in profit and loss- is removed from equity and recognised in the income statement. Impairmentlosses recognised in the income statement on equity instruments classified asavailable-for-sale are not reversed through the income statement. (n) Fair value estimation The fair value of financial assets and financial liabilities must be estimatedfor recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such asavailable-for-sale securities) is based on quoted market prices at the balancesheet date. The quoted market price used for financial assets held by the Groupis the current bid price; the appropriate quoted market price for financialliabilities is the current ask price. The nominal value less estimated credit adjustments of trade receivables andpayables are assumed to approximate their fair values. The fair value offinancial liabilities for disclosure purposes is estimated by discounting thefuture contractual cash flows at the current market interest rate that isavailable to the Group for similar financial instruments. (o) Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciation.Historical cost includes expenditure that is directly attributable to theacquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item will flow to the Group and the cost of theitem can be measured reliably. All other repairs and maintenance are charged tothe income statement during the financial period in which they are incurred. Land is shown at cost and is not depreciated. Depreciation on other assets iscalculated using the straight line method to allocate their cost or revaluedamounts, net of their residual values, over their estimated useful lives, asfollows: - Buildings 10-20 years - Machinery 5-12 years - Vehicles 3-5 years - Furniture, fittings and equipment 3-8 years The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amountif the asset's carrying amount is greater than its estimated recoverable amount(note 1(i)). Gains and losses on disposals are determined by comparing proceeds with carryingamount. These are included in the income statement. (p) Exploration and evaluation expenditure Exploration and evaluation costs include expenditure incurred in connection withthe exploration for and the evaluation of economically recoverable diamondresources. These costs include costs of acquisition, exploration and appraisalcosts and technical overheads directly associated with those projects. The company's policy with respect to exploration and evaluation expenditure isto use the "area of interest" method. Under this method, exploration andevaluation costs are carried forward on the following basis: (i) Each area of interest is considered separately when deciding whether and to what extent to carry forward or write off exploration and evaluation costs; (ii) Exploration and evaluation costs related to an area of interest may becarried forward provided that rights to tenure of the area of interest arecurrent and provided further that one of the following conditions are met: • such costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively, by its sale; or • exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. (iii)The carrying values of exploration and evaluation costs are reviewed by directors where results of exploration and/or evaluation of an area of interest are sufficiently advanced to permit a reasonable estimate of the costs expected to be recouped through successful development and exploitation of the area of interest or by its sale. Expenditure in excess of this estimate is written off to the profit and loss account in the year in which the review occurs; (iv) When development of an area of interest is complete and productioncommences, all exploration, evaluation and development costs carried forward asan asset (including the cost of extractive rights acquired) are transferred tomining properties. Development costs related to an area of interest are carried forward as an assetto the extent that they are expected to be recovered either through sale orsuccessful exploitation; and (q) Mining properties Mine properties represent the acquisition costs and/or accumulation ofexploration, evaluation and development costs in respect of areas of interest inwhich mining has commenced. When further development expenditure is incurred in respect of a mine propertyafter the commencement of production, such expenditure is carried forward aspart of the mine property only when substantial future economic benefits arethereby established, otherwise such expenditure is classified as part of thecost of production. Amortisation is provided on a unit-of-production basis so as to write off thecost in proportion to the depletion of the proved and probable mineralresources. (r) Trade and other payables These amounts represent liabilities for goods and services provided to the Groupprior to the end of financial year which are unpaid. The amounts are unsecuredand are usually paid within 30 days of recognition. (s) Borrowings Borrowings are initially recognised at fair value, net of transaction costsincurred. Borrowings are subsequently measured at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption amount isrecognised in the income statement over the period of the borrowings using theeffective interest method. The fair value of the liability portion of a convertible bond is determinedusing a market interest rate for an equivalent non-convertible bond. This amountis recorded as a liability on an amortised cost basis until extinguished onconversion or maturity of the bonds. The remainder of the proceeds is allocatedto the conversion option. This is recognised and included in shareholders'equity, net of income tax effects. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. (t) Borrowing costs Borrowing costs incurred for the construction of any qualifying asset arecapitalised during the period of time that is required to complete and preparethe asset for its intended use or sale. Other borrowing costs are expensed. (u) Provisions Leave entitlements Provisions are recognised when the consolidated entity has a legal, equitable orconstructive obligation to make a future sacrifice of economic benefits to otherentities as a result of past transactions or other past events, it is probablethat a future sacrifice of economic benefits will be required and a reliableestimate can be made of the amount of the obligation. Rehabilitation and restoration costs The Consolidated entity has obligations for site restoration related to itsmining properties. The Consolidated entity establishes restoration provisionsfor future mine closure costs when a legal or constructive obligation existsbased on the present value of the future cash flows required to satisfy theobligations. Provisions expected to be utilized in the coming 12 months on areaswith lives of less than one year are accounted for in the income statement ofthe consolidated entity. Provisions not expected to be utilized in the coming 12months are added to the capital cost of the related mining assets in mineproperties and amortised over the resource life. The provision is accreted toits future value over the resource life through a charge to borrowing costs. Changes in the estimated cost of rehabilitation is applied on a prospectivebasis with an adjustment to capital cost. (v) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annualleave and accumulating sick leave expected to be settled within 12 months of thereporting date are recognised in other payables in respect of employees'services up to the reporting date and are measured at the amounts expected to bepaid when the liabilities are settled. Liabilities for non-accumulating sickleave are recognised when the leave is taken and measured at the rates paid orpayable. (ii) Share-based payments Share-based compensation benefits are provided to employees via the DwykaDiamonds Limited Share and Option Plan. Shares and options granted before 7 November 2002 and/or vested before 1 January2005. No expense is recognised in respect of these shares or options. The sharecapital is recognised when either, the share purchase loan is repaid or when theoptions are exercised, and the proceeds received allocated to share capital. Shares options granted after 7 November 2002 and vested after 1 January 2005 The fair value of shares and options granted under the Dwyka Diamonds LimitedEmployee Share and Option Plans is recognised as an employee benefit expensewith a corresponding increase in equity. The fair value is measured at grantdate and recognised over the period during which the employees becomeunconditionally entitled to the shares and/or options. The fair value at grant date is independently determined using a Black-Scholesoption pricing model that takes into account the issue/exercise price, the termof the option, the vesting and performance criteria, the impact of dilution, thenon-tradeable nature of the share/option, the share price at grant date andexpected price volatility of the underlying share, the expected dividend yieldand the risk-free interest rate for the term of the option. The fair value of the shares and/or options granted excludes the impact of anynon-market vesting conditions (for example, profitability and sales growthtargets). Non-market vesting conditions are included in assumptions regardingthe employee loan recoverability and about the number of options that areexpected to become exercisable. At each balance sheet date, the entity revisesits estimate of the number of options that are expected to become exercisable.The employee benefit expense recognised each period takes into account the mostrecent estimate. The value of shares issued to employees financed by way of a non recourse loanunder the employee share scheme is recognised with a corresponding increase inequity when the company receives funds from either the employees repaying theloan or upon the loan termination. All shares issued under the plan with nonrecourse loans are considered to be options. (w) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or optionsare shown in equity as a deduction, net of tax, from the proceeds. Incrementalcosts directly attributable to the issue of new shares or options for theacquisition of a business are not included in the cost of the acquisition aspart of the purchase consideration. (x) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable toequity holders of the company, excluding any costs of servicing equity otherthan ordinary shares, by the weighted average number of ordinary sharesoutstanding during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination ofbasic earnings per share to take into account the after income tax effect ofinterest and other financing costs associated with dilutive potential ordinaryshares and the weighted average number of shares assumed to have been issued forno consideration in relation to dilutive potential