Wrap Text
Final results for the year ended 31 December 2015
DiamondCorp plc
AIM share code: DCP & JSE share code: DMC
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp", “the Group” or "the Company")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Highlights
As underground development continued at the 74% owned Lace Mine in South Africa, DiamondCorp`s net loss for 2015 was
£2.41 million (2014: loss of £3.25m).
At 31 December 2015, total assets had risen to £34.99m (2014: £32.41m) and cash on hand stood at £1.78m (2014: £2.60m)
while a further £2.06m gross was received from the second tranche of a placing in January 2016.
During 2015, our consultants worked on a new Technical Report and Resources Statement for the Lace Mine using actual
mine data, drilling and sampling results. The total Resource in the main Lace pipe is now estimated at 38.69 million tonnes to
the 920m level and is open at depth.
Studies on diamond distribution together with financial modelling have shown that the optimum lower screen size for the
processing plant is 1.25mm and at this cut-off, the Resource is estimated to contain 9.39 million carats of diamonds.
Within the Resource, 2.21 million tonnes of kimberlite in the UK4 Block has been classified as a Mineral Reserve between the
230-370m levels. This is currently being mined while development continues to establish the first block cave on the 500m
level.
In November 2015, the 400 tonne per hour underground conveyor belt system from the first production level at Lace was
commissioned. This belt is capable of delivering ore at double the current front end capacity of the 1.2 million tonne per year
processing plant.
There were no delays for industrial action at Lace during 2015 and last February, Lace Diamond Mines signed a four year
wage agreement with the Association of Mineworkers and Construction Union (AMCU) based around 8% annual increases in
basic salary for most categories of workers.
In early April 2016, the Company closed the sale of a total of 8,648 carats of diamonds (6,247cts from underground) marking
the first sale of diamonds from the Lace kimberlite since 1931. The average price received for these kimberlite diamonds was
US$175/ct which compared to the estimate of $164/ct used in the new Resource Statement.
Our joint venture cutting operation in Johannesburg continues to illustrate the quality of Lace stones and the ability to add
value to specials while the recent tender included the first purple diamond that sold for $6,363/ct.
Demand and prices for diamonds fell in 2015 in line with a strong US$ and falls in other commodity prices while the industry
was impacted by financing issues and destocking through the pipeline. In recent months, demand and prices for rough and
polished stones have been improving with signs that the cycle has bottomed. We expect a further recovery in prices later in
the year.
A full version of the 2015 report and audited financial statements will shortly be posted to shareholders and are available
on the Company Website www.diamondcorp.plc.uk
Contact details:
DiamondCorp pl
Paul Loudon, Chief Executive
Tel: +27 56 216 1300
Euan Worthington, Chairman
Tel: +44 7753 862 097
UK Broker & Nomad
Panmure Gordon (UK) Limited
Atholl Tweedie/Adam James
Tel: +44 20 7886 2500
JSE Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
Megan Young
Tel: +27 11 445 8068
SA Corporate Advisor
Qinisele Resources Proprietary Limited
Dennis Tucker / Andrew Brady
Tel: +27 11 883 6358
Letter from the Chairman
Dear Shareholder
As I reported in my letter last year, it was hoped that 2015 would be the year that the Lace Mine (74%) resumed commercial
production for the first time since 1931. Unfortunately, underground mining operations met a few unforeseen bumps in the road
and it is only now, a year later, that we have completed our first diamond tender and are finalising mine development prior to
full commercial production of 30,000 tonnes per month of kimberlite from July 2016.
A major advance during 2015 was the final installation and commissioning of the underground conveyor at Lace which is now
bringing kimberlite and development waste to the surface without the need for excessively long haul distances for the
Company's heavy dump trucks. Another positive event was the completion of dams and water recovery systems on site, which
has alleviated concerns about water availability for processing the kimberlite ore. This is important after low annual rainfall in
recent years.
After a successful resolution to the strike by our workers who are members of the Association of Mineworkers and Construction
Union (AMCU) at the end of 2014, we began wage negotiations early in 2015. In February last year, a new four-year wage
agreement was signed based around 8% annual increases in the basic salary for most worker categories, along with a
progressive lift in pay for the lowest paid workers. This was a good result as two or three year agreements are more common in
the South African mining industry. Since that deal was signed, labour relations at the mine have been very positive with no
further stoppages for industrial action.
