Wrap Text
Final results for the year ended 31 December 2014
DiamondCorp plc
AIM share code: DCP & JSE share code: DMC
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp", “the Group” or "the Company")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Highlights
- The net loss for the year was £3.25m (2013: loss of £2.61m). The loss includes administrative
expenses of £1.60m (2013 £2.19m) which have fallen for the third year in a row as a result of
careful attention to cost control.
- Cash on hand at 31 December 2014 was £2.53m (2013: £2.22m) and total assets rose from
£23.28m to £32.41m.
- Development of the Upper K4 (UK4) mining block is on schedule for commencement of mining
operations in H2 2015, several months ahead of the original development schedule.
- Underground core drilling of the UK4 block has delineated 2.6 million tonnes of K4 (high
grade) kimberlite above the 370m level, an increase of more than 2 million tonnes over the
original Lace geological model. The final resource statement will require grade data from the
bulk testing currently scheduled to be completed by the end of Q2.
- Processing of K6 kimberlite recovered from the production level drives has commenced,
including recovery of a 19.83 carat clear white gem diamond, being the largest gem diamond
recovered from underground development so far and a 4.38 carat D Type IIA white. The
recovery of a Type IIA diamond has value implications for the entire resource as it means
Lace has the potential to produce large, very high value diamonds.
- The installation of the 400 tonnes per hour underground conveyor system which will bring ore
to surface for the life of the mine is on schedule for commissioning ahead of the mining ramp-
up.
- Delays resulting from industrial action combined with a 25% devaluation of the South African
Rand since the Lace project finance was arranged resulted in the Company needing to secure
additional working capital to complete the development of the UK4 mining block.
- Post year-end, the Company signed a term sheet with Acrux Resources, a South African
resources financing group, for a royalty financing facility for the rand equivalent of US$7m
(£4.5m), which would more than adequately cover the working capital requirement of between
£1.8m in the Company’s base case to £2.8m in the worst case. At the date of this report, the
royalty financing facility is in its final stages of negotiation.
- Diamond recoveries from tailings for the year ended 31 December 2014 totalled 18,354 carats
at a recovered grade of 5.96 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.
- Diamond sales for the year totalled 21,700 carats recovered from tailings at an average price
of US$63 per carat, slightly ahead of budget. Income from diamonds sold has been credited to
mine development as diamond recoveries are a result of fine tuning and testing of the
processing plant ahead of kimberlite mining.
- The Lost Time Injury Frequency Rate (LTIFR) for 2014 was 0.72, slightly up on 0.55 in 2013,
but still significantly below the average for mining operations in South Africa. Lace had two lost
time injuries and 61,303 lost time injury free shifts during 2014.
A full version of the 2014 report and audited financial statements will shortly be posted to
shareholders and available on the Company’s website www.diamondcorp.plc.uk
Contact details:
DiamondCorp plc
Paul Loudon, Chief Executive
Tel: +27 56 216 1300
Euan Worthington, Chairman
Tel: +44 7753 862 097
UK Broker & Nomad
Panmure Gordon (UK) Limited
Dominic Morley/Adam James
Tel: +44 20 7886 2500
JSE Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
Sharon Owens
Tel: +27 11 809 7500
SA Corporate Advisor
Qinisele Resources Proprietary Limited
Dennis Tucker / Andrew Brady
Tel: +27 11 883 6358
LETTER FROM THE CHAIRMAN
Dear Shareholder
This is a very exciting year for DiamondCorp as underground development progresses at the Lace Mine to extract
high grade kimberlite from the UK4 Block in the coming months. We are all waiting in eager anticipation to see the
diamonds which we believe will generate positive cashflow, and enable repayments for us all once the mine is in
full commercial production.
It is now 10 years since DiamondCorp was formed to acquire the rights to the Lace Diamond Mine in the Free State
of South Africa. Our first step was to secure two well established Black Empowerment partners in Shanduka
Resources and Sphere Holdings which each own 13% of Lace Diamond Mine, our South African operating
subsidiary and owner of 100% of the Lace Mine. Your company, DiamondCorp plc, through Soapstone
Investments has arranged all the financing for the development of the Lace Project and is now owed ZAR
325,000,000 which will start accruing interest at SA Prime (9.25%) plus 2% when Lace Mine is in commercial
production. As at 20 May 2015 this amounts to £17,015,707 compared to DiamondCorp’s market capitalisation of
£37,407,944.
Shanduka and Sphere have been influential shareholders in initially helping to secure the Mining Rights to Lace
and negotiating with the relevant South African authorities. During last year’s strike by workers belonging to the
Association of Mineworkers and Construction Union (AMCU), our partners gave us full support on our refusal to
agree to the appointment of two full time salaried shop stewards in the Lace workforce. The Board considered it
was unrealistic and unnecessary for the AMCU members at Lace, totalling 157 out of a total of 254 employees to
have such representation, particularly as they already had seven designated shop stewards to represent their
members in any dispute. We stood firm and our AMCU members returned to work after the six week strike and
wage negotiations began which resulted in a four year wage agreement.
The Lace workforce is not fully unionised, so underground operations at the mine were able to continue on a one
shift basis as other employees and managers multi-tasked during this period. They were led by Paul Loudon, our
Chief Executive Officer and Steve West, our Chief Operating Officer who both live on the mine and stayed
throughout the strike. I would like to thank them all for their resilience and efforts.
I have visited Lace twice in the past few months and every time I go underground it reminds me what difficult
work mining is. Development is a slow repetitive process of drilling, blasting and mucking out which is hard to
illustrate in our regular update reports.
Diamond Market
Prices for rough diamonds were flat in 2014, with an average fall of around 7% in the final quarter as the reduced
bank lending to the cutting and polishing sector bit into demand. Indications are that after a sluggish start to 2015,
prices have recovered in the last few months and the market now has a more positive but not overly exuberant
mood. However, we remain extremely optimistic for the future as global wealth growth supports demand at a time
when global diamond production is forecast to peak.
After the world financial crisis of 2008, global output of gemstones, which had already been falling from a peak of
over 175 million carats in 2005, dropped sharply to some 120 million carats in 2009. Production has since
recovered and in 2014 reached an estimated 131 million carats. Further increases in supply are forecast in the next
few years as mines such as Grib, Gahcho Kue, Liqhobong, Renard and of course Lace come on-stream while the
world’s largest mine Jwaneng raises output. Set against these new mines, output from major producers including
Ekati, Diavik, Argyle and Marange are falling as they near the end of their lives or become sub-economic. All
mineral resources have a finite life but the natural morphology of kimberlite pipes, usually carrot shaped, which
may bottom out as thin feeders, means that at depth, the volume of ore per vertical metre falls. This explains why
diamond resources are notably more finite than other minerals which occur in more homogenous orebodies. On the
cost side, finding diamondiferous kimberlites is a very expensive business, mine operating costs increase as
operations dig deeper and cutting and polishing stones takes much time and requires great skill. All these factors
illustrate why diamonds are such a rare and valuable commodity.
I am often asked about the impact of synthetic diamonds on the market. These have been produced for the past
50 years but new Chemical Vapour Deposition Technology is now able to produce high quality stones. The market
expects synthetics to add around 1.0 million carats suitable for use in jewellery manufacturing this year which is a
tiny proportion of the mined gem quality diamonds. Producing large man made stones (+ 1 carat) is still expensive
compared to mine production but no doubt technology will advance and costs fall, to help synthetics fill part of the
growing mine supply deficit. Even when this level is reached, noted recently by one investment bank to be 10 – 15
years away, then I am not convinced that many men will be brave enough to palm off their girlfriends, fiancés,
brides, wives or mistresses with synthetic goods.
On the demand side, after record global consumption of diamond jewellery amounting to US$79 billion in 2013 (De
Beers, Sept 2014), demand is estimated to have hit another peak of some $81 billion last year. The US remains the
largest consumer (now around 40%) of diamonds but China and India are the fastest growing markets. Jewellery
and hence gem diamond demand is related closely to the growth of economic wealth and disposable incomes. It is
therefore encouraging to note that a major investment bank, Credit Suisse (Global Wealth Report 2014), predicts
total global wealth to rise 40% from US$263 trillion in 2014 to US$369 trillion in 2019 with increases of 37% in the
US, 66% in China and 50% in India. China is expected to overtake Japan as the second wealthiest nation in 2019
and become the largest buyer of diamond jewellery ahead of the US by that year.
Both the flattening supply curve and the growing demand outlook point to a healthy outlook for diamond price
increases in coming years.