ordinary shares. (y) Financial instrument transaction costs The Group has taken the exemption available under AASB 1 to apply AASB 132 andAASB 139 from 1 July 2005. The Group has applied previous Australian GAAP(AGAAP) in the comparative information on financial instruments within the scopeof AASB 132 and AASB 139. Under previous AGAAP transaction costs were excludedfrom the amounts disclosed in the financial statements. Under AIFRS such costsare included in the carrying amounts. At the date of transition to AASB 132 andAASB 139 the adjustment to carrying amounts for the Group was immaterial. (z) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associatedGST, unless the GST incurred is not recoverable from the taxation authority. Inthis case it is recognised as part of the cost of acquisition of the asset or aspart of the expense. Receivables and payables are stated inclusive of the amount of GST receivable orpayable. The net amount of GST recoverable from, or payable to, the taxationauthority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flowsarising from investing or financing activities which are recoverable from, orpayable to the taxation authority, are presented as operating cash flow. (aa) Rounding of amounts The company is of a kind referred to in Class order 98/0100, issued by theAustralian Securities and Investments Commission, relating to the ''roundingoff'' of amounts in the financial report. Amounts in the financial report havebeen rounded off in accordance with that Class Order to the nearest thousanddollars, or in certain cases, the nearest dollar. (ab) New Accounting Standards and Interpretations As at 30 June 2006, a number of accounting standards have been issued or amendedwith applicable commencement dates subsequent to the year end. The company hasnot elected to early adopt these accounting standards. The expected impact ofthese accounting standards should not materially alter the accounting policiesof the company at the date of the report. The company is currently assessing theimpact of the adoption of the above, which will be effective from the 1 July2006. The new standards are (i) UIG 4 Determining whether an Asset Contains a Lease UIG 4 is applicable to annual periods beginning on or after 1 January 2006. Itwill apply UIG 4 in its 2007 financial statements and the UIG 4 transitionprovisions. The Group will therefore apply UIG 4 on the basis of facts andcircumstances that existed as of 1 July 2006. (ii) AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments toAustralian Accounting Standards (AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB139, AASB 1, AASB 4, AASB 1023 & AASB 1038) AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning onor after 1 January 2007. Application of the standards will not affect any of theamounts recognised in the financial statements, but will impact the type ofinformation disclosed in relation to the Group's financial instruments. (iii) AASB 2006-1 Amendments to Australian Accounting Standards (AASB 121) AASB 2006-1 is applicable to annual reporting periods ending on or after 31December 2006. The amendment relates to monetary items that form part of areporting entity's net investment in a foreign operation. It removes therequirement that such monetary items had to be denominated either in thefunctional currency of the reporting entity or the foreign operation. 2 Financial risk management and financial instruments The Group's activities expose it predominantly to interest rate risk and creditrisk. The Group's overall risk management program focuses on theunpredictability of financial markets and seeks to minimise potential adverseeffects on the financial performance of the Group. Risk management is carried out by the Board of Directors. The Board provideswritten principles for overall risk management, as well as written policiescovering specific areas, such as mitigating foreign exchange, interest rate andcredit risks. (a) Credit risk exposures The credit risk on financial assets of the Group which have been recognised onthe balance sheet, other than investments in shares, is generally the carryingamount, net of any provision for doubtful debts. The Group minimises concentrations of credit risk in relation to tradereceivables by undertaking transactions with a large number of customers. (b) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognisedassets and liabilities are denominated in a currency that is not the entity'sfunctional currency. The Group operates internationally and is exposed toforeign exchange risk arising from currency exposures to South African rand,British pounds and the US dollar. (c) Interest rate risk The Group is exposed to fluctuations in interest rates. Interest rate risk ismanaged by maintaining a mix of floating rate deposits. Current interest bearingdeposits have been secured on a fixed interest rate bases. 3 Critical accounting estimates and judgements Estimates and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that mayhave a financial impact on the entity and that are believed to be reasonableunder the circumstances. (a) Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates will, by definition, seldom equal the related actualresults. The estimates and assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within thenext financial year are discussed below. (i) Income taxes The Group is subject to income taxes in Australia and jurisdictions where it hasforeign operations. Significant judgment is required in determining theworldwide provision for income taxes. There are many transactions andcalculations undertaken during the ordinary course of business for which theultimate tax determination is uncertain. The Group recognises liabilities foranticipated tax audit issues based on estimates of whether additional taxes willbe due. Where the final tax outcome of these matters is different from theamounts that were initially recorded, such differences will impact the currentand deferred tax provisions in the period in which such determination is made. (ii) Exploration, evaluation and mining properties The Group's main activity is exploration and evaluation for, and mining ofdiamonds. The nature of mining and exploration activities are such that itrequires interpretation of complex and difficult geological models in order tomake an assessment of the size, shape, depth and quality of resources and theiranticipated recoveries. The economic, geological and technical factors used toestimate mining viability may change from period to period. In additionexploration activities by their nature are inherently uncertain. Changes in allthese factors can impact exploration and mining asset carrying values,provisions for rehabilitation and the recognition of deferred tax assets (iii) Rehabilitation obligations The Consolidated entity estimates the future removal costs of mine operationsdisturbances at the time of installation of the assets and commencement ofoperations. In most instances, removal of assets occurs some years into thefuture. This requires judgmental assumptions regarding removal date, the extentof reclamation activities required, the engineering methodology for estimatingcost, future removal technologies in determining the removal cost and assetspecific discount rates to determine the present value of these cash flows. (iv) Recoverable amounts of investments and receivables The parent entity has funded its controlled entities operations via theprovision of loan funds. The recoverable amount of these loans is subject to theperformance of those subsidiaries being able to generate sufficient profits andreserves to repay these advances. 4 Segment information During the year the Group operated primarily in two geographical segments beingSouth Africa, where its main operations are diamond mining exploration andproduction, and in India, where additional diamond exploration activities arelocated. The parent entity is based in Australia which is effectively thecorporate office of the Group. Although the consolidated entity operates in different areas of the globe it hasthe following 2 divisions organised by industry distinction. The mining divisionincorporates both hard rock and alluvial diamond mining and exploration fordiamond resources; while the industrial division incorporates the production andsale of bricks and cement using waste material from mining operations as asource material. Australia South Africa India Inter-segment Consolidated eliminations/ unallocated 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Revenue $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 External sales - - 7,402 5,164 - - - 7,402 5,164 Total sales - - 7,402 5,164 - - 7,402 5,164revenue Other revenue 160 - 535 52 - - - 695 52Inter-segment 470 783 - - - - (470) (783) - -revenueTotal segment 630 783 7,937 5,216 - - (470) (783) 8,097 5,216revenueUnallocated 373 576 373 576revenueTotal revenue 8,470 5,792 ResultSegment result (6,575) (4,600) (7,816) (1,749) (2,147) (21) 12,383 3,254 (4,155) (3,116)Unallocated 373 (1,032)revenue net ofunallocated expensesLoss before tax (3,782) (4,148)Income tax 168 -benefitLoss after tax (3,614) (4,148) AssetsSegment assets 17,562 16,595 19,349 8,132 96 958 (12,007) (9,493) 25,000 16,192Unallocated - -assetsTotal assets 25,000 16,192 LiabilitiesSegment liabilities 262 996 22,588 8,249 3,220 1,939 (21,622) (9,521) 4,448 1,663Unallocated liabilities 2,183 -Total liabilities 6,631 1,663 Acquisition ofproperty 41 113 8,571 970 - - - - 8,612 1,083plant and equipment andother non-current segment assetsLoan to associate - - 4,536 1,317 - - - - 4,536 1,317Other non-cash expenses - - - 536 - - 428 346 428 882Depreciation and 48 55 439 448 - - - - 487 473amortisation expense Impairment of assets - related party loans 5,867 1,380 7,137 - - - (13,004) (1,380) - - - investments in - 883 - - - - - (883) - -subsidiaries - other investments - 13 - - - - - - - 13 - Non-currentreceivables - - 3 199 - - - - 3 199 - explorationand evaluationand miningproperties - 552 - 28 2,130 - - - 2,130 580 Secondary reporting format - Business segments Segment revenues from sales to Segment assets Acquisition of property external customers plant and equipment and other non-current segment assets 2006 2005 2006 2005 2006 2005 $ $ $ $ $ $Mining 2,189 674 11,894 1,309 10,357 3,612Industrial 5,213 4,490 1,845 2,946 125 173 7,402 5,164 13,739 4,255 10,482 3,785 Unallocated assets 11,261 11,937 Total assets 25,000 16,192 5 Revenue Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000Revenue Sale of goods 7,402 5,164 - - Other revenue Interest received 373 576 276 491Foreign exchange gains 160 - 160 -Management fees - - 470 783Other income 535 52 - - 1,068 628 906 1,274 8,470 5,792 906 1,274 6 Expenses Loss before income taxexpense includes thefollowing specific expenses: Cost of sales includes thefollowing expenses:Depreciation