Financing
In March 2015, we announced that Lace Diamond Mines (Pty) Ltd, our 74% owned subsidiary and operator of the Lace Mine
had signed a term sheet with South African group Acrux Resources to sell a 3% net revenue royalty for US$7 million (£4.5
million). This would have provided funding at the operating level without the capital dilution for DiamondCorp plc shareholders
of an equity issue. We were unable to agree final terms and conditions for this royalty and after consultations with our major
shareholders, we gained strong support to proceed with a Placing and subscription of new shares, which raised £3.18 million
before expenses. The Board had also received encouragement from a number of private individuals and felt it important to
allow all shareholders to participate in this financing. Through an Open Offer at the same price as the Placing we raised a
further £2.09 million gross with excess demand for over-allotments.
We believed that this financing, completed last July, would cover the final capital development costs for underground
development to reach our target of the first diamond sale in Q3 2015. Unfortunately, mining through the K6 kimberlite on the
290m level then encountered unexpectedly very poor ground. This required additional rock support to ensure the safety of our
workers and equipment. Also, around the same time the Department of Mineral Resources informed us that anti-roll back idlers
had to be installed on the conveyor belt pursuant to new governement regulations. As well as slowing progress at this critical
time, these events added to costs.
We pursued other financing mechanisms to cover the revised budget but nothing could be concluded quickly, so in mid-
November your Board regrettably opted to seek funding from a further share placing. In an environment of weak diamond
prices and a depressed mining sector it was disappointing that we had to price this issue at 6 pence per share to raise £4.0
million, when six months earlier there was strong demand at 10 pence per share.
In addition to raising this new working capital, we requested the Investment Development Corporation (IDC) of South Africa to
reschedule interest and capital repayments on its ZAR 220 million loan to Lace Diamond Mines (Pty) Ltd. The first payment
was due in January 2016 but has now been deferred to 1st February 2017 by which time, the loan and rolled up interest will
total some ZAR 311 million (£15 million). DiamondCorp plc Shareholders will gain some comfort from the fall in the South
African Rand which now exchanges at ZAR/£20.70 compared to ZAR/£13.33 when we signed the IDC loan agreement in
September 2012.
The Company investigates all financing options as they arise and is highly conscious of trying to limit shareholder dilution in
any fund raising. As we ramp up to full production, management is focused on keeping all costs minimised and the budget
within existing cash resources, whilst cognisant of remaining both on schedule and operating within very high safety levels.
Health and Safety
All through our operations from surface to underground, the safety of our employees is of paramount importance. We strive for
100% accident free working but in an underground mining operation that is difficult to achieve. Luckily, the rock falls which we
experienced at Lace last year did not seriously injure any employees, although it did result in a number of lost time injuries and
was a stark reminder of the unknown conditions we can sometimes face in mining a kimberlite. Our compliance with a strict
safety code may delay operations and cause frustration to investors, but a serious accident could lead to closure of the mine
for weeks or months.
Corporate Governance
The Board considers that the best business practice is very important and adopts the Corporate Code of the Quoted
Companies Alliance. This reflects many of the rules in UK Corporate Governance Code (formerly known as the Combined
Code) but is more appropriate for a company of the size and in the stage of growth of DiamondCorp plc. As the Company has
been developing in recent years, we have considered that the Board has the necessary diversity of skills. In February this year,
Mr. R N Allen who had served as an independent non-executive director since March 2005 decided to retire. We must offer him
our sincere gratitude for sharing with your Company his great knowledge and valuable connections in the downstream diamond
market. In his place, we have recruited Chris Ellis who has some similar skills to Nick and adds a layer of knowledge in the
financial aspects of the diamond supply chain. We are pleased to welcome him to the Board and as required by our Articles of
Association, he will be standing for election at the forthcoming Annual General Meeting.
Diamond Market
The market for rough diamonds (the product we sell) has been somewhat resiliant but not immune to the fall seen in other
commodities. Prices, which had started to weaken in the last quarter of 2014, continued to decline during 2015 and on average
ended some 15% lower. Until mid-year, it appeared that the prices were relatively stable but then buying dried up and in
November, the Diamond Trading Company 'sight' at only US$70 million was the lowest anyone can remember. Everyone
breathed a sigh of relief when the last 'sight' of the year bounced back to over $250 million while the first three sights of 2016 at
$540 million, $617 million and $660 million reflect strengthening demand and stabilisation in the diamond pipeline.
