Wrap Text
Audited financial results for year ended 31 December 2013 and Notice of AGM
DiamondCorp plc
AIM share code: DCP & JSE share code: DMC
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp", “the Group” or "the Company")
Final Results for the year ended 31 December 2013 and
Annual Report and Accounts and Notice of Annual General Meeting
Highlights
- Further cuts in overhead costs including mine G&A reduces net loss for the year to £2.61 million
from £3.53m in 2012 and £4.24m in 2011
- Finance package for Lace mine development finalised in January 2013, surface facilities
installed and underground mining commenced
- Carrying value of property, plant and equipment at year end £14.89m from £8.78m
- Cash at year end £2.22m with a further £2.10m gross raised in April 2014
- Lace mine is fully funded to production which is expected to begin earlier than previously expected
- Underground mining fleet continues to provide near 90% availability with operating costs running at
95% of budget
- Prices for rough diamonds remain firm with a positive outlook for the medium and longer term
Annual Report and Accounts and Notice of General Meeting
The Company?s Annual Report and Accounts for the year ended 31 December 2013 is being posted to
shareholders today together with the Notice of the Annual General Meeting which will be held on Thursday,
th
26 June 2014 at 2.30 p.m. at City Group PLC, 4 floor, 6 Middle Street, London, EC1A 7JA.
The Company has also sent a letter today to shareholders informing them that it is intending to provide
Shareholder Information in electronic form.
Copies of all of these documents, together with the form of proxy, are also available on the Company?s
website (www.diamondcorp.plc.uk).
Contact details:
DiamondCorp plc
Paul Loudon, Chief Executive
Tel: +27 (0) 56 212 2930
Euan Worthington, Chairman
Tel: +44 (0) 7753 862 097
UK Broker & Nomad JSE Designated Advisor
Panmure Gordon (UK) Limited Sasfin Capital (a division of Sasfin Bank Limited)
Dominic Morley/Adam James Megan Young
Tel: +44 20 7886 2500 Tel: +27 11 809 7711
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Letter from the Chairman and the Chief Executive Officer
Dear Shareholder
Since we last wrote to you there have been major advances in our development of the Lace underground mine. Located in the Free State of
South Africa, Lace is some two hours drive from Johannesburg on good tarred roads. The mine, which now employs almost 300 people, is
connected to the main Eskom power grid and has an independent integrated water supply. We had commissioned a 1.2 million tonne per
annum ("mtpa") diamond recovery plant at Lace in 2007. Last year that plant resumed the processing of old tailings and has been modified to
treat kimberlite ore from underground. Your company owns 74% of the project with our BEE partners, Shanduka Resources (13%) and Sphere
Investments (13%) holding the balance.
Underground mine development
At the end of 2012, we completed a ZAR320 million financing for the 47 Level block cave development, including new underground ramps,
ventilation shafts, crusher and conveyor systems. In late January 2013, work started and by the year-end, underground tunnel development was
15% complete and was being achieved at 94% of the budgeted cost per metre. Hiring of additional mining crews continued after year end and the
full underground complement was reached by the end of March 2014.
The Company has experienced no labour issues and continues to hire the personnel it requires. Safety remains a major priority for the
Company, with Lace achieving a 39% improvement in the lost time injury frequency rate (LTIFR) from 0.90 in 2012 to 0.55 per 200,000
manhours in 2013. Management aims for zero harm to its employees and targets, a LTIFR of less than 0.50.
The underground mining fleet continues to provide near 90% availability, with operating costs running at 95% of budget. The mining fleet
rebuild costs are also running at 95% of budget. The last two rebuilt 20 tonne low profile dump trucks, required to achieve maximum
underground development rates, were commissioned on time during the year. The last two underground loaders were being assembled at year end
and since then one has been commissioned with the other to be operational in coming weeks.
At year end, twin decline development from the base of the boxcut was continuing downwards to meet the development tunnels coming up
from the 92m level and installation of the steel sets for reinforcement of the portal area was complete. The two sets of tunnels are expected to join
up in October 2014.
The design and detailed drawings for the underground conveyor belt system was on schedule (85% complete) and under budget. Fabrication of the
first leg of the conveyor to be installed was completed and delivered to site; fabrication at year-end of the second leg was 40% complete. During the
current year, the conveyor belt will be commissioned from the 200m level to surface, and will then be progressively installed down to the 470m level
as development progresses.
In 2013, we bought a new Boart Longyear diamond drilling rig which is now being used underground. The initial drilling programme aimed at better
defining the rim of the Main Pipe for finalised cave layout and definition of the „Bulge? area. In the process of this drilling, much more high-grade K4
kimberlite (CK or coherent kimberlite) was intersected on the western side of the pipe above the 345m level than was projected in the Lace
geological model. This Upper K4 unit has now been defined over an area of approximately 75m x 75m on the 250m level, and is being actively
delineated above and below to add to the resource base.
No kimberlite above the 345m level is included in the current mine plan, as definition drilling from surface was not possible due to the presence
of old workings. The Upper K4 Block (UK4) now being defined has the potential to add at least 1.0 million tonnes of additional kimberlite to the
Lace mine plan which can be mined while the 47 Level Block Cave development progresses and will form part of an upgraded resource
statement in 2014.
Diamond recovery plant
During 2013, we re-commissioned the 1.2mtpa Lace diamond recovery plant, including optimising bottom screen sizes to maximise operating
margins. Our first diamond sale since mid-2009 was a parcel of 6,442 carats which was concluded in Antwerp last November. The sale
included the first diamonds sold to Tiffany & Co. subsidiary Laurelton Diamonds Inc. under the Company?s offtake agreement. Regular sales
will continue this year as we ramp up retreatment of the remaining 2.3 million tonnes of tailings. These will be treated over the next few years
alongside increasing tonnage of kimberlite from underground development. The plant is now configured to treat both tailings and kimberlite ore.
Corporate actions
The Company is very cost conscious on all levels and the London office is no exception. During 2013, as activities accelerated at the Lace
mine, we relocated the Company?s finance function to South Africa to operate alongside the mining department. In July, we recruited Sanette De
Wet as Chief Financial Officer and we recently announced the appointment of PricewaterhouseCoopers LLP as Group auditors. Sanette, who
lives near Lace, has experience in the diamond sector and will work closely with the PwC office in Kimberley which has long standing connections
with South African diamond producers.
To further bolster our South African team, we are pleased that leading mining attorney, Hulme Scholes joined us as a Non-Executive director last
August. He has helped the Company since its creation and brings a wealth of experience to the Board.
As well as changing auditors, we reviewed the role of all our advisors. In London, we appointed Panmure Gordon & Co. as Nominated Advisor and
sole broker while in South Africa we have retained Sasfin Capital as our AltX Designated Advisor and broker.
4
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Letter from the Chairman and the Chief Executive Officer
In March this year, we completed an oversubscribed share placing to existing and new shareholders which raised £2.1million before costs for
corporate overheads and head office costs. We do not anticipate further fund raisings before Lace is in full production and loans to
DiamondCorp plc can be repaid.
Diamond prices
Rough diamond prices fell during 2013 in response to the weakening Indian rupee and continuing tight credit markets for cutters and polishers.
Polished prices on the other hand improved in response to improving economic conditions, particularly in the US, which remains the largest single
market for diamond jewellery. This was a healthy development as earlier increases in rough prices had not been matched at the retail end which
had the potential to destabilise the market.
Since year end, the improving market for polished diamonds, with diamond jewellery sales up 5% in the US in the first two months of the year and
Chinese jeweller Chow Tai Fook experiencing a 14% increase in demand in Q1, has flowed across to the rough market, as rough prices have
improved by around 5%. The Company is forecasting the market to be steady to modestly higher for the balance of 2014, with potential for price
strengthening in 2015 as world economies continue to recover.
Company strategy
In our letter to you last year, we noted that we are continually looking for other diamond opportunities to build DiamondCorp into a mid-tier
producer. That search continued during 2013 and for the last few months but despite reviewing a number of projects in Africa nothing has
cleared our stringent political risk hurdles or reached the economic threshold that we seek. Despite the stabilisation of the financial markets, we note
that the investors remain risk averse and increasingly focused on larger companies. We are strong believers in the attractions of the
diamond sector over coming years and with our experienced team will continue our efforts to build the Company but for now our attention is firmly
focused on the development of Lace.
In conclusion
It is difficult to convey in words the great advances which we have made at Lace in the past 15 months and we hope you can get a better
flavour from some of the photographs and presentations on the Company website at www.diamondcorp.plc.uk. We are now a mining company
and diamond producer well on the way to unlocking the treasure chest underground at the Lace mine while seeking other opportunities to build our
Company into a strong and profitable mid-tier diamond miner. We continue to believe that the outlook for diamond prices is very positive particularly
with growing demand from developing countries such as China and India. On the supply side, major new mines are not being
discovered, older mines are having to develop underground usually with lower output, new mine developments such as GahchoKue in Canada are
suffering delays and perhaps most significantly output from the Marange fields in Zimbabwe looks likely to fall sharply. All these factors are not
helping to meet the growing demand for diamonds that we and industry observers expect.
We would like to thank all our advisors and consultants, past and present, for helping us to reach this position but most importantly our
workforce at Lace. The future is positive and by this time next year we intend to be producing diamonds from fresh kimberlite.
Euan Worthington Paul Loudon
Chairman Chief Executive Officer
5
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Income Statement
Group Company
2013 2012 2013 2012
Note(s) £ £ £ £
Other income 13,983 15,834 3,500 -
Operating expenses (2,193,475) (3,362,571) (10,981,127) (927,437)
Operating loss 20 (2,179,492) (3,346,737) (10,977,627) (927,437)
Investment income 243,634 25,586 88 315
Fair value adjustments (619,042) (44,821) (188,481) (26,226)
Finance costs 22 (55,004) (168,968) (253,619) (86,429)
Loss before taxation (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Taxation 23 - - - -
Loss for the year (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Loss attributable to :
Owners of the parent (2,382,647) (3,016,615) (11,419,639) (1,039,777)
Non-controlling interest (227,257) (518,325) - -
(2,609,904) (3,534,940) (11,419,639) (1,039,777)
Loss per share
Per share information
Basic and diluted loss per share (pence) 26 0.86 1.22 - -
24
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Statement of Comprehensive Income
Group Company
2013 2012 2013 2012
Note(s) £ £ £ £
Loss for the year (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Other comprehensive loss:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations (2,290,568) (1,046,358) - -
Other comprehensive loss for the year net of 25 (2,290,568) (1,046,358) - -
taxation
Total comprehensive loss (4,900,472) (4,581,298) (11,419,639) (1,039,777)
Total comprehensive loss attributable to:
Owners of the parent (4,057,858) (4,165,247) (11,419,639) (1,039,777)
Non-controlling interest (842,614) (416,051) - -
(4,900,472) (4,581,298) (11,419,639) (1,039,777)
Items in the statement above are disclosed net of tax. The income tax relating to each component of other
comprehensive income is disclosed in note 25.