Financing
Delays resulting from the industrial action combined with a 24% devaluation of the South African Rand since the
Lace project finance was arranged, resulted in the Company needing to secure additional working capital to
complete the development of the first mining block at Lace. The funding requirement ranges from £1.8 million in the
Company’s base case to £2.8 million in the worst case. Post balance sheet date, the Company signed a term sheet
with Acrux Resources, a South African resources financing group, for a royalty financing facility for the rand
equivalent of US$7 million (£4.5 million), which more than adequately covers the working capital requirement. At
the date of this report, the royalty financing is in its final stages of completion.
Company Strategy
In the past, we have talked of looking for other diamond mine opportunities and have assessed numerous projects.
As it has become apparent that there are few if any projects available that can offer the attractive financial returns
we forecast for Lace, our efforts in the past year have been focused on bringing the mine into production.
We currently believe that it is in the best interests of all stakeholders to repay a proportion of outstanding debt and
then to apply free cash flow to capital returns or share buy-backs before the accumulation of distributable
reserves allows the payment of dividends. We expect this to increase the value of DiamondCorp and when
opportunities arise we will be in a stronger position to add new operations if they reach our target thresholds. At
the current annual plant capacity of 1.2 million tonnes, Lace has a resource down to a depth of 850 metres which
will sustain a mine life of over 25 years. We believe it very likely that diamonds are present well below this level
but we will not need to expend funds exploring such depths for many years. The presently identified constraint on
production levels at the Lace Mine is the availability of water but with progressively developing technology and our
large resource, there is a good possibility that in the future we could consider increasing mine output.
In Conclusion
As Lace nears the start of commercial production, I would like to thank you all for your patience over the past
decade. It may seem a long time since we started this venture but a new kimberlite discovery would probably take
around 15 years to bring into production and I believe it is very unlikely that an underground mine of similar size to
Lace could be brought on-stream for under the US$70 million capital cost which we aim to achieve.
All diamond mines are different and have specific geological and product characteristics. The Lace kimberlites
are unique in that they contain over 70% gem quality diamonds of which a small proportion are special lilac and
pink stones.
As a company, I believe that we also have some differentiating characteristics that benefit shareholders. These
include the rebuilding and maintenance of our own mining fleet, limited use of contractors, senior executives
living on site, local finance and audit functions and a small London office performing in-house IR/PR activities.
Together, these actions help to keep our capital and operating costs low.
Euan Worthington
Chairman
22 May 2015
LETTER FROM THE CHIEF EXECUTIVE OFFICER
Dear Shareholder
Financial year 2014 was a year of significant progress for DiamondCorp as we moved towards our goal of
diamond production from underground mining operations at the Lace Mine in the Free State of South
Africa.
Highlights for the year included:
- Development of the Upper K4 (UK4) mining block which is on schedule for commencement of mining
operations in H2 2015, several months ahead of the original development schedule.
- Underground core drilling has delineated 2.6 million tonnes of K4 (high grade) kimberlite above the 370m
level, an increase of more than 2 million tonnes over the original Lace geological model.
- The drilling of the UK4 block provides the volume data required for an updated resource statement. The final
resource statement will require grade data from the bulk testing currently scheduled to be completed by the
end of Q2.
- Processing of K6 kimberlite recovered from the production level drives has commenced, including recovery of
a 19.83 carat clear white gem diamond, being the largest gem diamond recovered from underground
development so far, and a 4.38 carat D Type IIA white. The recovery of a Type IIA diamond has value
implications for the entire resource as it means Lace has the potential to produce large, very high value
diamonds.
- Installation of the 400 tonnes per hour underground conveyor system which will bring ore to surface for the life
of the mine commenced and is on schedule for commissioning ahead of the mining ramp-up.
- The Company took delivery of a new Sandvik 421 drill rig required for longhole drilling on the production levels
in the UK4 and 47L block caves.
- The additional water storage dam and surface drainage were constructed allowing sufficient water to be
collected for 2015 processing requirements despite the third year of below average rainfall.
- Diamond recoveries from tailings for the year ended totalled 18,354 carats at a recovered grade of 5.96 carats
per hundred tonnes (cpht) against a budget of 5.00 cpht.
- Diamond sales for the year ended totalled 21,700 carats at an average price of US$63 per carat, slightly
ahead of budget. Income from diamonds sold has been credited to mine development as this is incidental to
the development and testing of the processing plant.
During 2014, a revised underground development schedule and budget was adopted which aimed to bring forward
the ramp up of commercial production from underground kimberlite mining by six months. The main challenges to
achieving this schedule and budget have been rising input costs, the more than 25% devaluation of the South
African Rand against major currencies since budgets were planned in 2012, and a climate of industrial relations
unrest in the South African mining industry. The former have been managed by careful attention to cost control,
but the latter, regrettably, resulted in the mine suffering a six-week strike by members of the Association of
Mineworkers and Construction Union in October and November.
However, a number of positives came out of the strike, including identification of underground workplace
inefficiencies which were addressed when the workforce returned to work. As a consequence of these changes, a
15% improvement in development productivity has been achieved. Further, in February 2015, the Lace Mine
signed a four-year wage agreement based around 8% annual increases in basic salary for most categories, along
with a progressive lift in the lowest categories to ZAR 12,500 per month basic salary over the life of the agreement.
This unprecedented long wage agreement will help provide industrial relations stability at the Lace mine during the
critical mine start up years and demonstrates a solid maturing of relationships between the union and
management.
Tunnel development costs to the year-end averaged ZAR 40,764 per month (and ZAR 38,961 per month as at end
April 2015) against a revised budget of ZAR 37,000 per month. The over spend was the result of increased
operating costs on the Company’s underground mining fleet and delays resulting from the labour strike. The
Company introduced a number maintenance and repair cost saving initiatives during the year, but these were
largely offset by cost increases on spare parts resulting from the weaker South African Rand. As yet, the impact of
international oil price falls has not been reflected in diesel costs in rand terms. The Company has not been affected
by Eskom load shedding. Post year-end, VAT refunds are now being handled by the South African Revenue
Service in a more timely manner and the overall mine development expenditure remains close to budget.
The Company is pleased to have taken delivery of its new Sandvik 421 longhole drill rig. This rig has the
capacity to drill longholes up to 54m in length and 127mm in diameter and will be used to complete all the
longhole drilling on the production levels in the UK4 and 47L block cave.
Workplace safety remains a priority for the Company. The Lost Time Injury Frequency Rate (LTIFR) for 2014 was
0.72, slightly up on 0.63 in 2013, but still significantly below the average for mining operations in South Africa.
Lace had two lost time injuries and 61,303 lost time injury free shifts during 2014. Management aims for zero harm
to its employees and targets a LTIFR of less than 0.5.*
Underground core drilling during the year delineated significant volumes of K4 (high grade) kimberlite above the
365m level. The drilling, bulk testing and release of an updated resource statement will take place by the end of
Q2 2015. The Upper K4 block will be the first mining block at Lace, and will be mined at the rate of 30,000 tonnes
per month, while the 47L block cave is established.
In the year ended 31 December 2014, the Company processed 308,047 tonnes of tailings. Diamond recoveries
totalled 18,354carats at an average recovered grade of 5.96 cpht, compared with a budget recovered grade of 5
cpht. Tailings re-treatment processing stopped in September to allow the surface earth moving fleet to complete
the construction of another 150,000 cubic metre surface process water storage dam in preparation for earlier than
scheduled kimberlite mining. This activity was successfully completed in the dry winter months ahead of the
summer rains. The construction of the new dam, plus additional surface drains has allowed the mine to capture all
of the water required for 2015 kimberlite processing despite the current summer rains being the third year in a row
with below average rainfall.
The Company's metallurgical consultants have commenced preliminary test work on the potential for installing a
high volume optical and x-ray waste sorter ahead of the dense media separation plant. Such a unit could remove
large volumes of internal waste from the kimberlite before processing. The K6 kimberlite contains up to 85% waste
in places and the higher grade K4 kimberlite has up to 25% internal waste. Installation of a waste sorter has the
potential to significantly reduce plant water and electricity consumption and could also allow the kimberlite to be
processed faster than the current planned 220 tonnes per hour. If the test work is successful a unit could be
installed before the mining ramp-up from the first block cave.
Diamond sales for the year ended 31 December 2014 totalled 21,700 carats for proceeds of $1,361,778. The
average sales price was $63 per carat, slightly ahead of forecast for the year. Profit share on two diamonds which
were beneficiated and the sale of fine diamonds added a further $58,544 to income for the year.
Short-term demand for rough diamonds continues to be soft in response to slower polished sales and tightening
liquidity as a number of banks which finance the cutting and polishing sector continue to reduce their exposure to
the sector. Longer-term, the outlook remains strong as world economies continue to recover.