Aside from generally weak commodity prices, the fall in rough prices was not unexpected as for a few years now the trend of
rough prices has been out of kilter with prices for polished stones. The downward correction was finally brought on by a number
of factors including weaker jewellery demand, the withdrawal of lending to the cutting and polishing industry by a couple of
major sector banks and the failure of producers to react to slowing demand. Last year saw tumbling prices for many minerals
including oil which was down 33% (Brent spot), copper - 22% (LME 3 months), iron ore -37% (62% Fe fines), nickel - 42%
(LME 3 months) and platinum - 27%. Polished diamond prices behaved more in line with the gold price (down 11%) as the
Rapport Diamond Index fell 9% and the IDEX Diamond Index was unchanged.
Some producer cutbacks were noted in 2015 but overall, it is estimated that global output of around 130 million carats (gem
quality diamonds) was little changed from the year before. We believe that major producers including De Beers and Alrosa
were forced to build stockpiles as demand for rough fell. Reviewing current mines and mines under development, it is quite
likely that the peak of global gem diamond production of over 170 million carats reached in 2005 will never be reached again.
However, in the absence of producer cutbacks, output is expected to increase in the next few years with new mines including
Grib, Gahcho Kue, Liqhobong, Renard, Korpinsky and Lace coming on stream, together with higher production from the Petra
Diamonds mines in South Africa and Debswana's Jwaneng mine in Botswana. Set against this will be declining output from
such mines as Ekati and Diavik in Canada, Argyle in Australia and the Marange fields in Zimbabwe. Of known projects, it is
estimated that world production may reach 150 million carats per year around 2021 before a steady and dramatic fall to some
100 million carats by 2030. In a recent Bain & Company report, the authors say that the gap between supply and demand of
rough diamonds is expected to widen from 2019 onwards.
The rough diamonds that we and other miners produce are the feed for cutters and polishers to turn into gems for the jewellery
manufacturers. India is now the world's predominant volume cutting centre and, together with tougher credit availability, the
strength of the Rupee has impacted on Indian production costs, which creates pressure elsewhere in the supply chain. The
slowdown in growth of Chinese economy which is widely reported to have started in the second half of 2014 was a major factor
in pulling down the global demand for jewellery which may have even decreased in 2015. An increase in demand of some 3%
from the US (still the world's largest market for diamonds) and a firm market in India offset falls in demand in China, Europe
and Japan.
Early indications in 2016 are that there has been some stabilization in prices for polished stones as inventories are being drawn
down. This is feeding through to better prices for rough diamonds and signs that the cycle has bottomed.
In Conclusion
While taking longer than ever hoped, your Company has now joined the ranks of diamond miners with more than 38 million tonnes of kimberlite having been identified for mining. Much work was completed during 2015 in updating the confidence we
have in the Lace diamond resource which culminated in the publication after year end of a new SAMREC compliant resource
and reserve statement. Details of the statements and their accompanying technical report are discussed in the CEO's letter and
are available on the Company's web site.
At the end of March this year, the first sale for 85 years of mined diamonds from Lace was a major milestone for our Company.
We can now look forward to unlocking the full value of this exciting long life mine.
Finally, I would like to thank all our employees for their contribution to the successful transition of Lace from developer to
producer, our partners, consultants and trade union for their co-operation on the Company's progress and all of you for strong
support when we needed it.
Mr. E A Worthington
Chairman
03 May 2016
Letter from the Chief Executive Officer
Dear Shareholder
Development work at the Lace mine continued through 2015, with tunneling concentrating on the 290m doming level and 310m
production level in the Upper K4 (UK4) block.
Kimberlite is a composite volcanic rock with significant amounts of fragmented bits of surrounding rocks that were incorporated
in the original volcanic eruption which can sometimes result in a difficult and friable rock engineering environment. Ironically, it
is this tendency to crumble which also makes it an ideal candidate for the block caving mining method, the preferred mining
method for most modern underground kimberlite mining operations today.
However, getting the needed development tunnels through kimberlite can be challenging, and such was the working conditions
for our underground mining teams for most of 2015. It is with considerable pride that we can say that our teams met this
challenge and completed the development work for the initial mining ramp up at Lace without any serious injury or damage to
our equipment.
While the delay resulting from challenging ground conditions put your Company under cash pressure, management and our
technical team will not cut corners or comprise on safety. Thankfully shareholders and lenders also understood that adherence
to safety standards over-rides all else, and were supportive of the additional capital raising we required in the midst of difficult
market conditions.
The game changer for Lace development during 2015 was the commissioning of our 400 tonne per hour underground conveyor
belt system. This piece of “life-of-mine” infrastructure was completed within budget, despite a South Africa wide change to
mandatory code of practice on underground conveyor belts half way through the year which delayed its commissioning by five
months. The commissioning delay put upward pressures on overall development costs as material needed to be trucked from
underground for five months longer than was planned. The conveyor belt is now fully operational and key to achieving a
smooth ramp up to 30,000 tonnes per month from the UK4 Block by July 2016.