of plant and 408 383 - -equipmentRehabilitation expenses 130 297 - - Other charges against assets:Impairment of assets 3 199 - -Impairment of investments - 13 - 13Impairment of related company - - 4,400 883loansImpairment of exploration 2,130 580 - 552expenditure and mineralproperties Administration includes thefollowing:Bad and doubtful debts 105 53 - -expenseConsulting expenses 982 1,049 754 865Depreciation of buildings, 79 60 48 55plant and equipmentDirectors fees 195 65 195 65Employee benefits expense 1,931 1,016 192 85Legal fees 68 45 35 42Loss on sale of property, 6 - - -plant and equipmentRental expenses related to 113 11 58 11operating leasesShare based compensation 428 346 428 346 7 Income tax Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Income statement Current income tax Current income tax charge - - - - Deferred income tax Increase in deferred tax asset (171) - (31) -(Note 17) Increase in deferred tax 3 - 3 -liability (Note 24) Income tax (benefit) / expense (168) - (28) -reported in income statement Unrecognised Deferred TaxBalances Unrecognised deferred tax 1,995 2,302 252 501assets - Losses Unrecognised deferred tax 431 425 431 425assets - Capital Losses Unrecognised deferred tax - - 4,945 7,281assets - Temporary differences Net unrecognised deferred tax 2,426 2,727 5,628 8,207 assets Reconciliation to income tax expense on accounting loss Loss from ordinary activities (3,614) (4,149) (6,298) (4,455)before income tax expense Income tax benefit @ 30% (1,084) (1,245) (1,889) (1,337) Tax effect on amounts which arenot deductibleShare-based payments 128 104 128 104Foreign expenditure 483 491 1,046 491Non-deductible provisions - 59 754 683Sundry items (17) 215 (22) (14) (490) (376) 17 (73) Prior year revenue losses (17) - (17) -recouped not previouslyrecognisedBenefit of tax losses not 507 376 - 73brought to accountIncome tax expense - - - - The Australian tax consolidation regime does not apply for the company. 8 Current assets - Cash and cash equivalents Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Cash at bank and on hand 9 4,085 6 1,773Deposits at call 3,740 5,472 3,508 5,472Term deposits 2,537 25 2,537 25 6,286 9,582 6,051 7,270 Interest earned from cash accounts and deposits ranged from 0% to 5.60% (2005:0% - 5.65%). The term deposits have an average maturity of 30 days. 9 Current assets - Trade and other receivables Trade debtors 928 714 - -Less provision for doubtful (130) (39) - -receivables 798 675 - -GST/VAT refund 94 51 54 51Loans to other parties 71 251 2 251Other debtors 14 26 - 17 977 1,003 56 319 Trade debtors are denominated and receivable in South African Rand (ZAR) and arenon interest bearing. Other debtors generally arise from transactions outside the usual operatingactivities of the Group and are non-interest bearing. Loans to other parties areinterest free and at call. GST/VAT refunds are non-interest bearing. The Group has recognised a loss of $104,905 (2005: $52,747) in respect of badand doubtful trade receivables during the year ended 30 June 2006. The loss hasbeen included in 'administration expenses' in the income statement. 10 Current assets - Inventories Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000At cost:Raw materials 130 93 - -Finished goods 117 114 - -Rough diamonds 237 335 - - 484 542 - - Inventories recognised in cost of sales amounted to $2,784,000 (2005:$1,592,000). 11 Non-current assets - Receivables Non-current Loan to other parties - 671 - -Less :impairment charge - (184) - - - 487 - - Loan to associate 4,536 1,317Loans to related parties - - 24,596 8,636(refer note 30)Less impairment of loans to - - (11,915) (2,323)related parties 4,536 1,317 12,681 6,313 4,536 1,804 12,681 6,313 The loan to an associate company - Superkolong Pty Ltd -consists of a SouthAfrican Rand (ZAR) denominated loan. The loan funds have been advanced forconstruction of a diamond tailings re-treatment plant which was at the earlycommissioning stage as at June 2006. The loan to this associate is carried atthe net recoverable amount and attracts a variable interest rate of SouthAfrican prime plus 1%. The loan is repayable from operating surpluses on aquarterly basis over 4.5 years from the end of the associates first financialyear of operations. Loans to related parties are carried at their net recoverable amount and arenon-interest bearing. 12 Non-current assets - Investments accounted for using the equity method Shares in associate - - - - Investments in associates are accounted for in the consolidated financialstatements using the equity method of accounting and are carried at cost by theparent entity. The Group has a 40% interest in Superkolong which had no operating activitiesduring the year under review. 13 Non-current assets - Other financial assets Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000Investments traded onorganised markets Opening balance - 89 - 89Additions - - - -Disposals - - - -Revaluation charged to equity - (13) - (13) - 76 - 76 Available-for-sale financialassets Opening balance 76 - 76 -Additions 375 - 375 -Disposals (372) - (372) -Revaluation charged to equity 24 - 24 - 103 - 103 - Other (non tradedinvestments) Shares in other corporationsat cost- controlled entities - - 4,581 24,251- less impairment of - - (4,581) (21,781)investment in controlledentities- associates - - - -- other entities 21 21 21 21- less impairment of (21) (21) (21) (21)investment in other entities - - - 2,470 103 76 103 2,546 (a) Non-traded shares in other corporations Non-traded shares in other corporations have been written down to their assessedrecoverable amount, being the present value of net cash inflows from expectedfuture dividends and subsequent disposal of the shares (b) Transition to AASB 132 and AASB 139 The Group has taken the exemption available under AASB 1 First-time Adoption ofAustralian Equivalents to International Financial Reporting Standards to applyAASB 132 Financial Instruments: Disclosure and Presentation and AASB 139Financial Instruments: Recognition and Measurement from 1 July 2005. For furtherinformation refer to section 5 of note 38. 14 Non-current assets - Property, plant and equipment Consolidated Freehold Plant & Leased land & equipment assets buildings Total $000 $000 $000 At 1 July 2004 Cost or fair value 107 3,878 - 3,985Accumulated depreciation (12) (2,602) - (2,614)Net book amount 95 1,276 - 1,371 Year ended 30 June 2005Opening net book amount 95 1,276 - 1,371 Additions 105 866 - 971Depreciation charge (5) (468) - (473)Exchange differences (7) (89) - (96)Closing net book 188 1,585 - 1,773 At 30 June 2005Cost or fair value 205 4,656 - 4,861Accumulated depreciation (17) (3,071) - (3,088)Net book amount 188 1,585 - 1,773 Year ended 30 June 2006Opening net book amount 188 1,585 - 1,773 Additions 5 1,001 465 1,471Acquisition of subsidiaries - 818 - 818Disposals - (229) - (229)Exchange differences (6) 257 - 251Depreciation charge (12) (475) - (487)Closing net book 175 2,957 465 3,597 At 30 June 2006Cost or fair value 200 5,547 465 6,212Accumulated depreciation (25) (2,590) - (2,615)Net book amount 175 2,957 465 3,597 Parent Freehold Plant & Leased land & equipment assets buildings Total $000 $000 $000 At 1 July 2004 Cost or fair value - 183 - 183Accumulated depreciation - (94) - (94)Net book amount - 89 - 89 Year ended 30 June 2005Opening net book amount - 89 - 89 Additions - 113 - 113Depreciation charge - (55) - (55)Closing net book - 147 - 147 At 30 June 2005Cost or fair value - 296 - 296Accumulated depreciation - (149) - (149)Net book amount - 147 - 147 Year ended 30 June 2006Opening net book amount - 147 - 147 Additions - 40 - 40Disposals - - - -Depreciation charge - (48) - (48)Closing net book - 139 - 139 At 30 June 2006Cost or fair value - 262 - 262Accumulated depreciation - (123) - (123)Net book amount - 139 - 139 15 Non-current assets - Exploration, evaluation and mining properties Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Exploration and evaluation 14,688 8,797 - -costsImpairment charges (9,835) (7,705) - - 4,853 1,092 - -Mining properties 14,442 10,586 - -Impairment charges (10,337) (10,337) - -Accumulated amortisation (249) (249) - - 3,856 - - - 8,709 1,092 - - Reconciliations of the carrying amount of exploration, evaluation andmining properties at the beginning and end of the current and previousfinancial year: Exploration and evaluationcosts Opening balance 1,092 - - -Exploration and evaluation 1,933 1,092 - -costs incurred during theyearExpenditure written off (2,130) - - -Exploration property acquired 4,629 - - -during the yearExchange translations (671) - - -Closing balance 4,853 1,092 - - Mining properties Opening balance - - - -Project generation costs - 580 - 552incurred during the yearMine property acquired during 2,370 - - -the yearMine development incurred 1,774 - - -after acquisitionExpenditure written off - (580) - (552)Exchange translations (288) - - -Closing balance 3,856 - - - During the year the costs associated with exploration in India were fullywritten off given the uncertainty over the company's future direction in regardsto exploration in India. Ultimate recoupment of costs carried forward for mining properties, explorationand evaluation is dependent upon: - continuance of the company's rights to tenure of the areas of interest; - results of future exploration; and - recoupment of costs through successful development and commercial exploitation, or alternatively by sale of the respective areas. 16 Non-current assets - Other Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Term deposit 308 320 - - Goodwill on consolidation 199 199 - -Impairment charge (199) (199) - - - - - - 308 320 - - The term deposits are held as security for bank guarantees in favour of theDepartment of Minerals and South African Mineral Authorities pursuant toconditions for the granting of mining leases. 