The Company has not factored diamond price increases into its Lace project model since the 250 level bulk test
diamonds were valued in 2012 at $160 per carat. Nonetheless, in light of the current market weakness, the
Company now models the Lace project at $150 per carat. At the current rand-dollar exchange rate, this represents
cash operating margins of 81% on the UK4 Block and 71% on the deposit overall.
In the next annual report, I look forward to reporting on the ramp up in production from the underground
operations at Lace and the commencement of regular sales of diamonds recovered from kimberlite. As we move
forward into positive cashflow, we will look to see how we can best maximise returns to our shareholders
demonstrate the intrinsic value in the Lace operation.
Paul R Loudon
Chief Executive Officer
22 May 2015
* LTIFR is an industry standard calculation based on the number of lost time injuries multiplied by 200,000,
divided by the number of lost time injuries multiplied by 9. PwC in their 2014 SA Mine Review show LTIFR in
South African gold mines averaged 4.2, platinum 2.1, coal 1.2 and other commodities, including diamonds, 1.1.
Consolidated and Separate Income Statement
Group Company
2014 2013 2014 2013
Note £ £ £ £
Other income 39,097 13,983 3,500 3,500
Operating expenses (1,605,381) (2,193,475) (318,970) (10,981,127)
Operating loss 20 (1,566,284) (2,179,492) (315,470) (10,977,627)
Finance income 49 243,634 49 88
Fair value adjustments (1,685,439) (619,042) (679,367) (188,481)
Finance costs 22 - (55,004) (253,466) (253,619)
Loss before taxation (3,251,674) (2,609,904) (1,248,254) (11,419,639)
Taxation 23 - - - -
Loss for the year (3,251,674) (2,609,904) (1,248,254) (11,419,639)
Loss attributable to :
Owners of the parent (3,141,615) (2,382,647) (1,248,254) (11,419,639)
Non-controlling interest (110,059) (227,257) - -
(3,251,674) (2,609,904) (1,248,254) (11,419,639)
Loss per share
Per share information
Basic and diluted loss per share (pence) 26 (1.02) (0.86) - -
Consolidated and Separate Statement of Comprehensive Income
Group Company
2014 2013 2014 2013
Note £ £ £ £
Loss for the year (3,251,674) (2,609,904) (1,248,254) (11,419,639)
Other comprehensive expense:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations (243,532) (2,290,568) - -
Other comprehensive expense for the year 25 (243,532) (2,290,568) - -
Total comprehensive expense (3,495,206) (4,900,472) (1,248,254) (11,419,639)
Total comprehensive expense attributable to:
Owners of the parent (3,294,711) (4,057,858) (1,248,254) (11,419,639)
Non-controlling interest (200,495) (842,614) - -
(3,495,206) (4,900,472) (1,248,254) (11,419,639)
Consolidated and Separate Statement of Financial Position
Group Company
2014 2013 2014 2013
Note £ £ £ £
Assets
Non-Current Assets
Property, plant and equipment 4
Goodwill 5 23,993,549 14,892,223 257,622 277,440
Investments in subsidiaries 6 4,606,026 4,606,026 - -
Loans to group companies 7 - - 4,672,501 4,672,501
Rehabilitation trust fund 9 - - 14,307,300 13,714,510
Restricted cash 12 101,199 43,632 - -
70,232 73,108 - -
28,771,006 19,614,989 19,237,423 18,664,451
Current Assets
Inventories 10 455,684 557,085 - -
Current tax receivable 6,651 6,651 - -
Trade and other receivables 11 648,810 880,990 - -
Cash and cash equivalents 12 2,531,420 2,220,130 1,054,175 5,979
3,642,565 3,664,856 1,054,175 5,979
Total Assets 32,413,571 23,279,845 20,291,598 18,670,430
Equity and Liabilities
Equity
Equity Attributable to Equity Holders of Parent
Share capital 13 37,161,666 35,190,544 37,161,667 35,190,544
Reserves (1,967,241) (1,807,236) 611,222 618,131
Accumulated losses (26,048,922) (22,907,307) (20,599,180) (19,350,926)
9,145,503 10,476,001 17,173,709 16,457,749
Non-controlling interest (2,147,363) (1,946,868) - -
Total Equity 6,998,140 8,529,133 17,173,709 16,457,749
Liabilities
Non-Current Liabilities
Other financial liabilities 17 17,972,843 9,239,447 455,000 455,000
Provisions 18 581,756 528,828 - -
18,554,599 9,768,275 455,000 455,000
Current Liabilities
Compound instruments - debt component 16 2,811,742 2,532,981 1,234,488 981,022
Compound instruments - derivative component 16 3,730,434 2,107,849 1,409,446 730,079
Trade and other payables 19 318,656 341,607 18,955 46,580
6,860,832 4,982,437 2,662,889 1,757,681
Total Liabilities 25,415,431 14,750,712 3,117,889 2,212,681
Total Equity and Liabilities 32,413,571 23,279,845 20,291,598 18,670,430
The financial statements on pages 25 to 73, of DiamondCorp plc, registered number 5400982, were approved by the Board of
Directors and authorised for issue on 22 May 2015 and signed on behalf of the Board of Directors.
EA Worthington
Director
Consolidated and Separate Statement of Changes in Equity
Share capital Share premium Total share capital Foreign currency Share option Warrant reserve Reserves Accumulated Total attributable Non-controlling Total equity
translation reserve reserve losses to owner of the interest
parent
£ £ £ £ £ £ £ £ £ £ £
Group
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
based 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 01 January 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
2014
Loss for the year - - - - - - - (3,141,615) (3,141,615) (110,059) (3,251,674)
Other comprehensive loss - - - (153,096) - - (153,096) - (153,096) (90,436) (243,532)
Total comprehensive loss - - - (153,096) - - (153,096) (3,141,615) (3,294,711) (200,495) (3,495,206)
for the year
Issue of shares 41,525 1,929,597 1,971,122 - - - - - 1,971,122 - 1,971,122
Value attributed for equity - - - - 5,899 - 5,899 - 5,899 - 5,899
settled share based
payments
Fair value adjustment of - - - - - (12,808) (12,808) - (12,808) - (12,808)
reserve
Total contributions by 41,525 1,929,597 1,971,122 - 5,899 (12,808) (6,909) - 1,964,213 - 1,964,213
and distributions to
owners of company
recognised directly in
equity
Balance at 31 December 8,346,709 28,814,957 37,161,666 (2,578,463) 532,030 79,192 (1,967,241) (26,048,922) 9,145,503 (2,147,363) 6,998,140
2014
Note 13 13 13 14 15
Consolidated and Separate Statement of Changes in Equity
Share capital Share premium Total share capital Foreign currency Share option Warrant reserve Reserves Accumulated Total attributable Non-controlling T
translation reserve reserve losses to owner of the interest
parent
£ £ £ £ £ £ £ £ £ £
Company
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 -
2013
Loss for the year - - - - - - - (11,419,639) (11,419,639) - (1
Total comprehensive - - - - - - - (11,419,639) (11,419,639) - (1
loss for the year
Issue of shares 180,000 90,000 270,000 - - - - - 270,000 -
Value attributed for - - - - 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 -
and distributions to
owners of company
recognised directly in
equity
Balance at 01 January 8,305,184 26,885,360 35,190,544 - 526,131 92,000 618,131 (19,350,926) 16,457,749 -
2014
Loss for the year - - - - - - - (1,248,254) (1,248,254) -
Total comprehensive - - - - - - - (1,248,254) (1,248,254) -
loss for the year
Issue of shares 41,526 1,929,597 1,971,123 - - - - - 1,971,123 -
Value attributed for - - - - 5,899 - 5,899 - 5,899 -
equity settled share
based payments
Fair value adjustment - - - - - (12,808) (12,808) - (12,808) -
of reserve
Total contributions by 41,526 1,929,597 1,971,123 - 5,899 (12,808) (6,909) - 1,964,214 -
and distributions to
owners of company
recognised directly in
equity
Balance at 31 8,346,710 28,814,957 37,161,667 - 532,030 79,192 611,222 (20,599,180) 17,173,709 -
December 2014
Note 13 13 13 14 15
Consolidated and Separate Statement of Cash Flows
Group Company
2014 2013 2014 2013
Note £ £ £ £
Cash flows from operating activities
Cash used in operations 27 (879,829) (3,313,229) (560,646) (1,142,665)
Finance costs - (55,004) - (52,857)
Net cash used in operating activities (879,829) (3,368,233) (560,646) (1,195,522)
Cash flows from investing activities
Purchase of property, plant and equipment 4 (7,971,705) (6,765,660) - -
Sale of property, plant and equipment 4 - 2,530 - -
Loans advanced to group companies - - (362,330) (432,132)
Outflow relating to other non-current asset (57,567) (43,632) - -
Interest Income 49 243,634 49 88
Net cash used in investing activities (8,029,223) (6,563,128) (362,281) (432,044)
Cash flows from financing activities
Proceeds on share issue 13 1,971,122 270,000 1,971,123 270,000
Proceeds from other financial liabilities 8,733,396 9,442,618 - -
Net cash generated from financing activities 10,704,518 9,712,618 1,971,123 270,000
Total cash movement for the year 1,795,466 (218,743) 1,048,196 (1,357,566)
Cash at the beginning of the year 2,220,130 4,227,404 5,979 1,363,545
Effect of exchange rate movement on cash balances (1,484,176) (1,788,531) - -
Total cash at end of the year 12 2,531,420 2,220,130 1,054,175 5,979
Basis of Preparation and Accounting Policies
1. General information
DiamondCorp plc is a Company incorporated in England and Wales under the Companies Act 2006 and incorporated as
an external company in South Africa under the Companies Act No 71 of 2008. The address of the registered office is
given on page 2.