The year under review was the third year in a row of below average rainfall in South Africa. Mindful that water management and
consumption is central to achieving planned future production rates of 100,000 tonne per month, the Lace technical team
finalised its trade off studies on bottom cut off screen sizes in the processing plant. The recommendation was to lift the bottom
screen size in the plant from 1.00 mm to 1.25 mm. This change results in a significant reduction in recovered diamond grades,
however, the diamonds no longer being recovered are the smallest and lowest value diamond sizes. Studies showed that the
recovery and sale of these would be break even at best. While the impact on economics was minimal, the biggest driver behind
the decision was water saving in the plant as this low value small sand and slime fraction would be the biggest consumer of
water and reagents in the processing plant. As a result of the decision, water consumption in the plant has been cut by 30%
from 1 cubic metre of water per tonne of kimberlite to 0.7 cubic metres per tonne.
The second stage of the water management project has been trade off studies on different x-ray and optical waste sorting
technologies. Because the internal waste with-in the kimberlite cannot possibly contain a diamond, every tonne of waste
removed before it reaches the processing plant further reduces water consumption and processing costs. Evidence is also
emerging that internal waste (which is predominantly basalt, a harder rock than the rest of the kimberlite) is a major contributor
to diamond damage and breakage in the secondary crushing circuits of diamond processing plants, so removing it up front is
also beneficial in this regard. During the year, the Lace team completed 3-tonne bulk tests on waste sorting machines at
commercial run rates of 250 tonnes per hour. The tests demonstrated that up to 65% of the waste could be ejected before the
processing plant without losing any kimberlite. This technology has the ability to cut plant water consumption by a further 33%
and deliver a high grade concentrate to the dense media separation units. This technology will be introduced at Lace over the
next few years ahead of underground tonnages from the first block cave pushing the plant towards full production. Also,
because our conveyor belt capacity from underground is 400 tonnes per hour (double the plant capacity) and (when mature)
the planned block caves can be mined faster than is currently proposed, the waste sorting technology will allow higher diamond
production from Lace over a shorter time period.
During 2014 and 2015, almost 4,500m of underground core drilling was completed by the Company?s in-house drilling crews.
This program was designed and supervised by the Company?s independent geological consultants, MPH Consulting Ltd of
Toronto, and delineated increasing volumes of high-grade K4 kimberlite in the Upper K4 block and deeper levels of the pipe for
future block cave mining. This drilling program will be on-going with a further 6,600m of drilling planned over the next few years
for rim definition and improved mining grade forecasting purposes. In addition, almost 20,000 tonnes of K4 and K6 kimberlite
was extracted during development for the first UK4 mining block. These development tunnels were treated as a controlled bulk
test by MPH Consulting Ltd, which also took a channel sample at each bulk test site for microdiamond analysis.
More than 3,500kg of drill core and channel sample material was analysed and resulted in the recovery of 5,390
microdiamonds (diamonds less than 1.00 mm in two dimensions). The microdiamond and macrodiamond recoveries were then
analysed by Dr Johan Ferreira, the former chief geostatistician for De Beers and one of the world?s leading microdiamond
experts. After year end, Dr Ferreira aligned his analysis to the new 1.25 mm bottom screen size in the plant, which allowed for
very accurate grade and carat value estimates to be made regarding future mine recoveries at Lace. In March 2016, Dr
Ferreira and MPH Consulting Ltd?s work resulted in the publication of a new technical report and updated Resource and
Reserve Statement for the Lace project. The report concludes that the updated resource/reserve statement is a conservative
base case with compelling evidence that considerable grade and value per carat upside is likely which will be defined with
additional production and evaluation data.
The total resource tonnage in the main Lace pipe has been estimated at 38.49 million tonnes to the 920m level, an increase of
16% from 33.12 million tonnes estimated in March 2012 to the 855m level. The resource remains open at depth. The
recoverable diamonds from this resource at the increased bottom screen size of 1.25 mm is estimated at 9.39 million carats
(March 2012: 13.39 million carats, at 1.00 mm screen size). The average value of the Lace diamonds from the stone size
frequency distribution achieved with the 1.25 mm bottom screen size has been forecast to be $164 per carat in the current
market (March 2012: $160 per carat). Importantly, this price does not include any values achieved from the recovery of special
stones, for which Lace was known during its previous production period pre-Great Depression, including diamonds up to 122
carats in size.