17 Deferred tax asset The balance comprises temporary differences attributable to: Amounts recognised in profitand loss:Accruals 21 - 13 -Receivables from related 150 - 18 -companies 171 - 31 -Amounts recognised directlyin equity:Available-for-sale financial 17 - 17 -assetsEquity issue costs 49 - 49 - 66 - 66 - 237 - 97 -Set-off against deferred tax (237) - (97) -liabilities - - - - MovementsOpening balance 1 July 2005 - - - - Credited to income statement 171 - 31 - Credited to equity 66 66 Closing balance 237 - 97 - Deferred tax assets to be 95 - 12 -settled within 12 months Deferred tax assets to be 142 - 84 -settled after 12 months 237 - 97 - 18 Current liabilities - Trade and other payables Trade payables 1,561 1,000 169 219Other payables 88 101 88 65 1,649 1,101 257 284 Trade creditors are non-interest bearing and are normally settled on 30 dayterms. Other creditors are non-interest bearing and are settled on an at-callbasis. Of the consolidated payables $1,363,974 (2005: $781,618) is denominatedand repayable in South African Rand. 19 Current liabilities - Provisions Rehabilitation costs- opening balance 397 351 - -- utilised during year (289) (251) - -- Exchange differences (18) - - -- provision for year 130 297 - -Balance at end of year 220 397 - -Leave entitlements 29 28 5 3 249 425 5 3 20 Current liabilities - Borrowings SecuredLease liabilities 76 - - - Refer to note 23 for details of the security arrangements 21 Non-current liabilities - Trade and other payables Loan from controlled entity - - - 710 22 Non-current liabilities - Provisions Rehabilitation costs- opening balance 97 105 - - - provision acquired on 216 - - -purchase of subsidiariesduring year- Finance costs 25 8- Exchange differences (33) (16 ) - -Balance at end of year 305 97 - - 23 Non-current liabilities - Borrowings Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Secured Lease liabilities 428 - - - Unsecured Convertible notes 2,183 - 2,183 - 2,611 - 2,183 - The lease liabilities are South African Rand denominated and bear interest at9,5% per annum. They are secured by moveable assets with a book value of$465,000 as at 30 June 2006. The agreements are repayable in fixed monthlyinstalments until June 2011. The parent entity issued 1,000 8% convertible notes for GBP1 million on 22 June2006. The notes are convertible into ordinary shares of the parent entity, atthe option of the holder, or repayable on 23 June 2010. The number of ordinaryshares to be issued for each convertible note will be based on a conversionprice of GBP0.36. The convertible notes are presented in the statement offinancial position as follows: Face value of notes issued 2,489 - 2,489 - Other equity securities - (313) - (313) -value of conversion rights 2,176 2,176 Interest expense * 7 - 7 - Non-current liability 2,183 - 2,183 - * Interest expense is calculated by applying the effective interest rate of 12%to the liability component. 24 Deferred tax liabilities The balance comprises temporary differences attributable to: Amounts recognised in profitand loss:Cash assets 3 - 3 -Exploration, evaluation and 1,741 - - -mining properties 1,744 - 3 -Amounts recognised directlyin equity:Convertible note 94 - 94 - 1,838 - 97 -Set-off against deferred tax (237) - (97) -assets 1,601 - - - MovementsOpening balance 1 July 2005 - - - - Credited in income statement 3 - 3 - Charged to equity 94 - 94 - Acquisition of subsidiaries 1,984 - - -Exchange differences (243) - - -Closing balance 1,838 - 97 - Deferred tax liabilities to 3 - 3 -be settled within 12 months Deferred tax liabilities to 1,385 - 94 -be settled after 12 months 1,838 - 97 - 25 Contributed equity (a) Share capital Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Ordinary shares fully paid 56,912 50,726 56,693 50,726 (b) Other equity securities Value of conversion rights - 313 -convertible notes, net of tax Deferred tax liability (94) -component Total contributed equity 56,912 50,726 (c) Movements in ordinary share capital: Date Details Notes Number of Issue $000 shares price 1 July 2004 Opening Balance 61,057,696 40,35210 August - 13 Placement 16,532,500 GBP0.26 10,856September 2004 ($A0.67)12 January Employee share plan 33,333 $0.52 172005 loan repaid -proceeds received9 February Employee share plan 83,333 $0.52 442005 loan repaid -proceeds received Less: issue - (543) transactions costs30 June 2005 Balance 77,706,862 50,7261 September Mine purchase 2,747,802 GBP0.35 2,3082005 consideration (A$0.84)4 November Placement 4,500,000 GBP0.30 3,1872005 ($A0.72)22 December Placement in lieu of 749,137 A$0.69 5132005 services rendered8 March 2006 Employee share plan 33,333 $A0.52 17 loan repaid -proceeds received Less: issue - (107) transactions costs Deferred tax credit - 49 recognised directly in equity 30 June 2006 Balance 85,737,134 56,693 (d) Movement in Employee Share Plan shares issued with limited recourseemployee loans: 1 July 2004 Opening Balance 2,850,00012 January Employee share plan (33,333) $A0.522005 loan repaid - shares transferred to ordinary share capital9 February Employee share plan (83,333) $A0.522005 loan repaid - shares transferred to ordinary share capital30 June 2005 Balance 2,733,334 21 December Employee Share Plan 750,000 $0.872005 issue21 December Employee Share Plan 3,350,000 $1.002005 issue8 March 2006 Employee share plan (33,333) $0.52 loan repaid - shares transferred to ordinary share capital6 April 2006 Employee Share Plan 200,000 $1.00 issue30 June 2006 Balance 7,000,001 The weighted average issue price of issued employee share plans shares is $0.77.Refer to note 38 for details of the employee share plan. (e) Share options Number of options 2006 2005 To acquire ordinary fully paid shares in DwykaDiamonds Limited:- at $1.47 per share on or before 30 June 2006 - 2,000,000Employee option plan options (refer note 38)- at $0.52 per share on or before 30 June 2007 1,100,000 1,100,000- at $0.87 per share on or before 30 June 2009 250,000 -- at $1.00 per share on or before 30 June 2009 1,250,000 - 2,600,000 3,100,000 (f) Movements in share options Number of options 2006 2005 To acquire ordinary fully paid shares at $1.47 on or before 30 June 2006:Beginning of the financial year 2,000,000 2,000,000Options expired (2,000,000) - Balance at end of financial year - 2,000,000 Refer to note 38 for movements in the employee option plan includingdetails of options issued, exercised, and lapsed during the year andoptions outstanding at the end of the financial year. (g) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceedson winding up of the Company in proportion to the number and amounts paid on theshares held. On a show of hands every holder of ordinary shares present at a meeting inperson or by proxy, is entitled to one vote, and upon a poll each share isentitled to one vote. (h) Employee share scheme Information relating to the employee share scheme, including details of sharesissued under the scheme, is set out in note 38. 26 Reserves and accumulated losses (a) Reserves Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000Available-for-saleinvestments revaluationreserveBalance 1 July - - -Adjustment on adoption of (82) - (82) -AASB 132 and AASB 139Revaluation 24 - 24 -Deferred tax 17 - 17 -Balance 30 June (41) - (41) - Share-based payments reserveBalance 1 July 519 173 519 173Expense for the year 428 346 428 346Balance 30 June 947 519 947 519 Foreign currency translationreserveBalance 1 July 394 - - -Currency translation 288 394 - -differencesBalance 30 June 682 394 - - Deferred share issue reserveBalance 1 July - - - -Deferred share issue on 629 - 629 -business unit acquisitionBalance 30 June 629 - 629 - TOTAL 30 June 2,217 913 1,535 519 (b) Accumulated losses Movements in accumulated losses were as follows: Balance at beginning of year (37,070) (32,922) (35,647) (31,192)Adjustment on adoption 82 - 82 -of AASB 132 and AASB 139, net of taxNet loss attributable to (3,681) (4,148) (6,298) (4,455)members of Dwyka DiamondsLimited Balance at end of financial year (40,669) (37,070) (41,863) (35,647) (c) Nature and purpose of reserves (i) Available-for-sale investments revaluation reserve Changes in the fair value and exchange differences arising on translation ofinvestments, such as equities, classified as available-for-sale financialassets, are taken to the available-for-sale investments revaluation reserve.Amounts are recognised in profit and loss when the associated assets are sold orimpaired. (ii) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of employeeshare plan shares issued with an attaching limited recourse employee loan; andemployee option plan options issued but not exercised. (iii) Foreign currency translation reserve Exchange differences arising on translation of foreign controlled entities aretaken to the foreign currency translation reserve. The reserve is recognised inprofit and loss when the net investment is disposed of. (iv) Deferred share issue reserve During the year the Group acquired a new business unit (refer Note 32). Aportion of the consideration consists of a deferred share issue. Upon thedeferred shares being issued the reserve will be transferred to contributedequity. 27 Minority interest Consolidated 2006 2005 $000 $000 Outside equity interestcomprises:Reserves 91 91Accumulated losses (42) (91) 49 - The parent entity bears the responsibility for the minority interest's share ofoutgoings resulting from accumulated losses in excess of reserves. 28 Key management personnel disclosures (a) Directors The following persons were directors of Dwyka Diamonds Limited during thefinancial year: (i) ChairmanMs M Sturgess (ii) Executive directorsMr A Griffin, Chief Executive OfficerMr C J Bredenkamp, Managing director - South AfricaMr M Langoulant, Chief Financial Officer (iii) Non-executive directorsMr E NealonDr E Kirby (b) Other key management personnel The following persons also had authority and responsibility for planning,directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Position Mr G Button Commercial Manager All of the above persons were also key management persons during the year ended30 June 2005, except for A Griffin who commenced employment with the Group on 1December 2005. (c) Key management personnel compensation Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Short-term employee benefits 981,127 816,627 796,486 714,552Post-employment benefits 21,966 6,365 21,966 6,365Share-based payments 341,860 131,644 318,396 97,500 1,344,953 954,636 1,136,848 818,417 The company has taken advantage of the relief provided by CorporationsRegulation CR2M.604 and has transferred the detailed remuneration disclosures tothe directors' report. The relevant information can be found in sections A-C ofthe remuneration report on pages 14 to 19. (d) Equity instruments disclosure relating to key management personnel (i) Shares and options provided as remuneration and shares issued on exercise ofsuch options Details of shares and options provided as remuneration, and of shares issued onthe exercise of such options, together with the terms and conditions of theshares and options, can be found in section D of the remuneration report onpages 14 to 19. (ii) Option holdings The numbers of options over ordinary shares in the company held during thefinancial year by each director of Dwyka Diamonds Limited and other keymanagement personnel of the Group, including their personally related parties,are set out below. 