These financial statements are presented in pounds sterling because that is the functional currency of the parent Company
as well as presentation currency of the Group. Foreign operations are included in accordance with the policies set out in this
note.
These accounting policies are consistent with the previous period.
Statement of compliance
The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) issued by the IASB and in accordance with IFRS interpretations committee (IFRS IC) interpretations. The
financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the
Group financial statements comply with Article 4 of the EU IAS Regulation.
Basis of preparation
The financial statements have been prepared in accordance with the UK Companies Act 2006 applicable to companies
reporting under IFRS.
The financial statements have been prepared on the historical cost basis, except for certain financial instruments that are
measured at fair value, as explained in the accounting policies below. Historical cost is generally based on fair value of the
consideration given in exchange for assets. The financial statements have been prepared on a going concern basis. The
principal accounting policies adopted are set out below.
1.1 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating-decision
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.
The basis of segmental reporting has been set out in note 3 of the financial statements.
1.2 Consolidation
Basis of consolidation
The audited consolidated and separate financial statements incorporate the audited consolidated and separate financial
statements of the group and all investees which are controlled by the Company (its subsidiaries).
The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns
from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the
investor's returns.
The results of subsidiaries are included in the audited consolidated and separate financial statements from the effective
date of acquisition to the effective date of disposal.
Adjustments are made when necessary to the audited consolidated and separate financial statements of subsidiaries to
bring their accounting policies in line with those of the group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the
group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests
are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling
interest.
Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and
after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.
The difference between the fair value of consideration paid or received and the movement in non-controlling interest for
such transactions is recognised in equity attributable to the owners of the parent.
Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to
fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling
interest.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling
interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount
by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous
carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When
assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been
recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other
comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the
relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable
IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition of the financial asset in accordance with IAS 39 Financial Instruments: Recognition and
Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled
entity.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value
of the identifiable assets and liabilities of a subsidiary, at the date of acquisition. Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an
asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not
subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to the Group’s cash-generating unit expected to benefit from
the synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is
translated to the presentation currency of the group at the end of each reporting period with the adjustment recognised in
equity through other comprehensive income.
1.3 Significant judgments and sources of estimation uncertainty
In preparing the audited consolidated and separate financial statements, management is required to make estimates and
assumptions that affect the amounts represented in the audited consolidated and separate financial statements and
related disclosures. Use of available information and the application of judgment is inherent in the formation of estimates.
Actual results in the future could differ from these estimates which may be material to the audited consolidated and
separate financial statements. Significant judgments include:
Impairment testing
Impairment of goodwill - Judgment is applied in determining appropriate assumptions to be used in testing for and
calculating impairment. See policy regarding Goodwill.
Provisions
Provisions were raised and management determined an estimate based on the information available. Additional disclosure
of these estimates of provisions are included in note 18 - Provisions - of the financial statements.
Provisions are recognised when:
the group has a present obligation as a result of a past event;
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
and
a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where
some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the
reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the
entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the
reimbursement shall not exceed the amount of the provision.
Provisions are not recognised for future operating losses.
If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a
provision.
Valuations
* Valuation of inventory - Judgment was applied in calculating the initial carrying value of inventory and judgment
continues to be applied in assessing the net realisable value. See accounting policy regarding Inventories.
* Valuation of warrants, share options and ordinary shares issued as consideration - Judgment is applied in determining
appropriate assumptions to be used in calculating the fair value of warrants, shares and share options issued. See notes 14
and 15 of the financial statements.
* Valuation of the bifurcated embedded derivative in the convertible bonds - Judgment is applied in determining
appropriate assumptions to be used in calculating the fair value of convertible bonds. See note 16 of the financial
statements.
Going concern
Judgment is applied in assessing the likelihood and timing of future cash flows associated with the Group's activities.
Judgment is also applied in assessing the likelihood of receiving future funding.
1.4 Property, plant and equipment
Initial recognition
The cost of an item of property, plant and equipment is recognised as an asset when:
it is probable that future economic benefits associated with the item will flow to the company; and
the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost.
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred
subsequently to add to, replace part of, service it, the initial estimate of the rehabilitation obligation, and for qualifying assets
(where relevant), borrowing costs. If a replacement cost is recognised in the carrying amount of an item of property, plant
and equipment, the carrying amount of the replaced part is derecognised. The purchase price or construction cost is the
aggregate amount paid and the fair value any other consideration given to acquire the asset. The capitalised value of a
finance lease is also included within property, plant and equipment.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs
ceases and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for
capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve
development.
Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
Upon completion of mine construction, the assets are transferred into “Property, plant and equipment”. Items of property,
plant and equipment and mining properties are stated at cost, less accumulated depreciation and accumulated impairment
losses.
Mines under construction
Upon transfer of “Exploration and evaluation assets” into “Construction in progress” within “Property, plant and
equipment”, all subsequent expenditure on the construction, installation or completion of infrastructure facilities is
capitalised within ”Construction in progress”. Development expenditure is net of proceeds from the incidental sale of
diamonds extracted during the development phase. After production starts, all assets included in “Construction in
progress” are transferred to “Mining properties” within “Property, plant and equipment”.
Depreciation/amortisation
Mining properties are depreciated/amortised on a unit-of-production basis over the economically recoverable reserves of
the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case the
straight-line method is applied. Only proven and probable reserves are included in the unit of production calculation.
Other plant and equipment such as mobile mine equipment is generally depreciated on a straight-line basis over their
estimated useful lives to their residual values.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Land N/A
Buildings 20 years
Plant and machinery 5 - 20 years
Mining rights 25 years (life of mine)
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If
the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of
another asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when
the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is
determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Assets which the (company/group) holds for rentals to others and subsequently routinely sell as part of the ordinary course
of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not
accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash
flows on these assets are included in cash flows from operating activities in the cash flow statement.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and
overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it
is probable that future economic benefits associated with the item will flow to the Group through an extended life, the
expenditure is capitalised.
Where part of the asset was not separately considered as a component, the replacement value is used to estimate the
carrying amount of the replaced asset(s).
1.5 Financial liabilities / assets
Initial recognition and measurement
Financial liabilities are classified as either financial liabilities at fair value through profit or loss ("at FVTPL") or 'other
financial liabilities'.
Other financial liabilities
Other liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or
they expire.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at
FVTPL.
A financial liability is classified as held for trading if:
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and
its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management
or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of
a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in
profit or loss.
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.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value (net of transaction costs), 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 (net of transaction costs), 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 higher of:
the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets; and
the amount initially recognised (fair value) less, when appropriate, cumulative amortisation recognised in
accordance with IAS 18 Revenue.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue cost.
1.6 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 (assets) 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.
1.7 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.
Operating leases – lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term and is included in the
operating expenses of the group. 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.
1.8 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.
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.
1.9 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 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 dispose 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.
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.
1.10 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.
1.11 Share based payments
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments granted.
Equity-settled share-based payment instruments issued to persons other than employees are measured at the fair value of
the goods and services received, unless that fair value cannot be estimated reliably. If that is the case, the fair value is
measured at the fair value of the equity instruments granted. 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 14 of the financial statements.
The fair value determined at the grant date of the equity-settled share-based payments is expensed 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.
1.12 Revenue
Revenue from the sale of diamonds is recorded when the diamonds are sold.
Incidental sale of diamonds derived from underground development is credited to mine development costs.
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.
1.13 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 overdraft and borrowings are initially measured at fair value, and are subsequently 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.
1.14 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.
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.
1.15 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.
1.16 Rehabilitation trust fund
Contributions for the rehabilitation liability are made to an external insurer to fund the estimated cost of rehabilitation during
and at the end of the life of the mine. The amounts contributed to this insurance fund are accounted for at cost and as a
non-current asset.