25
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Statement of Financial Position
Group Company
2013 2012 2013 2012
Note(s) £ £ £ £
Assets
Non-Current Assets
Property, plant and equipment 4 14,892,223 8,776,273 277,440 297,258
Goodwill 5 4,606,026 4,606,026 - -
Investments in subsidiaries 6 - - 4,672,501 4,672,501
Loans to group companies 7 - - 13,714,510 -
Other non-current asset 9 43,632 - - -
Restricted cash 12 73,108 92,372 - -
19,614,989 13,474,671 18,664,451 4,969,759
Current Assets
Inventories 10 557,085 297,474 - -
Loans to group companies 7 - - - 23,436,964
Current tax receivable 6,651 8,403 - -
Trade and other receivables 11 880,990 186,619 - 9,167
Cash and cash equivalents 12 2,220,130 4,227,404 5,979 1,363,545
3,664,856 4,719,900 5,979 24,809,676
Total Assets 23,279,845 18,194,571 18,670,430 29,779,435
Equity and Liabilities
Equity
Equity Attributable to Owners of Parent
Share capital 13 35,190,544 34,920,544 35,190,544 34,920,544
Reserves (1,807,236) (218,920) 618,131 531,236
Accumulated loss (22,907,307) (20,524,660) (19,350,926) (7,931,287)
10,476,001 14,176,964 16,457,749 27,520,493
Non-controlling interest (1,946,868) (1,104,254) - -
Total Equity 8,529,133 13,072,710 16,457,749 27,520,493
Liabilities
Non-Current Liabilities
Other financial liabilities 17 9,239,447 - 455,000 455,000
Provisions 18 528,828 119,745 - -
9,768,275 119,745 455,000 455,000
Current Liabilities
Compound instruments - liabilities 16 2,532,981 2,642,739 981,022 780,261
Compound instruments - derivatives 16 2,107,849 1,525,391 730,079 541,598
Trade and other payables 19 341,607 833,986 46,580 482,083
4,982,437 5,002,116 1,757,681 1,803,942
Total Liabilities 14,750,712 5,121,861 2,212,681 2,258,942
Total Equity and Liabilities 23,279,845 18,194,571 18,670,430 29,779,435
The financial statements on pages 26 to 70, of DiamondCorp plc, registered number 5400982, were approved by the Board of Directors and
authorised for issue on 2 June 2014 and signed on behalf of the Board of Directors.
26
DiamondCorp plc
(Registration number 2007/031444/10)
Audited Consolidated And Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Statement of Changes in Equity
Share capital Share premium Total share Foreign currency Share option Warrant reserve Total reserves Accumulated Total attributable Non-controlling Total equity
capital translation reserve loss to owner of the interest
reserve parent
£ £ £ £ £ £ £ £ £ £ £
Group
Balance at 01 January 7,268,041 26,702,502 33,970,543 398,476 429,066 505,877 1,333,419 (18,013,922) 17,290,040 (688,203) 16,601,837
2012
Loss for the year - - - - - - - (3,016,615) (3,016,615) (518,325) (3,534,940)
Other comprehensive loss - - - (1,148,632) - - (1,148,632) - (1,148,632) 102,274 (1,046,358)
Total comprehensive loss - - - (1,148,632) - - (1,148,632) (3,016,615) (4,165,247) (416,051) (4,581,298)
for the year
Issue of shares 857,143 142,857 1,000,000 - - - - - 1,000,000 - 1,000,000
Issue costs - (49,999) (49,999) - - - - - (49,999) - (49,999)
Warrants granted - - - - - 92,000 92,000 - 92,000 - 92,000
Expiry of warrants - - - - - (505,877) (505,877) 505,877 - - -
Value attributed for equity - - - - 10,170 - 10,170 - 10,170 - 10,170
based share based
payments
Total contributions by and 857,143 92,858 950,001 - 10,170 (413,877) (403,707) 505,877 1,052,171 - 1,052,171
distributions to owners of
company recognised
directly in equity
Balance at 01 January 8,125,184 26,795,360 34,920,544 (750,156) 439,236 92,000 (218,920) (20,524,660) 14,176,964 (1,104,254) 13,072,710
2013
Loss for the year - - - - - - - (2,382,647) (2,382,647) (227,257) (2,609,904)
Other comprehensive loss - - - (1,675,211) - - (1,675,211) - (1,675,211) (615,357) (2,290,568)
Total comprehensive loss - - - (1,675,211) - - (1,675,211) (2,382,647) (4,057,858) (842,614) (4,900,472)
for the year
Issue of shares 180,000 90,000 270,000 - - - - - 270,000 - 270,000
Value attributed for equity - - - - 86,895 - 86,895 - 86,895 - 86,895
settled share based
payments
Total contributions by and 180,000 90,000 270,000 - 86,895 - 86,895 - 356,895 - 356,895
distributions to owners of
company recognised
directly in equity
Balance at 31 December 8,305,184 26,885,360 35,190,544 (2,425,367) 526,131 92,000 (1,807,236) (22,907,307) 10,476,001 (1,946,868) 8,529,133
2013
Note(s) 13 13 13 15
27
DiamondCorp plc
(Registration number 2007/031444/10)
Audited Consolidated And Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Statement of Changes in Equity
Share capital Share premium Total share Foreign currency Share option Warrant reserve Total reserves Accumulated Total attributable Non-controlling Total equity
capital translation reserve loss to owner of the interest
reserve parent
£ £ £ £ £ £ £ £ £ £ £
Company
Balance at 01 January 7,268,041 26,702,502 33,970,543 - 429,066 505,877 934,943 (7,397,387) 27,508,099 - 27,508,099
2012
Loss for the year - - - - - - - (1,039,777) (1,039,777) - (1,039,777)
Total comprehensive - - - - - - - (1,039,777) (1,039,777) - (1,039,777)
loss for the year
Issue of shares 857,143 142,857 1,000,000 - - - - - 1,000,000 - 1,000,000
Issue costs - (49,999) (49,999) - - - - - (49,999) - (49,999)
Expiry of warrants - - - - - (505,877) (505,877) 505,877 - - -
Value attributed for - - - - 10,170 - 10,170 - 10,170 - 10,170
equity settled share
based payments
Warrants granted - - - - - 92,000 92,000 - 92,000 - 92,000
Total contributions by 857,143 92,858 950,001 - 10,170 (413,877) (403,707) 505,877 1,052,171 - 1,052,171
and distributions to
owners of company
recognised directly in
equity
Balance at 01 January 8,125,184 26,795,360 34,920,544 - 439,236 92,000 531,236 (7,931,287) 27,520,493 - 27,520,493
2013
Loss for the year - - - - - - - (11,419,639) (11,419,639) - (11,419,639)
Total comprehensive - - - - - - - (11,419,639) (11,419,639) - (11,419,639)
loss for the year
Issue of shares 180,000 90,000 270,000 - - - - - 270,000 - 270,000
Value attributed for - - - - 86,895 - 86,895 - 86,895 - 86,895
equity settled share
based payments
Total contributions by 180,000 90,000 270,000 - 86,895 - 86,895 - 356,895 - 356,895
and distributions to
owners of company
recognised directly in
equity
Balance at 31 8,305,184 26,885,360 35,190,544 - 526,131 92,000 618,131 (19,350,926) 16,457,749 - 16,457,749
December 2013
Note(s) 13 13 13 15
28
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Consolidated and Separate Statement of Cash Flows
Group Company
2013 2012 2013 2012
Note(s) £ £ £ £
Cash flows from operating activities
Cash used in operations 27 (3,313,229) (2,185,843) (1,142,665) (1,110,308)
Finance costs (55,004) - (52,857) -
Net cash used in operating activities (3,368,233) (2,185,843) (1,195,522) (1,110,308)
Cash flows from investing activities
Purchase of property, plant and equipment 4 (6,765,660) (850,034) - -
Sale of property, plant and equipment 4 2,530 - - -
Loans advanced to group companies - - (432,132) -
Outflow relating to other non-current asset (43,632) - - -
Interest Income 243,634 25,586 88 315
Net cash used in investing activities (6,563,128) (824,448) (432,044) 315
Cash flows from financing activities
Proceeds on share issue 13 270,000 950,001 270,000 950,001
Proceeds from other financial liabilities 9,442,618 - - -
Movement in other payables - 50,000 - 50,000
Proceeds from issue of convertible bonds - 3,911,944 - 1,216,495
Net cash from financing activities 9,712,618 4,911,945 270,000 2,216,496
Total cash movement for the year (218,743) 1,901,654 (1,357,566) 1,106,503
Cash at the beginning of the year 4,227,404 2,531,976 1,363,545 257,042
Effect of exchange rate movement on cash balances (1,788,531) (206,226) - -
Total cash at end of the year 12 2,220,130 4,227,404 5,979 1,363,545
29
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1. General information
DiamondCorp plc is a Company incorporated in England and Wales under the Companies Act 2006 and incorporated as an
external company in South Africa under the Companies Act No 71 of 2008. The address of the registered office is given on
page 2. The nature of the Group?s operations and its principal activities are set out in the Directors? Report on page 11.
These financial statements are presented in pounds sterling because that is the functional currency of the parent Company
as well as presentation currency of the Group. Foreign operations are included in accordance with the policies set out in
this note.
These accounting policies are consistent with the previous period.
1.1 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating-decision
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.
The basis of segmental reporting has been set out in note 3.
1.2 Consolidation
Basis of consolidation
The audited consolidated and separate financial statements incorporate the audited consolidated and separate financial
statements of the group and all investees which are controlled by the Company (its subsidiaries).
The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns
from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the
investor's returns.
The results of subsidiaries are included in the audited consolidated and separate financial statements from the effective
date of acquisition to the effective date of disposal.
Adjustments are made when necessary to the audited consolidated and separate financial statements of subsidiaries to
bring their accounting policies in line with those of the group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the
group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are
allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.
Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and
after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.
The difference between the fair value of consideration paid or received and the movement in non-controlling interest for
such transactions is recognised in equity attributable to the owners of the parent.
Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair
value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the
controlling interest.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling
interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the
amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the Company.
30
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.2 Consolidation (continued)
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous
carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When
assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been
recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other
comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the
relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable
IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and
Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled
entity.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group?s interest in the fair value
of the identifiable assets and liabilities of a subsidiary, at the date of acquisition. Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an
asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not
subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to the Group?s cash-generating unit expected to benefit from the
synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is
translated to the presentation currency of the group at the end of each reporting period with the adjustment recognised in
equity through other comprehensive income.