2006 Balance at Granted Balance at Vested and the start of during the the end of exercisable at the Name the year year the year end of the year Directors of Dwyka Diamonds Limited M J Sturgess - - - - E F G Nealon - - - - E Kirby - - - - Griffin - - - - C J Bredenkamp 250,000 250,000 500,000 166,667 M J Langoulant - - - - Other key management personnel of the Group G Button - - - - 2005 Balance at Granted Balance at Vested and the start of during the the end of exercisable at the Name the year year the year end of the year Directors of Dwyka Diamonds Limited M J Sturgess - - - - E F G Nealon - - - - E Kirby - - - - A Griffin - - - - C J Bredenkamp 250,000 - 250,000 83,333 M J Langoulant - - - - Other key management personnel of the Group G Button - - - - (iii) Share holdings The numbers of shares in the company held during the financial year by eachdirector of Dwyka Diamonds Limited and other key management personnel of theGroup, including their personally related parties, are set out below. 2006 Balance at the Received Balance at the start of the year during the end of the year year NameDirectors of Dwyka Diamonds Limited Ordinary sharesM J Sturgess 1,002,500 1,000,000 2,002,500E F G Nealon 1,000,000 1,000,000 2,000,000E Kirby 250,000 750,000 1,000,000A Griffin - - -C J Bredenkamp 12,660 - 12,660M J Langoulant - 1,000,000 1,000,000 Other key management personnel of the Group Ordinary sharesG Button 350,000 - 350,000 2005 Balance at Movement Balance at the the start of during the end of the the year year year NameDirectors of Dwyka Diamonds Limited Ordinary sharesM J Sturgess 1,002,500 - 1,002,500E F G Nealon 1,000,000 - 1,000,000E Kirby 250,000 - 250,000C J Bredenkamp 12,660 - 12,660M J Langoulant - - - Other key management personnel of the Group Ordinary sharesG Button 416,667 (66,667) 350,000 29 Remuneration of auditors Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Remuneration for audit or review of the financial reports of the parententity or any entity in the Group:Auditor of the parent entity- Australian firm 85,600 54,800 85,600 54,800- Related practices of 20,975 41,197 - -Australian firm- Other firms 2,677 4,172 - - 109,252 100,169 85,600 54,800 Remuneration for otherservices:Auditor of the parent entity, - 29,919 - 29,919tax consulting- Other; tax consulting - 671 - - - 30,590 - 29,919 30 Contingencies/Commitments (a) Contingent liabilities The parent entity and Group had no known contingent liabilities as at 30 June2006. (b) Contingent assets The parent entity and Group had no known contingent assets as at 30 June 2006. (c) Commitments The Group has an exploration commitment with a de Beers subsidiary to expend$US1.5 million over the next 2 years upon exploration of the Tanzanianexploration tenements. This commitment can be reduced with approval of de beersupon the acceptance of alternative exploration proposals. The company and deBeers are currently investigating an alternate exploration plan which wouldsignificantly reduce this exploration commitment.. The Group leases various plant and equipment with a carrying amount of $360,000under finance leases expiring 5 years. These leases are denominated in SouthAfrican Rand. Commitments in relation tofinance lease are payable asfollows:Within one year 130 - - -Later than one year but no 374 - - -later than 5 yearsLater than 5 years - - - -Minimum lease payments 504 - - -Represented byCurrent (note 20) 76 - - -Non-current (note 23) 428 - - - 504 - - - 31 Related party transactions (a) Parent entity The ultimate parent entity in the wholly-owned group and the ultimate Australianparent entity is Dwyka Diamonds Limited. (b) Subsidiaries Interests in subsidiaries are set out in note 33. (c) Key management personnel Disclosures relating to key management personnel are set out in note 28. (d) Transactions with related parties The following transactions occurred with related parties: Parent entity 2006 2005 $ $ Loans advanced to controlled entitiesOpening balance 6,312,908 1,478,676- Management fee charged to controlled 470,074 782,711entities- cash advances to controlled entities 5,153,767 4,884,548- parent company shares issued on behalf of a 2,308,154 -controlled entity as part consideration to acquire abusiness unit- parent company shares to be issued to be on behalf 629,496 -of a controlled entity as part consideration to acquire a business unit- transfer of loans to parent company on members 1,692,902 -voluntary liquidation of controlled entity- parent company shares issued on behalf of a 513,159 -controlled entity in lieu of services- provision for loss on loans to related parties (4,400,953) (833,027)Closing balance 12,679,507 6,312,908 Loans received from controlled entitiesOpening balance (709,695) (714,196)- loan repaid on liquidation of 777,320 -controlled entity- cash advances to controlled entities 4,501- cash advances from controlled entities (67,625) -Closing balance - (709,695) Loans advanced to associateOpening balance 1,316,698 -- cash advances to associate 3,219,722 1,316,698Closing balance 4,536,420 1,316,698 (e) Outstanding balances The following balances are outstanding at the reporting date in relation totransactions with related parties: Non-current loans advanced by Dwyka to controlled 12,679,507 6,312,908entities Non-current loans advanced by Dwyka to associates 4,536,420 1,316,698 Non-current loans received by Dwyka from controlled - (709,695)entities 32 Business combination On 1 September 2005 the parent entity effected the acquisition of 100% of theissued share capital of Kophia Diamonds Pty Ltd and Bellsbank Mining Number OnePty Ltd. These entities were acquired as a single business acquisitiontransaction. Together these companies own 3 underground mines in South Africa. Theconsideration for this purchase is the issue of 2,747,802 shares and the paymentof ZAR5 million to the vendors of the companies. This acquisition incorporatesthe provision of future services to the company by the vendors and includesoperational targets for the mines acquired. The acquired business contributed revenues of $1,044,983 and a net profit of$1,987 to the Group for the period from 1 October 2005 to 30 June 2006. If theacquisition had occurred on 1 July 2005, the acquired business would havecontributed revenues of $1,044,983 and a net loss of $69,377 to the Group. Details of the fair value of the assets and liabilities acquired and goodwillare as follows: AUD Purchase consideration: $000 Cash paid (ZAR5 million) 1,021Parent company shares (valued at themarket price of 2,308those shares as at the date ofacquisition)Deferred issue of Parent company shares(valued at the 629market price of those shares as at thedate of acquisition)Total purchase consideration 3,958Fair value of net identifiable assets 3,958acquiredGoodwill - At the date of acquisition it is considered probable that at least a further749,400 parent company shares will be issued as additional consideration for theacquisition. This deferred share issue has been valued at the market price ofthose shares as at the date of acquisition. Further in the event that certainpre-determined mine performance hurdles are achieved by the subsidiary,additional consideration in the form of shares and options may be payable. It isnot possible to determine if additional shares and/or options will be issued.The fair value of assets and liabilities acquired are based on discounted cashflow models. No acquisition provisions were created. There were no acquisitionsin the year ended 30 June 2005. The assets and liabilities arising from the acquisition are as follows: Carrying Fair Value amount $000 $000Receivables 211 211Inventories 345 345Plant and equipment 818 818Exploration - 4,630Mine property/development 170 2,370Deferred tax asset 149 -Trade payables (45) (45)Deferred tax liability - (1,984)Rehabilitation provision - (216)Non-current payables (776) (776)Non-current loans from vendors (1,395) (1,395)Net identifiable assets acquired (523) 3,958 33 Subsidiaries The consolidated financial statements incorporate the assets, liabilities andresults of the following controlled entities in accordance with the accountingpolicy described in Note 1(a): Name of entity Country of Class of Equity holding incorporation shares 2006 2005 % %Supermix Mining South Africa Ordinary 100 100Biz Africa 546 South Africa Ordinary 70 70Basfour 254 South Africa Ordinary 70 70JJS & L Mining South Africa Ordinary 100 100Diamantrif Delwery South Africa Ordinary 100 100Kophia Diamonds South Africa Ordinary 100 -Bellsbank Mining South Africa Ordinary 100 -Number OneKohinoor Mining Mauritius Ordinary 100 100InternationalDwyka Diamonds Mauritius Ordinary 100 100HoldingsHuntingdale Mauritius Ordinary 100 100InvestmentsKarringyup Holdings Mauritius Ordinary 100 100Troon Investments Mauritius Ordinary 100 100Tralee Investments* Mauritius Ordinary 100 N/aAMIL Mining India India Ordinary 100 100Diamix (in members United Ordinary 100 100voluntary liquidation) KingdomDwyka Alsami* Tanzania Ordinary 100 N/aDwyka Tanzania* Tanzania Ordinary 95 N/a * Incorporated during the financial year ended 30 June 2006. 34 Investments in associates (a) Carrying amounts Information relating to associates is set out below. Name Principal Ownership interest Consolidated Parent entity activity 2006 2005 2006 2005 2006 2005 % % $000 $000 $000 $000 Superkolong Diamond 40 - - - - -(unlisted) tailings processing The above associate is incorporated in South Africa and had not traded in theyear to 30 June 2006. In the year to 30 June 2006 the associate secured aprocessing agreement with de Beers and has been constructing a diamond tailingsre-treatment plant. This plant was at the early commissioning stage as at 30June 2006. (b) Summarised financial information of associates Group's share of Assets Liabilities Revenues Profits $000 $000 $000 $000 Superkolong 3,176 3,176 - - (c) Share of associates' expenditure commitments and contingencies As at June 2006 the associate had no commitments or contingent liabilities. 35 Events occurring after the balance sheet date Since the end of the financial year an in principle agreement has been reachedwhereby Dwyka will restructure its black economic empowerment ("BEE")arrangements with its principal BEE partner, Kolong Investments such that theGroup will increase its interest in the SMI4 de Beers tailings re-treatmentproject to 70% in exchange for reducing its interest in current 100% owned SouthAfrican operations to 70%. Formal approvals for this proposal are being soughtand agreements to affect this proposal are being prepared. Except for the above no other matter or circumstance has arisen since 30 June2006 that has significantly affected, or may significantly affect: (a) the Group's operations in future financial years; (b) the results of those operations in future financial years; or (c) the Group's state of affairs in future financial years. 