1.17 Warranty reserve policy
Options issued as warrants are treated as equity settled share based payments.
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:
Amendments to 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 01 January 2014.
The group has adopted the amendments for the first time in the 2014 audited consolidated and separate financial statements.
The impact of the amendment 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 01 January 2015 or later periods:
Amendment to IFRS 2: Share-based Payment: Annual improvements project
Amended the definitions of "vesting conditions" and "market conditions" and added definitions for "performance condition" and
"service condition."
The effective date of the amendment is for years beginning on or after 01 July 2014.
The group expects to adopt the amendment for the first time in the 2015 audited consolidated and separate financial
statements.
It is unlikely that the amendment will have a material impact on the group's audited consolidated and separate financial
statements.
Amendment to IFRS 8: Operating Segments: Annual improvements project
Management are now required to disclose the judgments made in applying the aggregation criteria. This includes a brief
description of the operating segments that have been aggregated in this way and the economic indicators that have been
assessed in determining that the aggregated operating segments share similar economic characteristics.
The effective date of the amendment is for years beginning on or after 01 July 2014.
The group expects to adopt the amendment for the first time in the 2015 audited consolidated and separate financial
statements.
The impact of this amendment is currently being assessed.
Amendment to IAS 24: Related Party Disclosures: Annual improvements project
The definition of a related party has been amended to include an entity, or any member of a group of which it is a part, which
provides key management personnel services to the reporting entity or to the parent of the reporting entity ("management
entity"). Disclosure is required of payments made to the management entity for these services but not of payments made by
the management entity to its directors or employees.
The effective date of the amendment is for years beginning on or after 01 July 2014.
2.2 Standards and interpretations not yet effective (continued)
Amendment to IAS 24: Related Party Disclosures: Annual improvements project (continued)
The group expects to adopt the amendment for the first time in the 2015 audited consolidated and separate financial
statements.
It is unlikely that the amendment will have a material impact on the group's audited consolidated and separate financial
statements.
Amendment to IAS 38: Intangible Assets: Annual improvements project
The amendment adjusts the option to proportionately restate accumulated amortisation when an intangible asset is revalued.
Instead, the gross carrying amount is to be adjusted in a manner consistent with the revaluation of the carrying amount. The
accumulated amortisation is then adjusted as the difference between the gross and net carrying amount.
The effective date of the amendment is for years beginning on or after 01 July 2014.
The group expects to adopt the amendment for the first time in the 2015 audited consolidated and separate financial
statements.
It is unlikely that the amendment will have a material impact on the group's audited consolidated and separate financial
statements.
Amendment to IFRS 13: Fair Value Measurement: Annual improvements project
The amendment clarifies that references to financial assets and financial liabilities in paragraphs 48–51 and 53–56 should be
read as applying to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, regardless of
whether they meet the definitions of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation.
The effective date of the amendment is for years beginning on or after 01 July 2014.
The group expects to adopt the amendment for the first time in the 2015 audited consolidated and separate financial
statements.
It is unlikely that the amendment will have a material impact on the group's audited consolidated and separate financial
statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programs; IFRIC 15
Agreements for the construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter
Transactions Involving Advertising Services.
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. An entity recognises revenue in accordance with that core principle by applying the following steps:
Identify the contract(s) with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognise revenue when (or as) the entity satisfies a performance obligation.
IFRS 15 also includes extensive new disclosure requirements.
The effective date of the standard is for years beginning on or after 01 January 2017.
The group expects to adopt the standard for the first time in the 2017 audited consolidated and separate financial statements.
The impact of this standard is currently being assessed.
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.
The Lace Diamond Mine segment will derive income primarily from the production and sale of rough and polished diamonds.
All the other segments are primarily focused on administrative and financing activities.
2014
Income Separately disclosable items
Total other Operating Depreciation Interest Interest Taxation
income loss and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mine 35,597 (423,348) - - - -
All other segments 12,371 (1,142,887) (19,818) 49 - -
Total 47,968 (1,566,235) (19,818) 49 - -
Reconciling items
Fair value adjustments (1,685,439)
Loss after tax (3,251,674)
2013
Income Separately disclosable items
Total other Operating Depreciation Interest Interest Taxation
income loss and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mine 13,645 (872,220) - 39,012 - -
All other segments 204,825 (1,118,642) (19,817) 204,622 (55,004) -
Total 218,470 (1,990,862) (19,817) 243,634 (55,004) -
Reconciling items
Fair value adjustments (619,042)
Loss after tax (2,609,904)
Reconciliation of other income Total Inter- Income from Total Inter- Income from
segment segment external segment segment external
income income customers income income customers
2014 2014 2014 2013 2013 2013
£ £ £ £ £ £
Lace Diamond Mine
Profit on foreign exchange 21,309 - 21,309 1,845 - 1,845
transactions
Sundry income 14,288 - 14,288 11,800 (3,162) 8,638
Soapstone Investment
Profit / (loss) on sale of fixed assets - - - 199,032 (199,032) -
Diamondcorp Holding
Marketing fee 8,871 (8,871) - 2,293 (2,293) -
Diamondcorp PLC
Rental income 3,500 - 3,500 3,500 - 3,500
47,968 (8,871) 39,097 218,470 (204,487) 13,983
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.
2014
Additions to Total assets
non-current
assets
£ £
Lace Diamond Mines 9,850,018 25,359,311
All other segments 726,519 7,054,260
Total 10,576,537 32,413,571
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
4. Property, plant and equipment
Group 2014 2013
Cost / Accumulated Carrying Cost / Accumulated Carrying
Valuation depreciation / value Valuation depreciation / value
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Land & Buildings 941,662 (231,275) 710,387 863,020 (191,071) 671,949
Plant and machinery 7,202,535 (3,725,078) 3,477,457 6,898,130 (3,355,700) 3,542,430
Mining Rights 558,840 (195,595) 363,245 565,493 (169,648) 395,845
Construction in Progress 21,671,561 (2,229,101) 19,442,460 12,602,367 (2,320,368) 10,281,999
Total 30,374,598 (6,381,049) 23,993,549 20,929,010 (6,036,787) 14,892,223
Company 2014 2013
Cost / Accumulated Carrying Cost / Accumulated Carrying
Valuation depreciation / value Valuation depreciation / value
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Mining Rights 396,343 (138,721) 257,622 396,343 (118,903) 277,440
Reconciliation of property,
plant and equipment – Group
- 2014
Opening Additions Disposals Foreign Depreciation Total
balance exchange
movements
£ £ £ £ £ £
Land & Buildings 671,949 113,565 - (26,992) (48,135) 710,387
Plant and machinery 3,542,430 732,968 (5,020) (70,188) (722,733) 3,477,457
Mining Rights 395,845 - - (4,586) (28,014) 363,245
Construction in Progress 10,281,999 9,730,004 - (569,543) - 19,442,460
14,892,223 10,576,537 (5,020) (671,309) (798,882) 23,993,549
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 Progress 4,130,832 6,733,444 - (582,277) - 10,281,999
8,776,273 7,739,665 (2,530) (1,141,402) (479,783) 14,892,223
Reconciliation of property, plant and equipment - Company - 2014
Opening Depreciation Total
balance
£ £ £
Mining Rights 277,440 (19,818) 257,622
Reconciliation of property, plant and equipment - Company - 2013
Opening Depreciation Total
balance
£ £ £
Mining Rights 297,257 (19,817) 277,440
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 of the
financial statements). 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 of the financial statements).