Statement of compliance
The consolidated and separate financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs) issued by the IASB and in accordance with IFRS interpretations committee (IFRS IC)
interpretations. The financial statements have also been prepared in accordance with IFRSs adopted by the European
Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
Basis of preparation
The financial statements have been prepared in accordance with the UK Companies Act 2006 applicable to companies
reporting under IFRS and in terms of the Companies Act 2008 of South Africa.
The financial statements have been prepared on the historical cost basis, except for certain financial instruments that are
measured at fair value, as explained in the accounting policies below. Historical cost is generally based on fair value of th e
consideration given in exchange for assets. The financial statements have been prepared on a going concern basis. The
principal accounting policies adopted are set out below.
1.3 Significant judgements and sources of estimation uncertainty
In preparing the audited consolidated and separate financial statements, management is required to make estimates and
assumptions that affect the amounts represented in the audited consolidated and separate financial statements and related
disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual
results in the future could differ from these estimates which may be material to the audited consolidated and separate
financial statements. Significant judgements include:
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DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.3 Significant judgements and sources of estimation uncertainty (continued)
Impairment testing
Impairment of goodwill - Judgements is applied in determining appropriate assumptions to be used in testing for and
calculating impairment. See policy regarding Goodwill.
Provisions
Provisions were raised and management determined an estimate based on the information available. Additional disclosure of
these estimates of provisions are included in note 18 - Provisions.
Provisions are recognised when:
the group has a present obligation as a result of a past event;
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
and
a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where
some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the
reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity
settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the
reimbursement shall not exceed the amount of the provision.
Provisions are not recognised for future operating losses.
If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a
provision.
Valuations
* Valuation of inventory - Judgement was applied in calculating the initial carrying value of inventory and judgement
continues to be applied in assessing the net realisable value. See accounting policy regarding Inventories.
* Valuation of warrants, share options and ordinary shares issued as consideration - Judgement is applied in
determining appropriate assumptions to be used in calculating the fair value of warrants, shares and share options issued. See
notes 14 and 15.
* Valuation of convertible bonds - Judgement is applied in determining appropriate assumptions to be used in calculating the
fair value of convertible bonds. See note 16.
Going concern
Judgement is applied in assessing the likelihood and timing of future cash flows associated with the Group's activities.
Judgement is also applied in assessing the likelihood of receiving future funding.
1.4 Property, plant and equipment
Initial recognition
The cost of an item of property, plant and equipment is recognised as an asset when:
it is probable that future economic benefits associated with the item will flow to the company; and
the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost.
32
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.4 Property, plant and equipment (continued)
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred
subsequently to add to, replace part of, service it, the initial estimate of the rehabilitation obligation, and for qualifying
assets (where relevant), borrowing costs. If a replacement cost is recognised in the carrying amount of an item of property, plant
and equipment, the carrying amount of the replaced part is derecognised. The purchase price or construction cost is the
aggregate amount paid and the fair value any other consideration given to acquire the asset. The capitalised value of a finance
lease is also included within property, plant and equipment.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs
ceases and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for
capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve
development.
Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
Upon completion of mine construction, the assets are transferred into “Property, plant and equipment”. Items of property,
plant and equipment and mining properties are stated at cost, less accumulated depreciation and accumulated impairment
losses.
Mines under construction
Upon transfer of “Exploration and evaluation assets” into “Construction in progress” within “Property, plant and equipment”, all
subsequent expenditure on the construction, installation or completion of infrastructure facilities is capitalised within
”Construction in progress”. Development expenditure is net of proceeds from the incidental sale of diamonds extracted during
the development phase. After production starts, all assets included in “Construction in progress” are transferred to “Mining
properties” within “Property, plant and equipment”.
Depreciation/amortisation
Mining properties are depreciated/amortised on a unit-of-production basis over the economically recoverable reserves of the
mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case the
straight-line method is applied.
The units of production rate for the depreciation/amortisation of mining properties takes into account expenditure relating to
mining properties currently and to be expensed in future.
Other plant and equipment such as mobile mine equipment is generally depreciated on a straight-line basis over their
estimated useful lives to their residual values.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Land N/A
Buildings 20 years
Plant and machinery 5 - 20 years
Mining rights 20 years (life of mine)
Rehabilitation asset 20 years (life of mine)
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the
expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of anoth er
asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the
item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is
determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
33
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.4 Property, plant and equipment (continued)
Assets which the (company/group) holds for rentals to others and subsequently routinely sell as part of the ordinary course of
activities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not
accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash
flows on these assets are included in cash flows from operating activities in the cash flow statement.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and
overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it is
probable that future economic benefits associated with the item will flow to the Group through an extended life, the
expenditure is capitalised.
Where part of the asset was not separately considered as a component, the replacement value is used to estimate the
carrying amount of the replaced asset(s).
Repairs and maintenance that do not meet the recognition criteria of an asset are expensed when incurred.
1.5 Site restoration and dismantling cost
The company has an obligation to dismantle, remove and restore items of property, plant and equipment. Such obligations are
referred to as „decommissioning, restoration and similar liabilities?. The cost of an item of property, plant and equipment includes
the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation
for which an entity incurs either when the item is acquired or as a consequence of having used the item
during a particular period for purposes other than to produce inventories during that period.
If the related asset is measured using the cost model:
subject to (b), changes in the liability are added to, or deducted from, the cost of the related asset in the current
period
if a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in
profit or loss.
if the adjustment results in an addition to the cost of an asset, the entity considers whether this is an indication
that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the asset is
tested for impairment by estimating its recoverable amount, and any impairment loss is recognised in profit or
loss.
1.6 Financial liabilities / assets
Initial recognition and measurement
Financial liabilities are classified as either financial liabilities at fair value through profit or loss ("at FVTPL") or 'other
financial liabilities'.
Other financial liabilities
Other liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire.
34
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.6 Financial liabilities / assets (continued)
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at
FVTPL.
A financial liability is classified as held for trading if:
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and
its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management
or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments:
Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at
FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit
or loss.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each balance sheet date.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is
recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other
derivatives are presented as current assets or current liabilities.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at
FVTPL.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid
instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or settled within
12 months. Other derivatives are presented as current assets or current liabilities.
Loans to (from) group companies
These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are
recognised initially at fair value plus direct transaction costs.
Loans to group companies are classified as loans and receivables.
Loans from group companies are classified as financial liabilities measured at amortised cost.
35
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.6 Financial liabilities / assets (continued)
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when
there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days
overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the
difference between the asset?s carrying amount and the present value of estimated future cash flows discounted at the
effective interest rate computed at initial recognition.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is
recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the
allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against
operating expenses in profit or loss.
Trade and other receivables are classified as loans and receivables.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate method.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, other short-term highly liquid investments and
restricted cash that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in
value. These are initially and subsequently recorded at amortised cost.
Convertible bond policy
The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as an
amortised cost financial liability and an embedded derivative financial liability in accordance with the substance of the
contractual arrangement. At the date of issue, the fair value of the embedded derivative financial liability component is
estimated using observable market data input into the Black Scholes model, modified for the Barone Adesi Whaley
approximation. This amount is recorded as an embedded derivative financial liability held at fair value through profit and
loss. The amortised cost financial liability (host debt contract) is determined by deducting the amount of the embedded
derivative component from the fair value of the compound instrument as a whole. The host debt contract is held on an
amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument?s maturity
date.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL, are
subsequently measured at:
the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue cost.
36
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.7 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to
(recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
Deferred tax assets and liabilities
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. A deferred tax liability is recognised for all taxable temporary
differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a
transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future. A deferred tax asset is not recognised when it
arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit
nor taxable profit (tax loss).
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future
taxable profit will be available against which the unused tax losses can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end
of the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the
extent that the tax arises from:
a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or
a business combination.
Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are
credited or charged, in the same or a different period, to other comprehensive income.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or
charged, in the same or a different period, directly in equity.
1.8 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease
is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
37
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.8 Leases (continued)
Operating leases - lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference
between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset /
liability. This asset / liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
1.9 Inventories
Inventories and work in progress are measured at the lower of cost, on a FIFO basis, and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
Inventory relating from development of the underground is carried at the lower of cost, on a FIFO basis, and net realisable
value.
The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of
inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any
write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of
inventories recognised as an expense in the period in which the reversal occurs.
1.10 Impairment of assets
The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any
such indication exists, the group estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the group also:
tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment
annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the
annual period and at the same time every period.
tests goodwill acquired in a business combination for impairment annually.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not
possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to
which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.
In assessing value in use, the estimated future cash flows are discounted to the present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. That reduction is an impairment loss. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation
decrease.
38
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.10 Impairment of assets (continued)
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in
profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior
periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the
recoverable amounts of those assets are estimated.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in
prior periods.
A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill
is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation
increase.
1.11 Share capital and equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities.
Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
1.12 Share based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the effect of non market-based vesting conditions. Details
regarding the determination of the fair value of equity-settled share-based transactions are set out in note 13.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group?s estimate of equity instruments that will eventually vest. At each balance
sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of
non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or
loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Save As You Earn ("SAYE") share options granted to employees are treated as cancelled when employees cease to
contribute to the scheme. This results in accelerated recognition of the expenses that would have arisen over the
remainder of the original vesting period.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair
value of the liability. At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the
liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
1.13 Revenue
Revenue from the sale of diamonds is recorded when the diamonds are sold. Incidental sale of diamonds derived from
underground development are credited to mine development costs.
Incidental sale of diamonds derived from underground development is credited to mine development costs.
39
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.13 Revenue (continued)
Revenue earned from sales prior to the new operations achieving commercial production were recognised as a reduction in the
carrying value of the pre-production expenses held within intangible assets. Revenue is measured at the fair value of the
consideration received or receivable. Subsequently it is recognised as a reduction in the carrying value of mine
development costs until production commences once development is completed.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset?s net carrying value.
Dividends are recognised, in profit or loss, when the company?s right to receive payment has been established.
1.14 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of
borrowing costs eligible for capitalisation is determined as follows:
Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any
temporary investment of those borrowings.
Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of
obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when:
expenditures for the asset have occurred;
borrowing costs have been incurred, and
activities that are necessary to prepare the asset for its intended use or sale are in progress.
Capitalisation is suspended during extended periods in which active development is interrupted.
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale
are complete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
Bank ovedraft and borrowings are initially measured at fair value, and are susequently measured at amortised cost, using
the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or
redemption of borrowings is recognised over the term of the borrowings in accordance with the group's accounting policy for
borrowing costs.