36 Reconciliation of loss after income tax to net cash outflow from operatingactivities Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Loss from ordinary activities (3,614) (4,140) (6,326) (4,455)after taxDepreciation and amortisation 488 473 48 55Exploration expenditure & 2,130 580 - 552mining property generationwritten offDoubtful debts 107 39 - -Finance costs 31 - 7 -Foreign exchange (gain)/loss (143) 840 (160) -Share based compensation 428 346 428 346Impairment of assets 3 212 4,400 2,276Loss on sale of plant 6 - - -Reversal of asset impairment (139)Management fees charged to - - (470) (783)controlled entitiesDecrease/(increase) in (224) (205) 14 (31)receivablesDecrease/(increase) in 58 (292) - -inventory(Increase)/decrease in tax (168) - - -expenseIncrease/(decrease) in 548 119 (27) (60)payablesIncrease/(decrease) in current (176) 58 2 3provisions Net cash flow used in (665) (1,970) (2,084) (2,097)operating activities Non-cash financing activities During the year the company issued 2,747,802 ordinary shares at GBP0.35 ($0.84)to acquire 3 underground mines and it issued 749,137 ordinary shares at $0.685in lieu of services rendered. 37 Loss per share The following reflects the operating loss and share data used in thecalculations of basic and diluted loss per share: 2006 2005 $000 $000 Net consolidated loss (3,614) (4,148)Adjustments:Less: Net loss attributable to outside equity 67 -interest (3,681) (4,148) Loss used in calculating basic and dilutedearnings per share Number NumberWeighted average number of ordinary shares used 83,352,062 77,706,802in calculating basic loss per shareEffect of dilutive securities:Employee share plan shares 4,923,380 2,733,334Adjusted weighted average number of ordinary 88,275,442 80,440,136shares used in calculating diluted loss pershare Information concerning the classification of securities: Options granted are considered to be potential ordinary shares but have not beenincluded in the determination of diluted loss per share as they are notdilutive. Details relating to the options are set out in the Directors' Reportand note 38. 38 Share-based payments (a) Employee Option Plan An employee incentive option plan was approved at the 2003 annual generalmeeting. This plan was replaced by a new employee option plan approved at the2005 annual general meeting. Participants of the option plan are determined by the Board and can be employeesand directors of, or consultants to, the company or a controlled entity. TheBoard considers length of service, seniority, responsibilities, potentialcontribution and any other relevant matters in determining eligibility ofpotential participants. The Board has sole responsibility to determine thenumber of options and terms and conditions of options granted to anyparticipant. The options issued under the option plan will be granted free of charge. Theexercise price for the options is to be not less than the weighted average shareprice for the last five trading days immediately preceding the options beingoffered to the participant. The expiry date of the options will be determined by the Board and will alsolapse within one month of the participant ceasing to be a director, employee orconsultant of the company or a controlled entity (subject to certainexceptions). The Board at its discretion may apply certain vesting conditionsupon any options issued under the plan. The options are not transferable without prior written approval from the Board.The options will not be quoted on a publicly traded stock market; howeverapplication will be made for ASX/AIM quotation of the shares issued upon theexercise of the options. Set out below are summaries of options granted under the plan: Consolidated and parent entity - 2006 Grant date Expiry date Exercise Balance Granted Balance Exercisable price at start during at end of at end of of year the year the year the year Number Number Number Number 17 February 30 June 2007 $0.52 1,100,000 - 1,100,000 733,333 200420 April 2006 30 June 2009 $0.87 - 250,000 250,000 -20 April 2006 30 June 2009 $1.00 - 1,250,000 1,250,000 - 1,100,000 1,500,000 2,600,000 733,333 Weighted average exercise price $0.52 $0.98 $0.78 $0.52 Consolidated and parent entity - 2005 Grant date Expiry date Exercise Balance Granted Balance Exercisable price at start during at end of at end of of year the year the year the year Number Number Number Number 17 February 30 June 2007 $0.52 1,100,000 - 1,100,000 366,666 2004 Weighted average exercise price $0.52 - $0.52 $0.52 No options were forfeited during the periods covered by the above tables. Fair value of options granted The assessed fair value at grant date of options granted during the year ended30 June 2006 was 20.7 cents per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividendyield and the risk free interest rate for the term of the option. The additional model inputs for options granted during the year ended 30 June2006 included: (a) options are granted for no consideration, have a three year life, and 33% ofeach tranche vests and is exercisable on each anniversary of the date of grant (b) share price at grant date: $0.76 (c) expected price volatility of the company's shares: 60% (d) expected dividend yield: Nil (e) risk-free interest rate: 5.8% The expected price volatility is based on the historic volatility (based on theremaining life of the options), adjusted for any expected changes to future volatility due to publicly availableinformation. (b) Employee Share Plan An employee incentive share plan was approved at the 2003 annual generalmeeting. This plan was replaced by a new employee share plan approved at the2005 annual general meeting. Participants of the plan are determined by the Board and can be employees anddirectors of, or consultants to, the company or a subsidiary. The Boardconsiders length of service, seniority, responsibilities, potential contributionand any other relevant matters in determining eligibility of potentialparticipants. The issue price for the shares issued under the plan are not less than theweighted average share price for the last five trading days immediatelypreceding the offer to the participant. The market value of shares issued underthe scheme, measured as the weighted average market price on the day of issue ofthe shares, is recognised in the statement of financial position as sharecapital and as part of employee benefit costs in the period the shares arevested. A participant who is invited to subscribe for shares under the plan may also beinvited to apply for a loan up to the amount payable in respect of the sharesaccepted by the participant. These loans are to be made on the following terms: • Interest free; • Applied directly against the issue price of the shares to be acquired under the plan; • For a term to be determined by the Board; • Repayable to the extent of the lesser of the issue price of the relevant shares issued, less any cash dividends applied against the outstanding principal; and the last market sale price of the shares on the date of repayment of the loan; • The loan must be repaid in full prior to expiry of the loan; • The company will have a lien over the shares in respect of which a loan is outstanding; • Shares issued under the plan are not transferable while a loan amount in respect of those shares remains payable; and • Shares issued under the share plan will not be quoted on a publicly traded stock market while a loan amount in respect of those shares remains payable. All shares issued under the employee share plan with non-recourse loans areconsidered to be options and are accounted for in accordance with note 1(v)(ii). On 17 December 2003, 2,850,000 shares were issued at $0.52 to directors,consultants and employees under the plan. The shares were paid for by way of aloan payable on or before 17 December 2006 (as provided by the plan). On 21 December 2005, 750,000 shares were issued at $0.87 to directors under theplan. Also on 21 December 2005, 3,350,000 shares were issued at $1.00 todirectors, consultants and employees under the plan. On 12 April a further200,000 shares were issued at $1.00 to a consultant under the plan. These shareswere paid for by way of a loan payable on or before 21 December 2008 and 12April 2009 respectively (as provided by the plan). For details of the shares issued to directors and executives refer to note 28. (c) Expenses relating to share based payment transactions Consolidated Parent entity 2006 2005 2006 2005 $000 $000 $000 $000 Options issued under employee 87 140 87 140option planShares issued under employee 341 206 341 206share planShares issued in exchange for 513 - 513 -services rendered 941 346 941 346 39 Impact of Adopting Australian Equivalents to IFRS (1) Reconciliation of equity reported under previous Australian GenerallyAccepted Accounting Principles (AGAAP) to equity under Australianequivalents to IFRSs (AIFRS) (a) At the date of transition to AIFRS: 1 July 2004 Consolidated Parent entity Previous Effect of AIFRS Previous Effect of AIFRS AGAAP transition AGAAP transition to AIFRS to AIFRS Notes $000 $000 $000 $000 $000 $000ASSETSCurrent assetsCash and cash 6,632 - 6,632 4,798 - 4,798equivalentsReceivables 547 - 547 37 - 37Inventories 250 - 250 - - -Total current 7,429 - 7,429 4,835 - 4,835assetsNon-current assetsReceivables 4(a) 1,627 (1,482) 145 3,010 - 3,010Other financial 89 - 89 3,939 - 3,939assetsProperty, plant and 4(b), 3,054 (1,683) 1,371 89 - 89equipment 4(c)Total non-current 4,770 (3,165) 1,605 7,038 - 7,038assets 12,199 (3,165) 9,034 11,873 11,873 Total assets - LIABILITIESCurrent liabilitiesPayables 982 - 982 344 - 344Provisions 4(d) 503 (159) 344 - - -Total current 1,485 (159) 1,326 344 - 344liabilitiesNon-currentliabilitiesPayables - - - 714 - 714Provisions 4(d) - 105 105 - - -Total non-current - 105 105 714 - 714liabilitiesTotal liabilities 1,485 (54) 1,431 1,058 - 1,058Net assets 10,714 (3,111) 7,495 10,815 - 10,815 EQUITYContributed equity 4(a) 41,834 (1,482) 40,352 41,834 41,834Reserves 4(a) - 173 173 - 173 173Accumulated losses 4(a), (31,120) (1,802) (32,922) (31,019) (173) (31,192) 4(b), 4(c), 4(d)Parent entity 10,714 (3,111) 7,603 10,815 - 10,815interestMinority interest - - - - - -Total equity 10,714 (3,111) 7,603 10,815 - 10,815 39 Impact of Adopting Australian Equivalents to IFRS (continued) (b) At the end of the last reporting period under previous AGAAP: 30 June2005 Consolidated Parent entity Previous Effect of AIFRS Previous Effect of AIFRS AGAAP transition AGAAP transition to AIFRS to AIFRS Notes $000 $000 $000 $000 $000 $000ASSETSCurrent assetsCash and cash 9,582 - 9,582 7,270 - 7,270equivalentsReceivables 1,003 - 1,003 319 - 319Inventories 542 - 542 - - -Total current 11,127 - 11,127 7,589 - 7,589assetsNon-current assetsReceivables 4(a) 3,545 (1,421) 2,124 6,313 - 6,313Other financial 76 - 76 2,546 - 2,546assetsProperty, plant and 4(b), 3,582 (1,809) 1,773 147 - 147equipment 4(c)Exploration, 1,092 - 1,092 - - -evaluation andmining properties Total non-current 8,295 (3,230) 5,065 9,006 - 9,006assets 19,422 (3,230) 16,192 16,595 - 16,595 Total assets LIABILITIESCurrent liabilitiesPayables 1,101 - 1,101 284 - 284Provisions 4(d) 561 (136) 425 3 - 3Total current 1,662 (136) 1,526 287 - 287liabilitiesNon-currentliabilitiesPayables - - - 710 - 710Provisions 4(d) - 97 97 - - -Total non-current - 97 97 710 - 710liabilitiesTotal liabilities 1,662 (39) 