5. Goodwill
Group 2014 2013
Cost Accumulated Carrying Cost Accumulated Carrying
impairment value impairment value
£ £ £ £ £ £
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 year. A post tax discount rate of 15% (2013: 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
2014 2013 2014 2013
£ £
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 74.00 % 74.00 % - -
- incorporated in South Africa Holdings Limited
Soapstone Investment Ltd DiamondCorp 100.00 % 100.00 % 455,000 455,000
- incorporated in South Africa Holdings Limited
DCP Exploration (Pty) Ltd Botswana 100.00 % 100.00 % - -
- incorporated in Botswana DiamondCorp
Limited
4,672,501 4,672,501
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
2014 2013
Lace Diamond Mines (Pty) Ltd RSA 26% 26%
Summarised statement of financial position
Lace Diamond Mines (Pty) Ltd
2014 2013
£ £
Assets
Non-current assets 22,980,382 14,502,254
Current assets 2,378,950 3,308,578
Total assets
25,359,332 17,810,832
Liabilities
Non-current liabilities 33,622,121 26,007,751
Current liabilities 563,287 553,685
Total liabilities
34,185,408 26,561,436
Total net liabilities
(8,826,076) (8,750,604)
Carrying amount of non-controlling interest (2,147,363) (1,946,868)
Summarised statement of financial performance
Lace Diamond Mines (Pty)
Ltd
2014 2013
£ £
Other income and expenses (423,303) (872,220)
Loss before tax (423,303) (872,220)
Loss for the year (423,303) (872,220)
Total comprehensive loss (771,133) (3,238,976)
Loss allocated to non-controlling interest (200,494) (842,614)
Summarised statement of cash flows
Lace Diamond Mines (Pty) Ltd
2014 2013
£ £
Cash flows used in operating activities (177,599) (1,479,667)
Cash flows used in investing activities (7,552,003) (8,528,827)
Cash flows from financing activities 7,203,248 12,127,898
Net (decrease) increase in cash and cash equivalents (526,354) 2,119,404
7. Loans to group companies
Company
2014 2013
£ £
Subsidiaries
DiamondCorp Holdings Ltd 24,231,426 23,869,096
24,231,426 23,869,096
Impairment of loans to subsidiaries (9,924,126) (10,154,586)
14,307,300 13,714,510
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 loan is not past due. The loan does not have any published 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
2014 2013
£ £
Non-current assets - net after impairment 14,307,300 13,714,510
The ageing of this loan is as follows:
Company
2014 2013
£ £
Over 6 months 14,307,300 13,714,510
8. Deferred tax
Any deferred tax asset relating to the tax loss has only been utilised to the extent that there is deferred tax liabilities.
Unutilised deferred tax assets in the Group amounting to £4,890,206 (2013: £4,946,613) and in the Company amounting
to £2,754,924 (2013: £2,846,895) have not been recognised due to the uncertainty of the timing of future taxable profits
that it can be utilised against. The Group's tax losses have no expiry date.
The unrecognised deferred tax asset comprises of:
Group Company
2014 2013 2014 2013
£ £ £ £
Capital allowances 509,961 684,036 12,782 9,215
Tax losses 2,004,922 1,679,807 608,455 476,739
Temporary differences 2,375,323 2,582,770 2,133,687 2,360,941
4,890,206 4,946,613 2,754,924 2,846,895
9. Rehabilitation trust fund
Group Company
2014 2013 2014 2013
£ £ £ £
At amortised cost:
Rehabilitation fund 101,199 43,632 - -
Contributions to an insurance policy to cover future environmental rehabilitation and closure cost. This, together with the
restricted cash in note 12 of the financial statements, serves as security for the rehabilitation Provision in note 18 of the
financial statements.
10. Inventories
Group Company
2014 2013 2014 2013
£ £ £ £
Diamond inventories 188,827 408,867 - -
Consumable and other inventories 266,857 148,218 - -
455,684 557,085 - -
Diamond inventories at 31 December 2014 totalled 2,815.12 (2013: 7,675) carats, all of which were recovered from tailings
(2013: 2,189). Inventory is valued as per the ac counting policy. There were no write down of inventories (2013: nil) or any
reversal of inventory write downs during the year.
11. Trade and other receivables
Group Company
2014 2013 2014 2013
£ £ £ £
Trade receivables 57,636 - - -
Prepayments 128,672 183,235 - -
VAT 462,502 697,755 - -
648,810 880,990 - -
The Directors consider that the carrying amount of these assets approximates their fair value. All receivables balances are
non-interest bearing.
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
2014, £ - (2013: £ -) were past due but not impaired. Trade and other receivables are considered to be past due after six
months of outstanding balances.
12. Cash and cash equivalents
Group Company
2014 2013 2014 2013
£ £ £ £
Cash & cash equivalents - current 2,531,420 2,220,130 1,054,175 5,979
Restricted cash - non-current 70,232 73,108 - -
2,601,652 2,293,238 1,054,175 5,979
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 in note 16 of the financial statements.
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: (Also refer to note 31 of the financial statements).
Group Company
2014 2013 2014 2013
£ £ £ £
Credit rating
A- 1,983,275 1,833,564 - 5,979
BBB 616,505 457,940 - -
Other 1,872 1,734 - -
2,601,652 2,293,238 - 5,979
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 Board, in
consultation with the Company's Nominated Adviser, and is based on UK corporate governance guidelines for AIM
companies.
ISSUED
Group Company
2014 2013 2014 2013
No. No. No. No.
Reconciliation of number of shares issued:
Ordinary shares of 0.1 pence each 276,839,478 270,839,478 276,839,478 270,839,478
Issue of shares - ordinary shares 41,526,000 6,000,000 41,526,000 6,000,000
Total number of shares 318,365,478 276,839,478 318,365,478 276,839,478
Reconciliation of number of shares: 318,365,478 276,839,478 318,365,478 276,839,478
Ordinary shares of 0.1 pence each Deferred 276,839,478 276,839,478 276,839,478
ordinary shares of 2.9 pence each 276,839,478
Total number of shares 595,204,956 553,678,956 595,204,956 553,678,956
- 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.
- 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 April 2014 the Company issued 41,526,000 ordinary shares of 0.1 pence each at a price of 5 pence with gross
proceeds of £2,079,514, and transaction costs of £128,878.
Group Company
2014 2013 2014 2013
£ £ £ £
Issued
Ordinary shares of 0.1 pence each 318,364 276,840 318,365 276,840
Deferred ordinary shares of 2.9 pence each 8,028,345 8,028,344 8,028,345 8,028,344
Share premium at shares of 5p and 3.5p each 28,814,957 26,885,360 28,814,957 26,885,360
37,161,666 35,190,544 37,161,667 35,190,544
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.
Equity-settled share option scheme (continued)
Details of the share options outstanding during the year are as follows. 2014 Number 2013 Number
Outstanding at the beginning of the year 8,345,000 6,345,000
Granted during the year 4,500,000 2,000,000
Forfeited during the year - -
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 12,845,000 8,345,000
Exercisable at the end of the year 12,845,000 8,345,000
At 31 December 2014, 12,845,000 (2013: 8,345,000) options were outstanding at a weighted average exercise price of 13p
(2013: 13p), and a weighted average remaining contractual life of 6.25 years (2013: 5.4 years).
During 2014, the Group recognised an expense of £5,899 (2013: £311,895) relating to equity-settled share-based payment
transactions.
Black-Scholes Assumptions 2014 Option 2013 Option 2010 Option 2007 UK The
Plan Plan Plan Option Plan DiamondCorp
Share Option
Plan
Term range 3 Years 5 Years 3 Years 3 Years 3 Years
Expected dividend yield Nil Nil Nil Nil Nil
Risk free interest rate 7% 5% 2% 5% 2%
Share price volatility 32% 90% 50% 40% 40%
Share price at time of grant 7 pence 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 2014, 2,130,000 options were outstanding under this plan (2013 - 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 2014, the number of options outstanding under this plan was 555,000 (2013 - 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 options expired.
During 2012 the exercise price of these options was adjusted to 5 pence. All other conditions remain unchanged.
At 31 December 2014, 3,660,000 options were outstanding under this plan (2013 - 3,660,000).
2013 Option Plan ("2013 Plan")
During 2013, options over 2,000,000 ordinary shares of 0.10 pence each were granted to Mr. 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 2014, 2,000,000 options were outstanding under this plan (2013 - 2,000,000).
2014 Option Plan - Amended 2007 option plan
During 2014, options over 4,500,000 ordinary shares of 0.1 pence were granted to employees and management of the
Company, exercisable at 8.5 pence for a period of 10 years from the date of issue.
All these options vest over 3 years at one-third at each anniversary of the issue date.
Share options granted during the year ended 31 December 2014 were valued by the Directors using the Black-Scholes
valuation model, based upon the assumptions detailed in the table above.
At 31 December 2014, 4,500,000, options were outstanding under this plan.
15. Warrant Reserve
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 31 December 2014 5,000,000 79,192
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 31 December 2013 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 1.68%
Share price volatility 90.09%
Share price at time of grant 4 pence
Exercise price 9 pence
Group Company
2014 2013 2014 2013
£ £ £ £
Warrant Reserve - End of the year 79,192 92,000 79,192 92,000
16. Compound instruments
The compound instruments have been split in a debt component and derivative as presented below:
Group Company
2014 2013 2014 2013
£ £ £ £
At amortised cost
Current liabilities 2,811,742 2,532,981 1,234,488 981,022
2,811,742 2,532,981 1,234,488 981,022
At fair value through profit or loss
Derivative financial instruments 3,730,434 2,107,849 1,409,446 730,079
3,730,434 2,107,849 1,409,446 730,079
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 of the financial statements).
SA Bonds
On 14 December 2012, Soapstone Investment Ltd (“Soapstone”), wholly-owned subsidiary of the Company, issued
ZAR 40,000,000 (£2,868,864 at spotrate on 14 December 2012) 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. The SA Bonds is further secured as indicated
in note 12 of the financial statements.