1.15 Translation of foreign currencies
Functional and presentation currency
Items included in the audited consolidated and separate financial statements of each of the group entities are measured
using the currency of the primary economic environment in which the entity operates (functional currency).
The audited consolidated and separate financial statements are presented in Pounds sterling which is the company's
functional and presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity?s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on
the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at
the rates prevailing on the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not translated.
40
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Basis of Preparation and Accounting Policies
1.15 Translation of foreign currencies (continued)
Group and Company
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in
the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair
value are included in the income statement for the period except for differences arising on the retranslation of non-
monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any
exchange component of that gain or loss is also recognised directly in equity.
In addition, in the case of presenting consolidated financial statements, any foreign exchange differences arising on
elimination of intercompany loan balances upon consolidation of the Group Companies, are classified as equity and
transferred to the Group?s translation reserve, as these loans are for long term investment purposes.
Determining the rate of exchange to be used
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group?s foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange
rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as other
comprehensive income and transferred to the Group?s translation reserve. Such translation differences are recognised in the
income statement in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
1.16 Environmental restoration and decommissioning obligations
An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when disturbance is
caused by the development or ongoing production of a mining property. Such costs arising from the decommissioning of plant
and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each
project, as soon as the obligation to incur such costs arises. These costs are recognised in the income statement over the life
of the operation, through the depreciation of the asset and the unwinding of the discount on the provision.
Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their
net present values and recognised in the income statement as extraction progresses.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work (that result
from changes in the estimated timing or amount of the cash flow, or a change in the discount rate) are added to or deducted
from, the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the
asset, the excess is recognised immediately in the income statement. If the asset value is increased and there is an
indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the
accounting policy above.
1.17 Warranty reserve policy
Options issued as warranties are treated as equity settled share based payments.
41
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations
2.1 Standards and interpretations effective and adopted in the current year
In the current year, the group has adopted the following standards and interpretations that are effective for the current
financial year and that are relevant to its operations:
IFRS 10 Consolidated Financial Statements
Standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements and SIC 12
Consolidation - Special Purpose Entities. The standard sets out a new definition of control, which exists only when an entity is
exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns
through power over the investee.
The effective date of the standard is for years beginning on or after 1 January 2013.
The group has adopted the standard for the first time in the 2013 audited consolidated and separate financial statements. The
impact of the standard is not material.
IAS 27 Separate Financial Statements
Consequential amendment as a result of IFRS 10. The amended Standard now only deals with separate financial
statements.
The effective date of the amendment is for years beginning on or after 1 January 2013.
The group has adopted the amendment for the first time in the 2013 audited consolidated and separate financial
statements.
The impact of the amendment is not material.
IFRS 12 Disclosure of Interests in Other Entities
The standard sets out disclosure requirements for investments in Subsidiaries, associates, joint ventures and
unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to
risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off
balance sheet vehicles.
The effective date of the standard is for years beginning on or after 1 January 2013.
The group has adopted the standard for the first time in the 2013 audited consolidated and separate financial statements. The
impact of the standard is not material.
IFRS 13 Fair Value Measurement
New standard setting out guidance on the measurement and disclosure of items measured at fair value or required to be
disclosed at fair value in terms of other IFRS?s.
The effective date of the standard is for years beginning on or after 1 January 2013.
The group has adopted the standard for the first time in the 2013 audited consolidated and separate financial statements. The
impact of the standard is not material.
2.2 Standards and interpretations not yet effective
The group has chosen not to early adopt the following standards and interpretations, which have been published and are
mandatory for the group?s accounting periods beginning on or after 1 January 2014 or later periods:
42
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations (continued)
IFRS 9 Financial Instruments
This new standard is the first phase of a three phase project to replace IAS 39 Financial Instruments: Recognition and
Measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial
assets and liabilities. The following are main changes from IAS 39:
Financial assets will be categorised as those subsequently measured at fair value or at amortised cost.
Financial assets at amortised cost are those financial assets where the business model for managing the assets
is to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of
principal and interest only). All other financial assets are to be subsequently measured at fair value.
Under certain circumstances, financial assets may be designated as at fair value.
For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is
classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the
provisions of IAS 39 still apply.
Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity
changes its business model for the management of financial assets. In such circumstances, reclassification
takes place prospectively from the beginning of the first reporting period after the date of change of the business
model.
Financial liabilities shall not be reclassified.
Investments in equity instruments may be measured at fair value through other comprehensive income. When
such an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not
recycled to profit or loss on derecognition of the investment. The election may be made per individual
investment.
IFRS 9 does not allow for investments in equity instruments to be measured at cost.
The classification categories for financial liabilities remains unchanged. However, where a financial liability is
designated as at fair value through profit or loss, the change in fair value attributable to changes in the liabilities
credit risk shall be presented in other comprehensive income. This excludes situations where such presentation
will create or enlarge an accounting mismatch, in which case, the full fair value adjustment shall be recognised in
profit or loss.
The effective date of the standard is for years beginning on or after 1 January 2018.
The group expects to adopt the standard for the first time in the 2018 audited consolidated and separate financial
statements.
It is unlikely that the standard will have a material impact on the company's audited consolidated and separate financial
statements.
IFRS 10, IFRS 12 and IAS 27 - Investment Entities
The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for
investment entities. These amendments require an investment entity to measure those subsidiaries at fair value through
profit or loss in accordance with IFRS 9 Financial Instruments in its consolidated and separate audited consolidated and
separate financial statements. The amendments also introduce new disclosure requirements for investment entities in IFRS
12 and IAS 27.
The effective date of the amendments is for years beginning on or after 1 January 2014.
The group expects to adopt the amendments for the first time in the 2014 audited consolidated and separate financial
statements.
It is unlikely that the amendment will have a material impact on the company's audited consolidated and separate financial
statements.
43
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
3. Segmental information
The Group is currently operating the Lace Diamond Mine. This operation is located in the northern part of the Free State
province in South Africa, 200 kilometres from Johannesburg, 30 kilometres from Kroonstad and 30 kilometres from
Viljoenskroon. The Lace Diamond Mine operation is treated as a single operation with the corporate head office and other
subsidiaries reported separately, including consolidation entries.
2013
Separately disclosable items
Total other EBITDA Depreciation Interest Interest Taxation
income and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mine 13,645 (911,232) - 39,012 - -
All other segments 204,825 (1,043,956) (19,817) 135 (55,004) -
Total 218,470 (1,955,188) (19,817) 39,147 (55,004) -
Reconciling items
Fair value adjustments (619,042)
Loss after tax (2,609,904)
2012
Separately disclosable items
Total other EBITDA Depreciation Interest Interest Taxation
income and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mine - (201,760) (503,391) 24,045 - -
All other segments 15,834 (2,475,321) (166,265) 1,541 168,968 -
Total 15,834 (2,677,081) (669,656) 25,586 168,968 -
Reconciling items
Fair value adjustments (44,821)
Loss after tax (3,534,940)
44
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
Segment assets and liabilities
The amounts provided to the Chief Executive Officer with respect to total assets are measured in a manner consistent with that
of the financial statements. These assets are allocated based on the operations of the segment and the physical
location of the asset.
2013
Additions to Total assets
non-current
assets
£ £
Lace Diamond Mines 7,736,774 17,813,845
All other segments 2,891 5,466,000
Total 7,739,665 23,279,845
2012
Additions to Total assets
non-current
assets
£ £
Lace Diamond Mines 951,284 9,310,270
All other segments 5,480 8,884,301
Total 956,764 18,194,571
4. Property, plant and equipment
Group 2013 2012
Cost / Accumulated Carrying value Cost / Accumulated Carrying value
Valuation depreciation / Valuation depreciation /
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Land & Buildings 863,020 (191,071) 671,949 796,573 (197,001) 599,572
Plant and machinery 6,898,130 (3,355,700) 3,542,430 7,307,782 (3,719,464) 3,588,318
Mining Rights 565,493 (169,648) 395,845 610,067 (152,516) 457,551
Construction in Progress 12,602,367 (2,320,368) 10,281,999 7,120,133 (2,989,301) 4,130,832
Total 20,929,010 (6,036,787) 14,892,223 15,834,555 (7,058,282) 8,776,273
Company 2013 2012
Cost / Accumulated Carrying value Cost / Accumulated Carrying value
Valuation depreciation / Valuation depreciation /
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Mining Rights 396,343 (118,903) 277,440 396,343 (99,085) 297,258
45
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
4. Property, plant and equipment (continued)
Reconciliation of property, plant and equipment - Group - 2013
Opening Additions Disposals Exchange Depreciation Total
balance differences
£ £ £ £ £ £
Land & Buildings 599,572 236,946 - (128,754) (35,815) 671,949
Plant and machinery 3,588,318 769,275 (2,530) (397,098) (415,535) 3,542,430
Mining Rights 457,551 - - (33,273) (28,433) 395,845
Construction in 4,130,832 6,733,444 - (582,277) - 10,281,999
Progress
8,776,273 7,739,665 (2,530) (1,141,402) (479,783) 14,892,223
Reconciliation of property, plant and equipment - Group - 2012
Opening Additions Transfers Exchange Depreciation Total
balance from differences
intangible
assets
£ £ £ £ £ £
Land & Buildings 179,511 78,282 436,102 (53,265) (41,058) 599,572
Plant and machinery 4,429,773 97,709 - (341,640) (597,524) 3,588,318
Mining Rights - - 503,623 (14,997) (31,075) 457,551
Construction in Progress - 780,773 3,702,076 (352,017) - 4,130,832
4,609,284 956,764 4,641,801 (761,919) (669,657) 8,776,273
Reconciliation of property, plant and equipment - Company - 2013
Opening Depreciation Total
balance
£ £ £
Mining Rights 297,258 (19,818) 277,440
Reconciliation of property, plant and equipment - Company - 2012
Opening Transfers Depreciation Total
balance from
intangible
assets
£ £ £ £
Mining Rights - 317,075 (19,817) 297,258
Plant and machinery includes mining fleet, processing plant, office equipment and motor vehicles which were previously
separately classified. The property, plant and equipment is pledged as security for the Convertible Bonds (note 16).
However, once the Industrial Development Corporation of South Africa Limited ("IDC") loan is drawn down in whole or in
part, the Bondholders security interest in these assets will be subordinated to the security interest of the IDC (note 17).
On 1 January 2012, a decision was taken that the mining property is economically feasible therefore all previous exploration and
evaluation and pre-production development expenditure has now been capitalised within property, plant and equipment under
construction in progress and has been transferred from intangible assets, and is still under devolment.