1,623 997 - 997 Net assets 17,760 (3,191) 14,569 15,598 - 15,598 EQUITY Contributed equity 4(a) 52,147 (1,421) 50,726 50,726 - 50,726Reserves 4(a), - 913 913 - 519 519 4(c), 4(d) Accumulated losses 4(a0, (34,387) (2,683) (37,070) (35,128) (519) (35,647) 4(b), 4(c), 4(d)Parent entity 17,760 (3,191) 14,569 15,598 - 15,598interest Minority interest - - - - -Total equity 17,760 (3,191) 14,569 15,598 - 15,598 (2) Reconciliation of profit under previous AGAAP to profit underAustralian equivalents to IFRSs (AIFRS) (a) Reconciliation of profit for the year ended 30 June 2005 Consolidated Parent entity Previous Effect of AIFRS Previous Effect of AIFRS AGAAP transition AGAAP transition to AIFRS to AIFRS Notes $000 $000 $000 $000 $000 $000RevenueRevenue from sale of 5,164 - 5,164goods - - -Cost of sales 4(b) (3,891) (31) (3,922) - - - 1,273 (31) 1,242 - - -Other income 628 - 628 1,274 - 1,274Other expenses fromordinary activitiesAdministration (3,994) - (3,994) (2,555) - (2,555)Share based 4(a) - (346) (346) (346) (346)compensationCharges against (212) - (212) (2,276) - (2,276)assetsExploration, (580) - (580) (552) (552) -evaluation andproject generation costsFinance costs 4(d) - (8) (8) - - -Foreign exchange 4(c) (382) (496) (878) - - -gains/(losses) Loss before income (3,267) (881) (4,148) (4,109) (346) (4,455)taxIncome tax expense - - - - - -Loss for the year (3,267) (881) (4,148) (4,109) (346) (4,455)Loss attributable to - - - - - -minority interest Loss attributable to (3,267) (881) (4,148) (4,109) (346) (4,455)members of DwykaDiamonds Limited 39 Impact of Adopting Australian Equivalents to IFRS (continued) (3) Reconciliation of cash flow statement for the year ended 30 June 2005The adoption of AIFRSs has not resulted in any material adjustments tothe cash flow statement. (4) Notes to the reconciliations (a) Share-based paymentsUnder AASB 2 Share-based Payment from 1 July 2004 the Group is requiredto recognise an expense for those shares and options that were issued toemployees under the Dwyka Diamonds Employee Share and Option Plan after 7November 2002 but that had not vested by 1 January 2005. In addition thetreatment of the shares issued under the Plan changes in that as theshares are financed by a limited recourse loan there is no equityrecognised until the employee loan is repaid in accordance with the Planterms (Refer Note 38) The effects of these changes are: (i) At 1 July 2004For the Group and parent company there has been an increase inaccumulated losses of $173,000 and a corresponding increase in reserves.For the Group and parent company non-current receivables decreases by$1,482,000 and contributed equity decreases by the same amount. (ii) At 30 June 2005For the Group and parent company there has been an increase inaccumulated losses of $519,000 and a corresponding increase in reserves.For the Group and parent company non-current receivables decreases by$1,421,000 and contributed equity decreases by the same amount. (iii) For the year ended 30 June 2005For the Group and parent company there has been an increase in employeebenefits expense of $346,000. (b) ImpairmentThe assessment of recoverable amount of the plant and equipment utilisedby the Group's South African based industrial division has been reviewed.When this assessment was made under previous AGAAP, the recoverableamount was estimated on an undiscounted basis. Using a discount rate of8% to arrive at value-in-use, at the date of transition an impairment of$25,000 existed. The effect of this is: (i) At 1 July 2004For the Group there has been a decrease in plant and equipment of $25,000while accumulated losses has increased by the same amount. (ii) At 30 June 2005For the Group there has been a decrease in plant and equipment of $56,000while accumulated losses has increased by the same amount. (iii) For the year ended 30 June 2005For the Group depreciation expense has increased by $31,000. 39 Impact of Adopting Australian Equivalents to IFRS (continued) (c) Foreign currency translation reserveUnder AIFRS the Group has elected to apply the period closing exchangerate for translation of controlled entity non-monetary items uponconsolidation with exchange translation differences being represented bya foreign currency translation reserve. Under AGAAP the Group wastranslating these non-monetary items at historical exchange rates. Further, the Group has elected to apply the exemption in AASB 1First-time Adoption of Australian Equivalents to International FinancialReporting Standards. The cumulative translation differences for allforeign operations calculated above and represented in the foreigncurrency translation reserve are deemed to be zero at the date oftransition to AIFRSs. This transition date adjustment carries through toeach subsequent period. The effects of the above are: (i) At 1 July 2004For the Group plant and equipment is reduced by $1,658,000 whileaccumulated losses are increased by the same amount (ii) At 30 June 2005For the Group plant and equipment is reduced by $1,753,000 whileaccumulated losses are increased by $2,154,000 and the foreign currencytranslation reserve is recognised at $401,000. (iii) For the year ended 30 June 2005For the Group, accumulated losses have increased by $496,000. (d) Provision for rehabilitationUnder AASB 137 Provisions, Contingent Liabilities and Contingent Assetsfrom 1 July 2004 the group is required to recognise a provision frominception of the operation, through the creation of an equal valued assetwhich is then amortised over the life of the operation. This is in contrast to the previous Australian GAAP treatment under whichthe provision is created in proportion to the tonnes mined over the lifeof mine reserve. (i) At 1 July 2004For the Group, there has been a net decrease in provisions of $54,000,and a corresponding decrease in accumulated losses of $54,000 (ii) At 30 June 2005For the Group, there has been a net decrease in provisions of $39,000, adecrease in reserves of $7,000 and a decrease in accumulated losses of$46,000 (iii) For the year ended 30 June 2005For the Company there has been an increase in interest expense of $8,000. 39 Impact of Adopting Australian Equivalents to IFRS (continued) (e) Accumulated lossesThe effect on accumulated losses of the changes set out above are asfollows: Consolidated Parent 1 July 30 June 1 July 30 June 2004 2005 2004 2005 Notes $000 $000 $000 $000Foreign currency 4(c) (1,658) (2,154) - -translation reserveImpairment 4(b) (25) (56) - -Provision for 4(d) 54 46 - -rehabilitationShare-based payments 4(a) (173) (519) (173) (519)Total adjustment (1,802) (2,683) (173) (519) (5) Adjustments on transition to AASB 132 Financial Instruments: Disclosure andPresentation and AASB 139 Financial Instruments: Recognition and Measurement: 1July 2005 (a) Available-for-sale financial assets The Group has taken the exemption available under AASB 1 to apply AASB 132 andAASB 139 only from 1 July 2005. The Group has applied previous AGAAP to thecomparative information on financial instruments within the scope of AASB 132and AASB 139. Refer to note 1(m) for further information on the transition to AASB 132 andAASB 139 from 1 July 2005. At 1 July 2005, for the Group and the parent entity, reserves are decreased by$82,000 and accumulated losses are decreased by the same amount. Additionally,within other financial assets, investments traded on organised markets isdecreased by $76,000 and available-for-sale financial assets is increased by thesame amount. DWYKA DIAMONDS LIMITED DIRECTOR'S DECLARATION In the directors' opinion: (a) the financial statements and notes set out on pages 27 to 84 are inaccordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 andother mandatory professional reporting requirements; and (ii) giving a true and fair view of the company's and consolidated entity'sfinancial position as at 30 June 2006 and of their performance, as representedby the results of their operations, changes in equity and their cash flows, forthe financial year ended on that date. (b) there are reasonable grounds to believe that the company will be able to payits debts as and when they become due and payable; and (c) the audited remuneration disclosures set out on pages 15 to 19 of thedirectors' report comply with Accounting Standards AASB 124 Related PartyDisclosures and the Corporations Regulations 2001. The directors have been given the declarations by the chief executive officerand chief financial officer required by section 295A of the Corporations Act2001. This declaration is made in accordance with a resolution of the directors. M. J Sturgess Executive Chairman Perth Date: 29 September 2006 PRICEWATERHOUSECOPERS Independent audit report to the members ofDwyka Diamonds Limited Audit opinion In our opinion: 1. the financial report of Dwyka Diamonds Limited: • gives a true and fair view, as required by the Corporations Act2001 in Australia, of the financial position of Dwyka Diamonds Limited and theDwyka Diamonds Limited Group (defined below) as at 30 June 2006, and of theirperformance for the year ended on that date, and • is presented in accordance with the Corporations Act 2001,Accounting Standards and other mandatory financial reporting requirements inAustralia, and the Corporations Regulations 2001;and 2. the remuneration disclosures that are contained on pages 14 to 19 ofthe directors' report comply with Accounting Standard AASB 124 Related PartyDisclosures (AASB 124) and the Corporations Regulations 2001. This opinion must be read in conjunction with the rest of our audit report. Scope The financial report, remunerations disclosures and directors' responsibility The financial report comprises the balance sheet, income statement, cash flowstatements, statements of changes in equity, accompanying notes to the financialstatements, and the directors' declaration for both Dwyka Diamonds Limited (thecompany) and the Dwyka Diamonds Limited Group (the consolidated entity), for theyear ended 30 June 2006. The consolidated entity comprises both the company andthe entities it controlled during that year. The company has disclosed information about the remuneration of directors andexecutives (remuneration disclosures) as required by AASB 124, under the heading"Remuneration Report" on pages 14 to 19 of the directors' report, as permittedby the Corporations Regulations 2001. The directors of the company are responsible for the preparation and true andfair presentation of the financial report in accordance with the CorporationsAct 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detectfraud and error, and for the accounting policies and accounting estimatesinherent in the financial report. The directors are also responsible for theremuneration disclosures contained in the directors' report. Audit approach We conducted an independent audit in order to express an opinion to the membersof the company. Our