Fair Value
Refer to note 31 of the financial statements for the valuation techniques and assumptions applied for the purposes of
measuring fair value.
17. Other financial liabilities
Group Company
2014 2013 2014 2013
£ £ £ £
At fair value through profit or loss
Financial guarantee contract - - 455,000 455,000
Held at amortised cost
Loan from the Industrial Development Corporation of 13,442,518 5,322,277 - -
SA Limited
Loan from Laurelton Diamonds Inc. 4,530,325 3,917,170 - -
Total financial liabilities 17,972,843 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
loan was fully drawn in July 2014, and all interest was capitalised during the year. 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 ZAR 100,000,000
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 year, 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.
The maximum exposure of the company under this guarantee is £455,000 (2013: £455,000).
Group Company
2014 2013 2014 2013
£ £ £ £
Non-current liabilities
Fair value through profit or loss - - 455,000 455,000
At amortised cost 17,972,843 9,239,447 - -
17,972,843 9,239,447 455,000 455,000
18. Provisions
Reconciliation of provisions - Group - 2014
Opening Additions Exchange Total
balance differences
£ £ £ £
Rehabilitation provision 528,828 74,368 (21,440) 581,756
Reconciliation of provisions - Group - 2013
Opening Additions Exchange Total
balance differences
£ £ £ £
Rehabilitation provision 119,745 500,325 (91,242) 528,828
A provision is recognised for the site restoration and decommissioning of current mining activities based on current
environmental and regulatory requirements. The additions of £74,368 (2013: £500,325) have been capitalised to mine
development costs.
19. Trade and other payables
Group Company
2014 2013 2014 2013
£ £ £ £
Trade payables 236,310 285,219 18,955 46,580
Accrued leave pay 82,346 56,388 - -
318,656 341,607 18,955 46,580
The Directors consider that the carrying amount of these liabilities approximate their fair value. All payable balances are
non-interest bearing.
20. Operating loss
Operating loss for the year is stated after accounting for the following:
Group Company
2014 2013 2014 2013
£ £ £ £
Other income
Sale of scrap metal - (8,638) - -
Gain on foreign exchange transactions (21,309) (1,845) - -
Sundry income (14,288) - - -
Office rent (3,500) (3,500) (3,500) (3,500)
(39,097) (13,983) (3,500) (3,500)
Operating lease charges
Premises
Contractual amounts (refer to note 34 of the 61,526 52,966 61,526 52,966
financial statements)
Share based payment expense 5,899 311,895 5,899 311,895
Impairment on loans to group companies - - (230,460) 10,154,586
Loss on exchange differences 285,060 - - -
Depreciation on property, plant and equipment (not 19,818 19,817 19,818 19,817
capitalised)
General and administrative expenses 1,080,927 1,370,078 - -
Attributable depreciation costs were capitalised to mine development cost.
21. Employee cost
Employee costs including Directors' emoluments of the Group and Company were:
Group Company
2014 2013 2014 2013
£ £ £ £
Wages and salaries 756,996 680,259 419,688 379,374
Social security costs 16,951 20,681 16,951 20,681
Other pension costs 139,659 65,200 - -
Share-based payment 5,899 311,895 5,899 311,895
919,505 1,078,035 442,538 711,950
Additional attributable payroll costs of £2,033,557 were capitalised to mine development cost (2013: £1,261,008).
Average monthly number of persons employed during the year was:
Group Company
2014 2013 2014 2013
No. No. No. No.
Administration 11 17 2 3
Operational 234 115 - -
245 132 2 3
22. Finance costs
Group Company
2014 2013 2014 2013
£ £ £ £
Effective interest cost on Bonds - - 253,466 201,462
Other interest paid - 55,004 - 52,157
- 55,004 253,466 253,619
Borrowing costs for the Group capitalised to qualifying assets (mine development) are disclosed as below:
Reconciliation of Group finance cost capitalised - 2014 Finance cost Capitalised Total as per
Income
Statement
2014 2014 2014
£ £ £
IDC interest 1,117,097 (1,117,097) -
Soapstone Investment interest 317,632 (317,632) -
Laurelton interest 357,445 (357,445) -
Effective interest cost on bonds 649,900 (649,900) -
2,442,074 (2,442,074) -
Reconciliation of Group finance cost capitalised - 2013 Finance cost Capitalised Total as per
Income
Statement
2013 2013 2013
£ £ £
IDC interest 134,912 (134,912) -
Soapstone Investment interest 193,054 (193,054) -
Laurelton interest 293,932 (293,932) -
Effective interest cost on bonds 651,716 (651,716) -
Other 55,004 - 55,004
1,328,618 (1,273,614) 55,004
23. Taxation
There was no tax expense during the year.
Group Company
2014 2013 2014 2013
£ £ £ £
Reconciliation
Reconciliation between accounting loss and tax expense.
Accounting loss (3,251,674) (2,609,904) (1,248,254) (11,419,639)
Tax at the applicable weighted UK tax rate of 21.50% (699,110) (606,803) (268,375) (2,655,066)
(2013: 23.25%)
Tax effect of adjustments on taxable income
Expenses not tax deductible 456,271 150,412 146,064 43,822
Deferred tax not recognised (24,878) 514,039 (2,846,895) (248,929)
Effect of different tax rates 267,717 (57,648) 214,282 13,278
Tax losses carried forward - - 2,754,924 2,846,895
- - - -
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.
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
2014 2013 2014 2013
£ £ £ £
Fees payable to the Company's auditor and it's 35,704 18,000 35,704 18,000
associates for the audit of parent company and
consolidated financial statements
Fees payable to the Company's auditors and its
associates for other services:
- The audit of company's subsidiaries 29,499 41,860 - -
Total auditors' remuneration 65,203 59,860 35,704 18,000
There were no non-audit services in 2014 (2013: nil).
25. Other comprehensive loss for the year
Components of other comprehensive loss - Group - 2014
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 year (243,532) - (243,532) 90,436 (153,096)
Components of other comprehensive loss - 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
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
2014 2013 2014 2013
£ £ £ £
Basic loss per share
From continuing operations (pence per share) (1.02) (0.86) - -
Basic loss per share was based on loss of £ 3,141,615 (2013: £ 2,382,647) and a weighted average number of ordinary
shares of 307,671,111 (2013: 276,354,546).
Reconciliation of profit or loss for the year to basic
loss
Loss for the year attributable to owners of the parent (3,141,615) (2,382,647) (1,248,254) (11,419,639)
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.
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
2014 2013 2014 2013
£ £ £ £
Headline loss per share (pence) (1.02) (0.86) - -
27. Cash used in operations
Group Company
2014 2013 2014 2013
£ £ £ £
Loss before taxation (3,251,674) (2,609,904) (1,248,254) (11,419,639)
Adjustments for:
Depreciation (not capitalised) 19,818 19,817 19,818 19,817
Gain / loss on foreign exchange 306,369 (203,171) - -
Interest received - investment (49) (243,634) (49) (88)
Finance costs - 55,004 253,466 253,619
Fair value adjustments 1,685,439 619,042 679,367 188,481
Impairment reversals - - (230,460) 10,154,586
Movements in provisions 52,928 409,083 - -
Share option expense 5,899 86,895 5,899 86,895
Other non-cash loss 3,619 - - -
Adjustment for warrant reserve (12,808) - (12,808) -
Changes in working capital:
Inventories 101,401 (259,611) - -
Trade and other receivables 232,180 (694,371) - 9,167
Trade and other payables (22,951) (492,379) (27,625) (435,503)
(879,829) (3,313,229) (560,646) (1,142,665)
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
Company of which PR Loudon is a director Glendree Capital Management Limited
Related party balances
Group Company
2014 2013 2014 2013
£ £ £ £
Loan accounts - Owing (to) by related parties
DiamondCorp Holdings Limited (before impairment - - 24,231,425 23,869,096
provision)
Bonds held by related parties
Loeb Aron & Company Limited 60,000 60,000 60,000 60,000
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
Group Company
2014 2013 2014 2013
£ £ £ £
Administration fees paid to (received from) related
parties
Lace Diamond Mines (Pty) Ltd - - - 235,600
Directors Remuneration paid to related parties
Glendree Capital Management Limited 129,114 116,572 129,114 116,572
Loeb Aron & Company Limited - 11,250 - 11,250
European Islamic Investment Bank plc 15,000 15,000 15,000 15,000
29. Directors' emoluments
Executive and Non-executive
2014
Emoluments Other benefits Fees paid to Bonuses Total
third party
£ £ £ £ £
E A Worthington (Chairman) * 90,000 - - - 90,000
R N Allen ** 15,000 - - - 15,000
P R Loudon * 50,886 4,904 129,114 - 184,904
J Willis-Richards ** 15,000 - - - 15,000
M Toxvaerd ** - - 15,000 - 15,000
H Scholes ** 16,000 - - - 16,000
186,886 4,904 144,114 - 335,904
2013
Emoluments Other benefits Fees paid to Bonuses Total
third party
£ £ £ £ £
E A Worthington (Chairman) * 90,000 - - - 90,000
R N Allen ** 15,000 - - - 15,000
P R Loudon * 63,428 412 116,572 100,000 280,412
J Willis-Richards ** 3,750 - 11,250 - 15,000
M Toxvaerd ** - - 15,000 - 15,000
H Scholes ** 6,666 - - - 6,666
GK Morton (Retired 1 August 2013) 7,500 - - - 7,500
186,344 412 142,822 100,000 429,578
Indicator Type of Director
* Executive
** Non-executive
30. Compensation to key personnel
Group Company
2014 2013 2014 2013
£ £ £ £
Short term employee benefits 264,111 216,390 - -
Contribution to pension fund 18,355 12,600 - -
Share based payment 1,966 25,000 - -
284,432 253,990 - -
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 & 34, 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.