46
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
5. Goodwill
Group 2013 2012
Cost Accumulated Carrying value Cost Accumulated Carrying value
impairment impairment
£ £ £ £ £ £
Goodwill 4,606,026 - 4,606,026 4,606,026 - 4,606,026
The goodwill relates to the acquisition of DiamondCorp Holdings Limited.
The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired. The
Group has one reportable business segment and all goodwill is associated with that segment. The recoverable amounts of
the cash generating unit (“CGU”) are determined from discounted cash flows to estimate fair value less cost to sell. The key
assumptions for the discounted cash flow calculations are those regarding the discount rates, production, resources and
expected changes to selling prices and direct costs during the period. A post tax discount rate of 15% has been used.
The Group?s test for impairment is based on several considerations including a model adopted by management from the
model prepared for the Lace Mine by one of its technical advisors. This model uses grade assumptions based on the
resource statement of the Group?s technical advisor and it uses diamond prices considered representative of market prices. The
model assumes that the Lace mine will reach full production of 1,200,000 tonnes of kimberlite in 2015 and run through 2040.
The valuations of the Lace Mine generated by the Model under variable sets of assumptions as to grades, revenues and costs
indicate that there has been no impairment of goodwill during the year. Management have considered the key assumptions to
be reasonable. A reasonable possible change in a key assumption would not lead to an indicator of
impairment of the cash generating unit which contains goodwill.
6. Interests in subsidiaries including consolidated structured entities
The following table lists the entities which are controlled by the company, either directly or indirectly through subsidiaries.
Company
Name of company Held by % % Carrying Carrying
holding holding amount amount
and and
voting voting
power power
2013 2012 2013 2012
£ £
Diamondcorp Holdings Limited - DiamondCorp plc 100.00 % 100.00 % 4,217,500 4,217,500
incorporated in the British Virgin
Islands
Botswana Diamondcorp Limited - DiamondCorp plc 100.00 % 100.00 % 1 1
incorporated in the British Virgin
Islands
Lace Diamond Mines (Pty) Ltd - DiamondCorp Holdings 74.00 % 74.00 % - -
incorporated in South Africa Limited
Soapstone Investment Ltd - DiamondCorp Holdings 100.00 % 100.00 % 455,000 455,000
incorporated in South Africa Limited
DCP Exploration (Pty) Ltd - Botswana DiamondCorp 100.00 % 100.00 % - -
incorporated in Botswana Limited
4,672,501 4,672,501
47
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
6. Interests in subsidiaries including consolidated structured entities (continued)
Subsidiaries with material non-controlling interests
The following information is provided for subsidiaries with non-controlling interests which are material to the reporting
company. The summarised financial information is provided prior to intercompany eliminations.
Country of % Ownership interest held
Subsidiary incorporation by non-controlling interest
2013 2012
Lace Diamond Mines (Pty) Ltd RSA 26% 26%
Summarised statement of financial position
Lace Diamond Mines (Pty)
Ltd
2013 2012
£ £
Assets
Non-current assets 14,502,254 8,926,477
Current assets 3,308,578 377,873
Total assets
17,810,832 9,304,350
Liabilities
Non-current liabilities 26,007,751 18,830,076
Current liabilities 553,685 569,730
Total liabilities 26,561,436 19,399,806
Total net liabilities (8,750,604) (10,095,456)
Carrying amount of non-controlling interest (1,946,868) (1,104,254)
Summarised statement of financial performance
Lace Diamond Mines (Pty)
Ltd
2013 2012
£ £
Other income and expenses (872,220) (1,993,558)
Loss before tax (872,220) (1,993,558)
Loss for the year (872,220) (1,993,558)
Total comprehensive loss (872,220) (1,993,558)
Loss allocated to non-controlling interest (226,777) (518,325)
48
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
6. Interests in subsidiaries including consolidated structured entities (continued)
Summarised statement of cash flows
Lace Diamond Mines (Pty)
Ltd
2013 2012
£ £
Cash flows from operating activities (1,479,667) (1,633,604)
Cash flows from investing activities (8,528,827) (850,034)
Cash flows from financing activities 12,127,898 281,620
Net increase (decrease) in cash and cash equivalents 2,119,404 (2,202,018)
7. Loans to group companies
Company
2013 2012
£ £
Subsidiaries
DiamondCorp Holdings Ltd 23,869,096 23,436,964
23,869,096 23,436,964
Impairment of loans to subsidiaries (10,154,586) -
13,714,510 23,436,964
The Directors consider that the carrying amount of these assets approximates their fair value. All receivable balances are
non-interest bearing. The loan at the end of the year is in terms of agreement not repayable within the next 12 months.
Credit quality of loans to group companies
The credit quality of loans to group companies is neither past nor due. The loan has an unrated credit rating. The loan has been
impaired to the extent that the liabilities of the subsidiary exceeds its assets. The company has subordinated as much of its loan
as is required to support its subsidiary in this position.
Company
2013 2012
£ £
Non-current assets 13,714,510 -
Current assets - 23,436,964
13,714,510 23,436,964
49
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
7. Loans to group companies (continued)
Credit quality of loans to group companies
The credit quality of loans to group companies that are neither past due nor impaired can be assessed by reference to
external credit ratings (if available) or to historical information about counterparty default rates:
Company
2013 2012
£ £
Credit rating
Unrated - no prior defaults 23,869,096 23,436,964
Loans to group companies impaired
As of 31 December 2013, loans to group companies of £ 10,154,586 (2012: £ -) were impaired and provided for. The
amount of the provision was £ 10,154,586 as of 31 December 2013 (2012: £ -).
The ageing of these loans is as follows:
Company
2013 2012
£ £
Over 6 months 23,869,096 23,463,964
8. Deferred tax
Deferred tax asset
Until it is probable that sufficient taxable profits will be available to allow the entire or partial recovery of potential deferred tax
assets of £2,773,590 (2012: £2,259,551), the accounting benefit of tax losses will not be reflected in the accounts. The Group's
tax losses have no expiry date.
Due to the Group's accumulated loss position, there are no temporary differences associated with investments in the
Group's subsidiaries.
9. Other non-current asset
Group Company
2013 2012 2013 2012
£ £ £ £
At amortised cost:
Rehabilitation fund 43,632 - - -
Contributions to an insurance policy to cover future environmental rehabilitation and closure cost.
50
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
10. Inventories
Group Company
2013 2012 2013 2012
£ £ £ £
Diamond inventories 408,867 293,283 - -
Consumable and other inventories 148,218 4,191 - -
557,085 297,474 - -
Diamond inventories at 31 December 2013 totalled 7,675 carats. Of these, 2,189 carats were recovered from bulk testing and
the balance, 5,486 carats, from tailings. Inventory is valued as per the accounting policy. No inventories were
recognised as an expense during the year. There were no write down of inventories (2012: £275,561) or any reversal of
inventory write downs during the year.
11. Trade and other receivables
Group Company
2013 2012 2013 2012
£ £ £ £
Trade receivables - 130,829 - 9,167
Prepayments 183,235 - - -
VAT 697,755 55,790 - -
880,990 186,619 - 9,167
The Directors consider that the carrying amount of these assets approximates their fair value. All receivables balances are
non-interest bearing.
Credit quality of trade and other receivables
The credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed by reference to
external credit ratings (if available) or to historical information about counterparty default rates:
Trade and other receivables past due but not impaired
Trade and other receivables which are less than 3 months past due are not considered to be impaired. At 31 December
2013, £ - (2012: £ -) were past due but not impaired.
12. Cash and cash equivalents
Group Company
2013 2012 2013 2012
£ £ £ £
Cash & cash equivalents - current 2,220,130 4,227,404 5,979 1,363,545
Restricted cash - non-current 73,108 92,372 - -
2,293,238 4,319,776 5,979 1,363,545
The restricted cash above form the basis of a guarantee issued by the financial institution, where the cash is held, in favour of
the Department of Mineral Resources providing for the original determined cost of environmental rehabilitation and
decommissioning on termination of the Lace project.
In terms of an agreement the group's right, title and interest in and to the debit balances have been encumbered for the
benefit of the bond holders as referred to note 16.
51
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
12. Cash and cash equivalents (continued)
Credit quality of cash at bank and short term deposits, excluding cash on hand
The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired
can be assessed by reference to external credit ratings (if available) or historical information about counterparty default
rates:
Group Company
2013 2012 2013 2012
£ £ £ £
Credit rating
A- 1,833,564 1,363,545 5,979 1,363,545
BBB 457,940 2,954,404 - -
Other 1,734 1,827 - -
2,293,238 4,319,776 5,979 1,363,545
13. Share capital
AUTHORISED
DiamondCorp plc does not have an authorised share capital, in line with the provisions of the UK Companies Act 2006.
The Directors' authority to issue and allot shares in the company is set each year by Company's shareholders at the Annual
General Meeting. The level of disapplication in respect of pre-emption authority is determined by the Company's
Nominated Adviser and is based on UK corporate governance guidlines for AIM companies.
ISSUED
Group Company
2013 2012 2013 2012
No. No. No. No.
Reconciliation of number of shares issued before
reorganisation:
Ordinary shares of (2012: 3 pence each) 270,839,478 242,268,048 270,839,478 242,268,048
Issue of shares - ordinary shares 6,000,000 28,571,430 6,000,000 28,571,430
Total number of shares 276,839,478 270,839,478 276,839,478 270,839,478
Reconciliation of number of shares issued after
reorganisation:
Ordinary shares of 0.1 pence each 276,839,478 - 276,839,478 -
Deferred ordinary shares of 2.9 pence each 276,839,478 - 276,839,478 -
Total number of shares 553,678,956 - 553,678,956 -
- In October 2012, the Company issued 28,571,430 ordinary shares at 3.5 pence each. The cost associated with the
issuance of these shares has been charged to the share premium account.
- Existing ordinary shares were sub-divided into one new ordinary share of 0.1 pence each ("New Ordinary Share") and one
deferred ordinary share of 2.90 pence each (Deferred Ordinary Share). As at year end each ordinary share holder held the
same number of ordinary shares and deferred ordinary shares.
- The New Ordinary Shares continue to carry the same rights and benefits as those attached to the Company?s existing
ordinary shares (save for the reduction in nominal value). The number of New Ordinary Shares in issue following the Share
Capital Reorganisation is identical to the number of existing ordinary shares in issue immediately prior to the Share Capital
Reorganisation.
52
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
13. Share capital (continued)
- The Deferred Ordinary Shares do not entitle the holders to (a) receive notice of or attend and vote at any general meeting
of the Company; (b) to receive any dividend or other distribution; or (c) to participate in any return on capital on winding up,
other than the nominal amount paid on such shares following a substantial distribution of ordinary shares in the Company.