audit was conducted in accordance with Australian AuditingStandards, in order to provide reasonable assurance as to whether the financialreport is free of material misstatement and the remuneration disclosures complywith AASB 124 and the Corporations Regulations 2001. The nature of an audit isinfluenced by factors such as the use of professional judgement, selectivetesting, the inherent limitations of internal control, and the availability ofpersuasive rather than conclusive evidence. Therefore, an audit cannot guaranteethat all material misstatements have been detected. For further explanation ofan audit, visit our website http://www.pwc.com/au/financialstatementaudit. We performed procedures to assess whether in all material respects the financialreport presents fairly, in accordance with the Corporations Act 2001, AccountingStandards and other mandatory financial reporting requirements in Australia, aview which is consistent with our understanding of the company's and theconsolidated entity's financial position, and of their performance asrepresented by the results of their operations, changes in equity and cashflows. We also performed procedures to assess whether the remunerationdisclosures comply with AASB 124 and the Corporations Regulations 2001. We formed our audit opinion on the basis of these procedures, which include: • examining, on a test basis, information to provide evidencesupporting the amounts and disclosures in the financial report and remunerationdisclosures, and • assessing the appropriateness of the accounting policies anddisclosures used and the reasonableness of significant accounting estimates madeby the directors. Our procedures include reading the other information in the Annual Report todetermine whether it contains any material inconsistencies with the financialreport. While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our audit was not designed to provide assurance on internal controls. Our audit did not involve an analysis of the prudence of business decisions madeby directors or management. Independence In conducting our audit, we followed applicable independence requirements ofAustralian professional ethical pronouncements and the Corporations Act 2001. PricewaterhouseCoopers David J Smith Perth Partner 29 September 2006 The shareholder information set out below was applicable as at 31 August 2006. A. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Class of equity security Shares1 - 1,000 781,001 - 5,000 1825,001 - 10,000 7010,001 - 100,000 139100,001 and over 85 554 There were 45 holders of a less than a marketable parcel of ordinary shares. B. Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted ordinary shares as at 31August 2006 were: Listed ordinary shares Name Number held Percentage of issued sharesChase Nominees Limited 11,432,350 12.33Mellon Nominees (UK) Limited 7,549,000 8.14Willbro Nominees Limited 5,208,572 5.62Daltonvale Ltd 4,439,905 4.79Productive Nominees Limited 3,290,867 3.55Brewin Nominees (Channel Islands ) 3,025,000 3.26LimitedChase Nominees Limited 2,930,000 3.16Acorn Mining (Proprietary) Limited 2,448,042 2.64Morstan Nominees Limited 2,405,600 2.59The Bank of New York (Nominees) 2,250,000 2.43LimitedGoldman Sachs Securities (Nominees) 2,053,135 2.21LimitedMr Ed Nealon 2,000,000 2.16Ms Melissa Sturgess 2,000,000 2.16ANZ Nominees Limited 1,992,650 2.15Ferlim Nominees Limited 1,735,000 1.87Pershing Keen Nominees Limited 1,699,655 1.83HSBC Custody Nominees (Australia) 1,604,844 1.73LimitedThe Bank of New York (Nominees) 1,386,783 1.50LimitedFisherstreet Management Limited 1,316,668 1.42Clyde Trading Ltd 1,259,133 1.36 62,027,204 66.90 C. Substantial holders Substantial holders in the Company are set out below: Ordinary shares Number held PercentageJP Morgan Chase & Co 8,755,000 9.44FNR Corp & FIL 8,295,600 8.96 D. Voting rights The voting rights attaching to each class of equity securities are set outbelow: (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shallhave one vote and upon a poll each share shall have one vote. E. Restricted securities There are no restricted securities on issue. F. Tenement Schedule 1. Mining Permit and Mining Licence held through controlled entity Supermix Mining (Pty) Ltd Mining Permit, MP 308/2000, issued in terms of Section 9(1) read with Section 9(3)(d) of the Minerals Act covering the farm De Hoop (formerly No. K72)measuring 3108.25 hectares in extent. The permit was renewed on 19 November 2003and is valid until 20 December 2006. Mining Permit, MP 165/2002, to mine diamonds and issued in terms of Section 9(1)read with Section 9(3)(d) of the Minerals Act covering the remaining extent DeHoop No. 65, Pax No. 195, Portion 7 De Hoop No. 65, Portion 8 De Hoop No. 65,Portion 9 De Hoop No. 65, Portion 10 a portion of Portion 1 De Hoop No. 65,Portion 11 a portion of Portion 1 of De Hoop No. 65, Farm No. 196, Farm 193 andPortion 5 of De hoop No. 65 (excluding area delineated as Phase B). The permitwas issued on 19 November 2002 and is valid until 18 November 2006. Mining Permit, ML 08/2002, to mine diamonds, sand and dimension stone and issuedin terms of Section 9(1) read with Section 9(3)(d) of the Minerals Act coveringPortion 5 of De Hoop No. 65 (Phase A and B) and the remaining extend of De Hoop.The permit was issued on 12 February 2003 and is valid until 20 December 2006. Mining Licence, ML 3/2003, issued in terms of Section 9(1) read with Section 9(3)(d) of the Minerals Act covering Portions 1, 2, 3, 4, 5 & 6 of the farmNooitgedacht. The licence is valid until 20 June 2011. F. Tenement Schedule (continued) 2. Right to Prospect and Prospecting Permit held through controlled entity Basfour 2624 (Pty) Ltd Prospecting Permit PP 31/2003 issued subject to the provisions of the MineralsAct 1991 - Permit on a certain surveyed portion of farms 84 & 86 and valid until24th August 2006 & issued on 25th August 2003. An application to convert the oldorder prospecting right to a new order prospecting right was launched on 15 July2006. Prospecting Permit, PP31/2003 is valid whilst the Department of Mineraland Energy process the application for a conversion. 3. Right to Prospect / Mine held through controlled entity - Kophia Diamonds The current status in respect of the prospecting/mining titles on the individualproperties is described as follows: 1. Newlands Diamond Mine - Certain 80 precious stone claims situated on portion 1 of Farm No 72, District of Barkly West. On the 9th January 2001 a mining license, ML 1/2001, was issued to KophiaDiamonds to mine for diamonds for a period ending on the exhaustion of theeconomically viable reserves or "in perpetuity". This mining license constitutesa "used old order mining right" and the holder of the mining license has theexclusive right to apply for a new order mining right for the period ending 31April 2009. The MPRDA states that the Minister must grant a new order miningright if the applicant complies with the prerequisites set out in Sections 22and 23 of the MPRDA, which includes compliance with the empowerment objectives. 2. West End Diamond Mine - Portion of the Remaining extent of Erf 14 ofPostmasburg. An application for a "new order mining right" has been submitted to the DME. Theapplication submitted is in respect of the West End Mine and does not includeany tailings situated on the surface. 3. Blaauwbosch Diamond Mine - District of Boshoff. Kophia Diamonds were issued with a mining license ML 12/2002 for a period of 25years ending 28 July 2027. This mining license constitutes a "used old ordermining right" and the holder of the mining license has the exclusive right toapply for a new order mining right for the period ending 31 April 2009. TheMPRDA states that the Minister must grant a new order mining right if theapplicant complies with the prerequisites set out in Sections 22 and 23 of theMPRDA, which includes compliance with the empowerment objectives. 4. New Elands Diamond Mine - District of Boshoff. Kophia Diamonds were issued with a mining license ML 12/2002 for a period of 25years ending 28 July 2027. This mining license constitutes a "used old ordermining right" and the holder of the mining license has the exclusive right toapply for a new order mining right for the period ending 31 April 2009. TheMPRDA states that the Minister must grant a new order mining right if theapplicant complies with the prerequisites set out in Sections 22 and 23 of theMPRDA, which includes compliance with the empowerment objectives. F. Tenement Schedule (continued) 4. Mineral exploration permits held through controlled entity Amil Mining India Pvt Ltd Reconnaissance permit covering Orissa licence 75 was executed on 19 February2006 for a period of three years. The licence granted covers an area of 128.06square kilometres. Reconnaissance permit covering Orissa licence 81 was executed on 19 February2006 for a period of three years. The licence granted covers an area of 2600square kilometres. Reconnaissance permit covering Orissa licence 68 was applied for on 8 March 2001for a period of three years. The licence application covers an area of 1930square kilometres. Awaiting execution. Reconnaissance permit covering Orissa licence 70 was applied for on 8 March 2001for a period of three years. The licence application covers an area of 1870square kilometres. Awaiting execution. Reconnaissance permit covering Orissa licence 71 was applied for on 8 March 2001for a period of three years. The licence application covers an area of 631.80square kilometres. Awaiting execution. Reconnaissance permit covering Orissa licence 76 was applied for on 15 August2001 for a period of three years. The licence application covers an area of 550square kilometres. Awaiting execution. Reconnaissance permit covering Orissa licence 80 was applied for on 24 December2001 for a period of three years. The licence application covers an area of 2000square kilometres. Awaiting execution. Prospecting Licence application covering Andhra Pradesh SL No. 1 was applied foron 1 July 2005 for a period of three years. The licence application covers anarea of 2.73 square kilometres. Application being processed. Prospecting Licence application covering Andhra Pradesh SL No. 2 was applied foron 1 July 2005 for a period of three years. The licence application covers anarea of 0.95 square kilometres. Application being processed. 5. Mineral exploration permits held through controlled entity Dywka Tanzania Limited Prospecting license 2097/2002 granted pursuant to section 29 of the mining act1998 in 2002 and renewed on 20 December 2005 for a further 3 year period. Prospecting license 2098/2002 granted pursuant to section 29 of the mining act1998 in 2002 and renewed on 12 January 2006 for a further 3 year period. This information is provided by RNS The company news service from the London Stock Exchange

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