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.
Categories of financial instruments (continued)
Group Group Company Company
Carrying Carrying Carrying Carrying
amount amount amount amount
2014 2013 2014 2013
£ £ £ £
FINANCIAL ASSETS
Loans and receivables (Including cash and cash 3,351,661 3,217,860 15,361,475 13,720,489
equivalents)
FINANCIAL LIABILITIES
Amortised cost 21,102,941 12,114,035 1,253,443 1,027,602
Financial guarantee contracts - - 455,000 455,000
Derivative instruments designated as fair value through 3,730,434 2,107,849 1,409,446 730,079
profit and loss (FVTPL)
28,185,036 17,439,744 18,479,364 15,933,170
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 (as per note 16 of the financial statements) 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
2014 2013
Term range 5 Years 5 years
Expected dividend yield Nil Nil
Risk free interest rate 1.68% 1.4%
Share price volatility 90.09% 84%
Share price at time of valuation 7.4 pence 4.9 pence
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.
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 of the financial statements.
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.
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.
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)
2014 2013
£ £
Cash denominated in South African Rand 1,106,488 2,145,355
Loan denominated in South African Rand (13,442,518) (5,322,277)
Cash denominated in United States Dollar 433,355 135,141
Loan denominated in United States Dollar (4,530,325) (3,917,170)
(16,433,000) (6,958,951)
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 British 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 year-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 2014 2013
£ £
Gain due to a 20% depreciation of the ZAR 2,467,206 635,384
Loss due to a 20% appreciation of the ZAR (2,467,206) (635,384)
- -
USD Currency Impact 2014 2013
£ £
Gain due to a 20% depreciation of the USD 819,394 756,406
Loss due to a 20% appreciation of the USD (819,394) (756,406)
- -
The Group’s sensitivity to foreign currency has increased during the current year, 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 of the financial statements.
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
2014 2014 2014 2013 2013 2013
% £ £ % £ £
Non-interest bearing -% 4,049,090 - -% 2,449,456 -
Fixed interest rate instruments 13.0 % 2,811,742 17,972,843 13.0 % 2,532,981 9,239,447
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
2014 2014 2014 2013 2013 2013
% £ £ % £ £
Non-interest bearing -% 1,428,401 - -% 776,659 -
Fixed interest rate instruments 23.0 % 1,234,488 - 23.0 % 981,022 -
Financial guarantee contract -% - 455,000 -% - 455,000
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. The Group expects to ramp up
to full production in the second half of 2015 and this will contribute to the Group cash flows. (Refer to note 32 of the
financial statements.)
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
2014 2014 2014 2013 2013 2013
% £ £ % £ £
Non-interest bearing -% 648,810 101,199 -% 880,990 43,632
Interest bearing 4.0 % 2,531,420 70,232 2.0 % 2,220,130 73,108
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
2014 2014 2014 2013 2013 2013
% £ £ % £ £
Non-interest bearing -% - 14,307,300 -% - 13,714,510
Interest bearing -% 1,054,175 - 1.0 % 5,979 -
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.
Based on simulations performed, the recalculated impact on net profit after tax of a 2% shift in the prime interest rate of
South Africa would be a maximum increase of £ 268,850.
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 existence of 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 Letters
from the Chairman and Chief Executive.
For the year ended 31 December 2014 the Group incurred a loss of £3,251,674 (2013: £2,609,904 loss).
As at 31 December 2014 the Group had a cash balance of £2,531,420 with the Industrial Development Corporation ("IDC")
loan fully drawn down during the year. Interest and loan principal repayments to the IDC only commence in January 2016
when the mine is scheduled to be in a positive cash flow position.
Analysis of the cash flow forecast identified the need to obtain additional funding in 2015 as the industrial strike and foreign
exchange movement on equipment purchases had a negative impact on cash flows in the first quarter of 2015. The cash
balance as at 15 May 2015 is £0.8 million, which represents a shortfall approximately from £1.8 million to £2.8 million from
the balance required to commence production.
In March 2015, Management negotiated and signed a term sheet for a Royalty financing facility of U$7 million (£4.4 million)
with Acrux Resources Proprietary Limited in exchange for payments amounting to 3% of future diamond sales. This facility
will be immediately available when the agreement has been signed. At the date of signing this Report the Acrux agreement
is in the near final stages of completion. Subject to Board approval and signing of a satisfactory final facility agreement,
receipt of these funds will be sufficient to cover the working capital required to bring the Lace mine into production. In May,
Darwin Strategic Limited exercised 5,000,000 warrants at 9p which added £450,000 to the cash balance. (Please refer to
note 15 of the financial statements).
Management also has shareholder authority to issue at any time up to 31,836,418 shares for cash.
As the Group has a number of alternatives available to alleviate short-term cash constraints management has prepared
the financial statements on the basis of accounting policies applicable to a going concern. This basis presumes that the
realisation of assets and settlement of liabilities will occur in the ordinary course of business.
However, the successful outcome of the funding alternatives constitutes a material uncertainty which may cast significant
doubt over the group's ability to continue as a going concern and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business. Accordingly, the financial statements do not include any
adjustments that might arise if the Group were unable to continue as a going concern.
33. Events after the reporting year
Subsequent to year-end, the Industrial Development Corporation and Management entered into discussions to clarify the
period of interest capitalisation with respect to the project finance facility granted to Lace. The outcome of these
discussions resulted in clarification and agreement that the period of interest capitalisation ends in July 2015, but is only
payable six months in arrears, commencing in January 2016.
Management also made an offer to UK Bond holders to extend the period of interest roll-up until the second half of 2015
when Lace is forecast to generating positive cash flow. The majority of UK Bond holders, including Mr. Loudon and Mr.
Worthington, directors of the Company, representing 14% of the total bonds, accepted the offer. There were no changes to
the terms of the bonds.
In May 2015, Darwin Strategic Limited exercised their 5,000,000 warrants at a price of 9p for a cash consideration of
£450,000.
34. Operating lease
Group Company
2014 2013 2014 2013
£ £ £ £
Minimum lease payments due
- within one year 50,012 61,526 50,012 61,526
- in second to fifth year inclusive 41,677 91,679 41,677 91,679
Present value of minimum lease payments 91,689 153,205 91,689 153,205
The operating lease on the premises expires in October 2016.
35. Fair value information
Fair value hierarchy
The table below analyses assets and liabilities carried at fair value. The different levels are defined as follows:
Level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the group can access at
measurement date.
Level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability.
Levels of fair value measurements
Level 3
Group Company
2014 2013 2014 2013
£ £ £ £
Recurring fair value measurements
Liabilities Note
Financial liabilities at fair value through profit or 17
loss
Derivative financial instruments 3,730,434 2,107,849 1,409,446 730,079
Financial guarantees - - 455,000 455,000
Total 3,730,434 2,107,849 1,864,446 1,185,079
Transfers of assets and liabilities within levels of the fair value hierarchy
No transfers were made between levels in the fair value hierarchy in the 2013 or 2014 financial years.
Valuation techniques used to derive level 3 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.
No changes have been made to the valuation technique.
Black Scholes Assumptions 31 December 31 December
2014 2013
Term range 4 years 5 years
Expected dividend yield Nil Nil
Risk free interest rate 1,68% 1,4%
Share price volatility 90.09% 84%
Share price at time of grant 4.9 pence 4.9 pence
For the valuation method and assumptions used for the Darwin Warrants refer to note 15 of the financial statements.
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
26 May 2015
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