- The Deferred Ordinary Shares are effectively valueless, non-transferable and have no effect on the economic interest of the
Shareholders.
- In January 2013, 4,500,000 ordinary shares at 5 pence each were issued to a director and certain employees for
successful completion of the project financing to fund the development of Lace mine.
- In April 2013, 1,500,000 ordinary shares at 3.5 pence each were issued to a financial advisor in respect of a success fee for
introducing Laurelton Diamonds Inc., a wholly owned subsidiary of Tiffany & Co.
Group Company
2013 2012 2013 2012
No. No. No. No.
Issued
Ordinary shares of 0.1 pence each 276,840 8,125,184 276,840 8,125,184
Deferred ordinary shares of 2.9 pence each 8,028,344 - 8,028,344 -
Share premium at shares of 5p and 3.5p each 26,885,360 26,795,360 26,885,360 26,795,360
35,190,544 34,920,544 35,190,544 34,920,544
14. Share based payments
Equity-settled share option scheme
The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the
average quoted market price of the Company's shares on the date of grant. If the options remain unexercised after a period of
ten years from the date of grant the options expire. Options are generally forfeited if the employee leaves the Group
before the options vest.
Details of the share options outstanding during the year are as follows.
2013 2012
Number Number
Outstanding at the beginning of the year 6,345,000 6,345,000
Granted during the year 2,000,000 -
Forfeited during the year - -
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 8,345,000 6,345,000
Exercisable at the end of the year 8,345,000 5,125,000
At 31 December 2013, 8,345,000 (2012: 6,345,000) options were outstanding at a weighted average exercise price of 13p
(2012: 15p), and a weighted average remaining contractual life of 5.4 years (2012: 6.5 years).
During 2013, the Group recognised an expense of £86,895 (2012 - £10,170) relating to equity-settled share-based payment
transactions. The Group also recognised an expense of £225,000 in 2013 relating to shares issued to employees in lieu of
bonus payments, bringing the total share based payments expense for the Group to £311,895.
53
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
14. Share based payments (continued)
Black-Scholes Assumptions 2013 Option 2010 Option 2007 UK The
Plan Plan Option Plan DiamondCorp
Share Option
Plan
Term range 5 Years 3 Years 3 Years 3 Years
Expected dividend yield Nil Nil Nil Nil
Risk free interest rate 5% 2% 5% 2%
Share price volatility 90% 50% 40% 40%
Share price at time of grant 5 pence 6.88 pence 90 pence 34.5 pence
2007 UK Options ("2007 Plan")
During 2007, options over 2,940,000 ordinary shares of 3 pence each were granted to employees and management of the
Company, exercisable at 135 pence for a period of 10 years from the date of issue.
270,000 of these options vested on grant date and the balance vest over 3 years at one-third at each anniversary of the
issue date. 690,000 of these options were forfeited during 2008 by reason of retirement and 120,000 options were forfeited
in 2009.
Share options granted during the year ended 31 December 2007 were valued by the Directors using the Black-Scholes
valuation model, based upon the assumptions as detailed in the table above:
At 31 December 2013, 2,130,000 options were outstanding under this plan (2012 - 2,130,000).
The DiamondCorp Share Option Plan ("DCP Plan")
During 2008, a share option plan was approved and registered in the Republic of South Africa to provide eligible employees of
the Group with the opportunity to acquire as an incentive an interest in the equity of the Company. Eligible employees were
granted options over 695,000 ordinary shares of 3 pence each, exercisable at 50 pence for a period of 10 years from the date of
issue, 16 December 2008. These options vest over 3 years at one-third at each anniversary of the issue date. During 2009, a
further 200,000 options were granted under this plan and 340,000 options were forfeited.
These options were valued by the Directors using the Black-Scholes valuation model, based upon the assumptions as
detailed in the table above.
In August 2010, the exercise price of these options was adjusted to 21 pence. All other conditions remain unchanged. At
31 December 2013, the number of options outstanding under this plan was 555,000 (2012 - 555,000).
2010 Option Plan ("2010 Plan")
During 2010, options over 4,570,000 ordinary shares of 3 pence each were granted to employees and management of the
Company, exercisable at 12 pence each for a period of 10 years from the date of issue. These options vest over 3 years at one
third on each anniversary of the date of issue, subject to the share price of the Company attaining and trading at or above 17
pence for a period of 3 consecutive months.
These options were valued by the Directors using the Black-Scholes valuation model, based upon the assumptions as
detailed above.
During the year ended 31 December 2010, 660,000 options expired.
During the year ended 31 December 2011, 250,000 option expired.
During 2012 the exercise price of these options was adjusted to 5 pence. All other conditions remain unchanged. At
31 December 2013, 3,660,000 options were outstanding under this plan (2012 - 3,660,000).
54
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
14. Share based payments (continued)
2013 Option Plan ("2013 Plan")
During 2013, options over 2,000,000 ordinary shares of 0.10 pence each were granted to Mr. EA Worthington, exercisable at a
price of 5 pence each for a period of 5 years from the date of issue. The 2,000,000 options vest immediately.
These options were valued by the Directors using the Black-Scholes valuation model, based upon the assumptions as
detailed above.
At 31 December 2013, 2,000,000 options were outstanding under this plan.
15. Warrant Reserve
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 1 January 2013 5,000,000 92,000
Outstanding at 31 December 2013 5,000,000 92,000
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 1 January 2012 5,816,666 505,877
Granted during the year 5,000,000 92,000
Expired during the year (5,816,666) (505,877)
Outstanding at 31 December 2012 5,000,000 92,000
Darwin Warrants
In respect of agreeing to provide a standby equity finance facility of up to £10,000,000 which can be drawn upon at the
Company?s discretion during a period of 36 months ending on 18 October 2015, the Company has granted 5,000,000
warrants to Darwin Strategic Limited a unit of Henderson Global Investors which are exercisable at 9p on or before 18
October 2015.
These warrants were valued by the Directors using the Black-Scholes valuation model, based on the assumptions as
detailed below.
Black-Scholes Assumptions Darwin
Warrants
Term range 3 years
Expected dividend yield Nil
Risk free interest rate 1.4%
Share price volatility 100%
Share price at time of grant 4 pence
Group Company
2013 2012 2013 2012
£ £ £ £
Warrant Reserve - End of the year 92,000 92,000 92,000 92,000
55
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
16. Compound instruments
The compound instruments have been split in a debt component and derivative as presented below:
Group Company
2013 2012 2013 2012
£ £ £ £
At amortised cost
Current liabilities 2,532,981 2,642,739 981,022 780,261
2,532,981 2,642,739 981,022 780,261
At fair value through profit or loss
Derivative financial instruments 2,107,849 1,525,391 730,079 541,598
2,107,849 1,525,391 730,079 541,598
UK Bonds
On 14 December 2012, the Company, issued £1,410,000 14% senior secured bonds (the “UK Bonds”) to investors in the
United Kingdom. The proceeds of the UK Bonds was held in escrow and released from escrow upon completion of a loan
agreement between Diamondcorp Holdings Limited, an associated company, and Laurelton Diamonds Inc. The UK Bonds are
due for repayment 14 December 2018 with interest payable quarterly in arrears, with the first 24 months of interest on the UK
Bonds to be accumulated and added to the principal amount to be repaid. Bondholders can request conversion of the UK
Bonds and outstanding interest at any time after 24 January 2013. Any request for conversion can be settled at the absolute
discretion of the Company with ordinary shares at 5.80 pence per share or the cash equivalent of the number of underlying
shares multiplied by the share price at the time of conversion. The UK Bonds are secured by the assets of the Company and
have a reversionary interest in the assets of Lace Diamond Mines (Pty) Limited. £250,000 of the UK Bonds were taken up by
directors of the Company or other related parties (see note 28).
SA Bonds
On 14 December 2012, Soapstone Investment Ltd (“Soapstone”), wholly-owned subsidiary of the Company, issued
ZAR 40,000,000 14% senior secured bonds (the “SA Bonds”) to investors in South Africa. The proceeds of the SA Bonds
was held in escrow and released from escrow upon completion of a loan agreement between Diamondcorp Holdings
Limited, a subsidiary company, and Laurelton Diamonds Inc. The SA Bonds are due for repayment 14 December 2018 with
interest payable quarterly in arrears, the first payment being 14 March 2013. The first two years of interest will be held in
escrow to be paid on the quarterly interest dates. Bondholders can request conversion of the SA Bonds and outstanding
interest at any time after 24 January 2013. Any request for conversion can be settled at the absolute discretion of the
Company with ordinary shares at ZAR 0.81 per share or the cash equivalent of the number of underlying shares multiplied
by the share price at the time of conversion. The SA Bonds are secured by the assets of Soapstone and have a
reversionary interest in the assets of Lace Diamond Mines (Pty) Limited. The SA Bond is also secured by way of a financial
guarantee provided by DiamondCorp plc.
Fair Value
Refer to note 31 for the valuation techniques and assumptions applied for the purposes of measuring fair value.
56
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
17. Other financial liabilities
Group Company
2013 2012 2013 2012
£ £ £ £
Financial gaurantee contract - - 455,000 455,000
Held at amortised cost
Loan from the Industrial Development Corporation of 5,322,277 - - -
SA Limited
Loan from Laurelton Diamonds Inc. 3,917,170 - - -
Total financial liabilities 9,239,447 - 455,000 455,000
IDC Loan
On 20 September 2012, Lace Diamond Mines (Pty) Ltd (“Lace”), a 74% owned subsidiary of the Company, entered into an
agreement with the Industrial Development Corporation of South Africa Limited (“IDC”) whereby IDC will provide a project
loan facility of ZAR 220,000,000. The term of the loan is 7 years from the initial drawdown date which was 14 August 2013
with an interest rate of South Africa Prime Rate + 2%. Interest will be capitalised for two years, subject to a maximum of
ZAR 20,141,000 and thereafter is payable semi-annually in arrears. The loan is repayable in 10 bi-annual payments of
ZAR 24,014,000 commencing on the date that is 2 years after the initial drawdown date and every six months thereafter.
The IDC Loan is secured by a general charge over the assets of Lace. In addition there is a cession in favour of IDC of
shares held by Lace?s shareholders and of loans to Lace by shareholders and associated companies. The initial drawdown
was conditional on ZAR100,000,000 having been advanced to Lace by shareholders and associated companies after 20
September 2012.
Loan from Laurelton Diamonds Inc
On 4 January 2013 DiamondCorp Holdings Limited, a wholly-owned subsidiary of the Company, entered into an agreement with
Laurelton Diamonds Inc ("Laurelton") whereby Laurelton will provide a Lace project loan facility of $6,000,000 in total. The terms
of the loan are 8 years, an interest rate of 9% per annum. Interest from the initial drawdown date will be
capitalised for 3 years and the interest accrued will be added to the loan balance.
The loan is repayable in 30 quarterly payments of $463,298 commencing on the date 3 years after the initial drawdown date and
every quarter thereafter. This loan is further secured by a guarantee from DiamondCorp plc and a third ranking bond over the
assets of Lace Diamond Mines (Pty) Ltd.
Financial Guarantee Contract
DiamondCorp plc has provided a financial guarantee to the Bondholders of the SA Bond, guaranteeing any amounts due under
the SA Bond agreement by its wholly-owned subsidiary, Soapstone Investment Ltd. This financial guarantee meets the
definition of a financial guarantee contract under IAS 39, Financial Instruments: Recognition and Measurement. In
accordance with IAS 39, the financial guarantee contract must be recognised initially at fair value. The fair value of the
financial guarantee contract has been determined to be £455,000 and this amount has been recorded as a financial liability on
the Company?s balance sheet, with a corresponding increase in the cost of its investment balance.
Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that no
amount will be payable under the arrangement. However, this estimate is subject to change depending on the probability of the
counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the
counterparty which are guaranteed suffer credit losses.
57
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
17. Other financial liabilities (continued)
Group Company
2013 2012 2013 2012
£ £ £ £
Non-current liabilities
Fair value through profit or loss - - 455,000 455,000
At amortised cost 9,239,447 - - -
9,239,447 - 455,000 455,000
18. Provisions
Reconciliation of provisions - Group - 2013
Opening Additions Exchange Total
balance differences
£ £ £ £
Rehabilitation provision 119,745 500,325 (91,242) 528,828
Reconciliation of provisions - Group - 2012
Opening Additions Exchange Total
balance differences
£ £ £ £
Rehabilitation provision 11,105 105,804 2,836 119,745
A provision is recognised for the site restoration and decommissioning of current mining activities based on current
environmental and regulatory requirements.
19. Trade and other payables
Group Company
2013 2012 2013 2012
£ £ £ £
Trade payables 285,219 833,986 46,580 482,083
Accrued leave pay 56,388 - - -
341,607 833,986 46,580 482,083
The Directors consider that the carrying amount of these liabilities approximate their fair value. All payable balances are
non-interest bearing.
58
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
20. Operating loss
Operating loss for the year is stated after accounting for the following:
Group Company
2013 2012 2013 2012
£ £ £ £
Other income
Sale of scrap metal (10,483) (15,834) - -
Office rent (3,500) - (3,500) -
(13,983) (15,834) (3,500) -
Auditors remuneration - 79,855 - 53,255
Write-off of tailings inventory - 275,561 - -
Share based payment expense 311,895 10,170 - -
Impairment on loans to group companies - - 10,154,586 -
Depreciation on property, plant and equipment (not 19,817 669,657 19,818 19,817
capitalised)
Attributable depreciation costs were capitalised to mine development cost.
21. Employee cost
Employee costs of the Group and Company were:
Group Company
2013 2012 2013 2012
£ £ £ £
Employee costs 803,925 948,160 508,346 155,208
Social security costs 20,681 18,118 20,681 18,118
Pension costs 65,200 66,943 - -
Share-based payment 311,895 10,170 311,895 10,170
1,201,701 1,043,391 840,922 183,496
Attributable payroll costs were capitalised to mine development cost.
Average monthly number of persons employed during the year was:
Administration 17 8 3 3
Operational 115 62 - -
132 70 3 3
59
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
22. Finance costs
Group Company
2013 2012 2013 2012
£ £ £ £
Effective interest cost on Bonds - 31,261 201,462 8,410
Other interest paid 55,004 137,707 52,157 78,019
55,004 168,968 253,619 86,429
Borrowing costs capitalised to qualifying assets (mine development) amounted to £1,063,296 (2012: nil) in the Group.
23. Taxation
Major components of the tax expense
Group Company
2013 2012 2013 2012
£ £ £ £
Current
Local income tax - current period - - - -
Deferred
Originating and reversing temporary differences - - - -
Reconciliation of the tax expense
Reconciliation between accounting loss and tax expense.
Accounting loss (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Tax at the applicable weighted UK tax rate of 23.25% (606,803) (866,060) (2,655,066) (254,745)
(2012: 24.5%)
Tax effect of adjustments on taxable income
Expenses not deductable 150,412 55,710 43,822 6,098
Deferred tax asset not recognised - previous period (2,259,551) (1,449,200) (248,647) -
Deferred tax asset not recognised - current year 2,773,590 2,259,550 - -
Effect of different tax rates (57,648) - - -
Tax losses carried forward - - 2,859,891 248,647
- - - -
The changes to the main rate of corporation tax for UK companies announced in the March 2013 Budget were substantively
enacted for financial reporting purposes on 2 July 2013. The main changes in corporation tax rates, that will have
accounting implications for deferred tax, are as follows:
The main rate of corporation tax will reduce from 23% to 21% from 1 April 2014.
The main rate of corporation tax will further reduce to 20% from 1 April 2015.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the
balance sheet date.
60
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
23. Taxation (continued)
DiamondCorp has measured its deferred tax assets and liabilities as follows:
Those being realised or settled before 1 April 2014 based on the existing 23% rate;
Those being realised or settled between 1 April 2014 and 1 April 2015 should be based on the new 21% rate;
and
Those being realised or settled after 1 April 2015 should be based on the new 20% rate.
24. Auditors' remuneration
Group Company
2013 2012 2013 2012
£ £ £ £
Fees payable to the Company's auditors for the - 53,255 - 53,255
audit of the Group accounts
Fees payable to the Company's auditors and their
associates for other services to the Group
The audit of the Company's subsidiaries - 26,000 - -
Total audit fees - 79,255 - 53,255
There were no non-audit services in 2013 (2012 - nil). No auditors' remuneration are reflected for the current year as new
auditors was appointed subsequent to the year end. No audit services were rendered prior to the year end.
25. Other comprehensive income
Components of other comprehensive income - Group - 2013
Gross Tax Net before Non- Net
non- controlling
controlling interest
interest
£ £ £ £ £
Items that may be reclassified to
profit or loss
Exchange differences on translating
foreign operations
Exchange differences arising during the (2,290,568) - (2,290,568) 615,357 (1,675,211)
year
61
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
25. Other comprehensive income (continued)
Components of other comprehensive income - Group - 2012
Gross Tax Net before Non- Net
non- controlling
controlling interest
interest
£ £ £ £ £
Items that may be reclassified to
profit or loss
Exchange differences on translating
foreign operations
Exchange differences arising during the (1,046,358) - (1,046,358) (102,274) (1,148,632)
year
26. Loss per share
Basic loss per share
Basic loss per share is determined by dividing loss attributable to the owners of the parent by the weighted average number of
ordinary shares outstanding during the year.
Group Company
2013 2012 2013 2012
£ £ £ £
From continuing operations (pence per share) 0.86 1.22 - -
Basic loss per share was based on loss of £ 2,382,647 (2012: loss of £ 3,016,615) and a weighted average number of
ordinary shares of 276,354,546 (2012: 247,576,401).
Reconciliation of loss for the year to basic loss
Loss for the year attributable to owners of the parent (2,382,647) (3,016,615) - -
and basic loss
Diluted loss per share
International Accounting Standard 33 requires presentation of diluted loss per share when a company could be called upon
to issue shares that would decrease the net profit or increase the net loss per share. The calculation of diluted loss per
share does not assume conversion, exercise, or other issue of potential ordinary shares that would increase the net profit or
decrease the net loss per share. As the Group is currently in a loss-making position then the inclusion of the potential
ordinary shares associated with share options or the convertible bonds in the diluted loss per share calculation would serve
to decrease the net loss per share. On that basis, no adjustment has been made for diluted loss per share.
62
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
26. Loss per share (continued)
Headline loss per share
The Group presents an alternative measure, as required by the JSE listing requirements, of loss per share after excluding all
capital gains and losses from the loss attributable to ordinary shareholders. Due to there being no adjustments headline loss
per share and basic loss per share is the same.
Group Company
2013 2012 2013 2012
£ £ £ £
Headline loss per share (pence) 0.86 1.22 - -
27. Cash used in operations
Group Company
2013 2012 2013 2012
£ £ £ £
Loss before taxation (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Adjustments for:
Depreciation (not capitalised) 19,817 669,656 19,817 19,817
Gain on foreign exchange (203,171) - - -
Interest received - investment (243,634) (25,586) (88) (315)
Finance costs 55,004 168,968 253,619 86,429
Fair value adjustments 619,042 44,821 188,481 26,226
Impairment loss - - 10,154,586 -
Movements in provisions 409,083 - - -
Share option expense 86,895 10,170 86,895 10,170
Warrants granted - 92,000 - 92,000
Write-off of tailings inventory - 275,561 - -
Changes in working capital:
Inventories (259,611) (140,443) - -
Trade and other receivables (694,371) (12,675) 9,167 (611,069)
Trade and other payables (492,379) 266,625 (435,503) 306,211
(3,313,229) (2,185,843) (1,142,665) (1,110,308)
28. Related parties
Relationships
Subsidiaries Refer to note 6
Directors Refer to directors' report
Company of which PR Loudon and J Willis-Richards are directors Loeb Aron & Company Limited
Company of which M Toxvaerd is a director European Islamic Investment Bank plc
63
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
28. Related parties (continued)
Related party balances
Group Company
2013 2012 2013 2012
£ £ £ £
Loan accounts - Owing (to) by related parties
DiamondCorp Holdings Limited (before impairment - - 23,869,096 23,436,964
provision)
Amounts included in Receivables (Payables)
regarding related parties
EA Worthington - 68,485 - 68,485
Bonds held by related parties
Loeb Aron & Company Limited 50,000 50,000 50,000 50,000
EA Worthington 100,000 100,000 100,000 100,000
PR Loudon 100,000 100,000 100,000 100,000
Financial Guarantees to bondholders of
Soapstone Investment Ltd - - 455,000 455,000
Related party transactions
Interest paid to (received from) related parties
EA Worthington - 68,485 - 68,485
Administration and management fees
Lace Diamond Mines (Pty) Ltd - - 235,600 -
Directors Remuneration paid to related parties
Glendree Capital Management Limited 116,572 91,458 116,572 91,458
Loeb Aron & Company Limited 11,250 20,000 11,250 20,000
European Islamic Investment Bank plc 15,000 20,000 15,000 20,000
29. Directors' emoluments
2013
Emoluments Other benefits Fees paid to Total
third party
£ £ £ £
E A Worthington (Chairman) * 90,000 - - 90,000
R N Allen ** 15,000 - - 15,000
P R Loudon * 163,428 412 116,572 280,412
J Willis-Richards ** 3,750 - 11,250 15,000
M Toxvaerd ** 7,500 - - 7,500
H Scholes (Appointed 1 August 2013) ** - - 15,000 15,000
G K Morton (Retired 1 August 2013) ** 6,666 - - 6,666
286,344 412 142,822 429,578
64
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
29. Directors' emoluments (continued)
2012
Emoluments Other benefits Fees paid to Total
third party
£ £ £ £
E A Worthington (Chairman) * 70,000 - - 70,000
R N Allen ** 12,000 - - 12,000
P R Loudon * 64,583 7,500 91,458 163,541
J Willis-Richards ** - - 12,000 12,000
M Toxvaerd ** 12,000 - - 12,000
H Scholes (Appointed 1 August 2013) ** - - 8,000 8,000
158,583 7,500 111,458 277,541
Indicator Type of Director
Executive
*
** Non-executive
30. Compensation to key personnel
Group Company
2013 2012 2013 2012
£ £ £ £
Short term employee benefits 216,390 183,310 - -
Long term employee benefits 12,600 - - -
Share based payments 25,000 - - -
253,990 183,310 - -
The key personnel included in these amounts are Mr. S West, Chief Operating Officer, Mrs. S De Wet, Chief Financial
Officer and Mr. A Labuschagne, Lace Mine Manager.
31. Risk management
Capital risk management
The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
The capital structure of the group consists of debt, which includes the borrowings (excluding derivative financial liabilities)
disclosed in notes 7, 16 & 17, cash and cash equivalents disclosed in note 12, and equity attributable to owners of the
parent, comprising issued capital, reserves and retained earnings. The Group is not subject to any externally imposed
capital requirements.
The Group reviews the capital structure on a regular basis. As part of this review the Directors consider the cost of capital
and the risks associated with each class of capital. In order to maintain or adjust the capital structure, the group may adjust
the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt.
65
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
31. Risk management (continued)
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 1 to the financial statements.
Categories of financial instruments
The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally
imposed capital requirements from the previous year.
Group Group Company Company
Carrying Carrying Carrying Carrying
amount amount amount amount
2013 2012 2013 2012
£ £ £ £
FINANCIAL ASSETS - - - -
Loans and receivables (Including cash and cash 3,217,860 4,506,395 - -
equivalents)
FINANCIAL LIABILITIES - - - -
Amortised cost 12,114,035 3,476,725 981,022 780,261
Financial guarantee contracts - - 455,000 455,000
Derivative instruments designated as fair value through 2,107,849 1,525,391 730,079 541,598
profit and loss (FVTPL)
The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
Valuation techniques and assumptions applied for the purposes of measuring fair value
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a
discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-
optional derivatives, and option pricing models for optional derivatives. The fair value of the embedded derivative
component of the convertible bonds was determined using the Black Scholes (using the Barone-Adesi and Whaley
approximation technique) option pricing model. The table below outlines the fair value inputs used in the embedded
derivative valuation.
Black-Scholes Assumptions 31 December 31 December
2013 2012
Term range 5 years 6 years
Expected dividend yield Nil Nil
Risk free interest rate 1.4% 1.4%
Share price volatility 84% 96%
Share price at time of valuation 4.9 pence 3.9 pence
66
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
31. Risk management (continued)
The embedded derivative component of the convertible bonds is deemed to represent a Level 2 fair value instrument in the fair
value hierarchy.
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
Financial risk management objectives
The Group's financial function provides services to the business, monitors and manages the financial risks relating to the
operations of the Group. These risks include market risk (including currency risk, fair value interest rate risk, cash flow
interest rate risk and price risk), credit risk and liquidity risk.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for any purpose.
Market risk
The Group?s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. There has
been no change to the Group?s exposure to market risks or the manner in which it is measured and managed.
Credit risk management
The Group and Company?s principal financial assets are bank balances and cash. The credit risk on liquid funds is limited
because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. Management
reviews the credit worthiness of all customers before entering into a transaction.
The Company transacts with the following financial institutions:
Financial Institution External
credit rating
Barclays A-
ABSA A-
Standard Bank BBB
First National Bank BBB
Rand Merchant Bank BBB
The Company also holds amounts receivable from related parties as disclosed in note 28. Management reviews the credit
worthiness of all balances due from related parties with reference to future profitability.
Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade receivables. The
company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-
party.
Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these
ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into
account its financial position, past experience and other factors. Individual risk limits are set based on internal or
external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.
67
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
31. Risk management (continued)
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise.
The carrying amounts of the Group?s and Company?s foreign currency denominated monetary assets and monetary
liabilities at the reporting date are as follows:
Assets Assets
(Liabilities) (Liabilities)
2013 2012
£ £
Cash denominated in South African Rand 2,145,355 2,958,573
Loan denominated in South African Rand (5,322,277) -
Cash denominated in United States Dollar 135,141 -
Loan denominated in United States Dollar (3,917,170) -
Foreign currency sensitivity analysis
The Group is exposed to the currency of South Africa (ZAR) and the United States Dollar.
The following table details the Group?s sensitivity to a 20% increase and decrease in the Great Brittish Pound against South
African Rand and United States Dollar. 20% is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management?s assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their
translation at the period end for a 20% change in foreign currency rates. A negative number below indicates a decrease in
profit where the Great British Pound strengthens 20% against the relevant currency. For a 20% weakening of the Great
British Pound against the relevant currency, there would be an equal and opposite impact on the profit and the balances
below would be positive.
ZAR Currency Impact 2013 2012
£ £
Profit due to a 20% depreciation of the ZAR 635,384 (390)
Loss due to a 20% appreciation of the ZAR (635,384) 586
ZAR Currency Impact 2013 2012
£ £
Profit due to a 20% depreciation of the USD 756,406 -
Loss due to a 20% appreciation of the USD (756,406) -
The Group?s sensitivity to foreign currency has increased during the current period, because the Company held higher
balances of foreign currency. However, the Group?s South African Rand deposits are held at a subsidiary level in South
Africa and as such this sensitivity analysis does not represent a real cash foreign exchange risk to the Group.
In management?s opinion, the impact of the sensitivity analysis is representative of the inherent foreign exchange risk.
Liquidity and interest risk tables
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities. The tables
have been drawn up on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes the principal cash flows all of which are due within less than one year.
In respect of the financial liability and the financial guarantee contract liability (Company only), the terms on which those
instruments might be required to be settled are outlined in note 17. The amounts outlined below in respect of these financial
guarantee contract which are currently repayable on demand and disclosed as current liabilities in the balance sheet of the
Group and the Company.
68
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
31. Risk management (continued)
LIABILITIES
GROUP Weighted Less than 1 More than 1 Weighted Less than 1 More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
£ £ £ £
Non-interest bearing -% 2,449,456 - -% 2,359,377 -
Fixed interest rate instruments 13.0 % 2,532,981 9,239,447 25.0 % 2,642,739 -
COMPANY Weighted Less than 1 More than 1 Weighted Less than 1 More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
£ £ £ £
Non-interest bearing -% 776,659 - -% 1,023,681 -
Fixed interest rate instruments 23.0 % 981,022 - 23.0 % 780,261 -
Financial guarantee contract -% - 455,000 -% - 455,000
The following table details the Group's and Company's expected maturity for its non-derivative financial assets. The tables
below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will
be earned on those assets.
ASSETS
GROUP Weighted Less than 1 More than 1 Weighted Less than 1 More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
£ £ £ £
Non-interest bearing -% 880,990 43,632 -% 186,619 -
Interest bearing 2.0 % 2,220,130 73,108 1.0 % 4,227,404 92,372
COMPANY Weighted Less than 1 More than 1 Weighted Less than 1 More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
£ £ £ £
Non-interest bearing -% - 13,714,510 -% 23,446,131 -
Interest bearing 1.0 % 5,979 - -% 1,363,545 -
69
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the year ended 31 December 2013
Notes to the Consolidated and Separate Financial Statements
31. Risk management (continued)
Interest rate and liquidity risk management
INTEREST RATE RISK MANAGEMENT
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest
rates. The risk is managed by the Group by maintaining an approximate mix between fixed and floating rate borrowings.
The Group's exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk
management section of this note.
LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk
management framework for the management of the Group's short term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
32. Going concern
In determining the appropriate basis of presentation of the financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the foreseeable future, this being a period of not less than 12
months from the date of the approval of the financial statements. The Group?s business activities and goals are set out in the
Letter from the Chairman and Chief Executive.
As at 31 December 2013 the Group had a cash balance of £2.3 million, which combined with the undrawn IDC loan facility of
£7.4 million, provides full funding for development of the Lace mine. The funding from the convertible bonds and loans are
restricted solely for that use.
While all of the necessary finance for the development of the Lace mine has been secured, the restricted nature of those
funds means the Company needed to raise additional cash to cover its corporate expenses.
After year-end the Group raised an additional £2.1 million equity financing, which is solely for the use of corporate
overheads. Management has reviewed cash flows for the next three years and is of the opinion that no further equity
financing will be necessary to take the Lace mine into production. Management therefore adopts the going concern basis of
preparation in the financial statements.
The loans to the subsidiaries of DiamondCorp plc have been subordinated. The directors have every reason to believe that the
company has adequate resources in place to continue operations for the foreseeable future.
33. Events after the reporting period
After year-end the Group raised an additional £2.1 million equity financing, which is solely for the use of corporate
overheads. Management has reviewed cash flows for the next three years and is of the opinion that no further equity
financing will be necessary to take the Lace mine into production. Management therefore adopts the going concern basis of
preparation in the financial statements.
After yearend underground core drilling designed to better define the rim of the Main Pipe for finalised cave layout and
definition of the "Bulge" areas intersected significantly more high-grade kimberlite on the eastern site of the pipe above the
345m level than was projected in the original Lace geological model. This block is predominantly higher grade kimberlite (K4
hypabyssal, otherwise called coherent or CK kimberlite) and has thus far been defined over an area of approximately 75m x
75m on the 250m level, and is being actively delineated above and below to add to the resource base.
No kimberlite of any type above the 345m level is included in the current mine plan, as definition drilling from surface was
not possible due to the presence of old workings. This Upper K4 resource drilling is now being completed from
underground with the Company's own rig and drilling crews, under the direction of the Company's independent consultants.
The Upper K4 Block now being defined has the potential to add at least 1.0 million tonnes of additional kimberlite to the
Lace mine plan which could be mined while the 47 Level Block Cave development progresses.
3 June 2014 70
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 03/06/2014 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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