The K4 kimberlite, which comprises 60% of the Lace resource by tonnage and 87% of the resource by diamond content has an
estimated average recoverable grade of 40 carats per hundred tonnes (cpht) at 1.25 mm bottom screen size (58 cpht
previously at 1.00 mm bottom screen size). The base case average recoverable grade from all tonnage is estimated at 24.4
cpht at 1.25 mm bottom screen size (40 cpht at 1.00 mm previously), equating to an average of US$40 revenue per tonne. At
an exchange rate of 15 South African Rands to the US dollar, the average grade and carat value equate to gross revenue of
ZAR 600 per tonne compared with forecast mining and processing costs of ZAR 238 per tonne for the UK4 Block and
ZAR 145 per tonne for block caving. This represents robust operating margins of 60% and 76% respectively.
Within the 38.49 million tonnes of resources, 2.21 million tonnes of the UK4 Block has been classified as a mineral reserve
between the 230 and 370m levels. This reserve comprises 1.43 million tonnes of K4 in the probable category grading 36.2 cpht
and 0.78 million tonnes of low grade K6 kimberlite in the probable category at a grade of 9.0 cpht. The whole block could be
mined for 60 months at a rate of 35,000 tonnes per month and generate a positive NPV of ZAR 133.3 million (US$8.9 million)
and a robust IRR of 59%. It is the Company?s intention to concentrate on mining the high-grade K4 kimberlite within this
reserve first while the first block cave is established on the 500m level (being outside of the current mineral reserve estimate).
There may well be opportunities to optimise the mine plan as more K4 is found to be present as the mine progresses. When
block caving progresses, any unmined portions of this reserve would then be extracted in subsequent caves.
The small Satellite pipe which was incorporated into the previous resource statement is not included in the new resource
statement as it is not considered a feasible mining proposition at this stage. The grade model for the UK4 Block reserve has
been found to show high precision in predicting recovered diluted grades achieved in the bulk sampling on -250m, -290m and -
310m levels. Lace has been demonstrated as a reliable microdiamond producer allowing for high-confidence grade estimates,
and the valuation data from 4,982 carats recovered during bulk sampling similarly gives confidence to the valuation model.
There is compelling geological evidence that K4 and K6 grade will improve within the block cave mining depths (and Lift 2 of
the UK4 Mine), however more evaluation work is needed to verify these trends. The CRB (country rock breccia) unit which
comprises 9% of the current resource model has been assigned zero grade at this time, although it is known to be significantly
diamondiferous. The CRB will be bulk and microdiamond sampled in coming months and will be incorporated into updated
grade estimations as these data become available, such that the carat content at Lace is highly likely to improve on the current
estimates. Kimberlite volumes and tonnages will also change as more delineation work is completed.
The full technical report and resource/reserve statement is available on the Company?s website at www.diamondcorp.plc.uk.
Resource Statement (Unaudited)
Mining Block Resource Kimberlite Volume Density Tonnes % of Total Recovered Carats USD/ct
Classification Facies (m 3 x 1000) Grade (cpt)
Upper K4 Indicated K4 1,065.486 2.585 2,754,281 36.9% 0.365 1,005,313 $164.00
mine 230-
370m levels
Indicated K6 1,834.957 2.563 4,702,995 63.1% 0.090 422,329 $164.00
Total Indicated 2,900.443 7,457,276 100.0% 0.191 1,427,642 $164.00
Inferred K8 144.722 2.641 382,211 16.3% 0.160 61,154 $164.00
Inferred CRB 723.803 2.709 1,960,782 83.7% 0.000 - $164.00
Total 868.525 2,342,993 100.0% 0.026 61,154 $164.00
Inferred
Block Cave 1 Inferred K4 1,626.754 2.59 4,213,293 48.4% 0.400 1,685,317 $164.00
370m– 510m
levels
Inferred K6 1,262.561 2.56 3,232,157 37.1% 0.100 323,216 $164.00
Inferred K8 13.713 2.64 36,203 0.4% 0.160 5,793 $164.00
Inferred CRB 451.786 2.71 1,224,339 14.1% 0.000 - $164.00
Total 3,354.815 8,705,993 100.0% 0.231 2,014,326 $164.00
Block Cave 2 Inferred K4 2,225.776 2.59 5,764,760 59.0% 0.400 2,305,904 $164.00
510m– 700m
levels
Inferred K6 1,484.048 2.56 3,799,164 38.9% 0.100 379,916 $164.00
Inferred K8 0.000 2.64 - 0.0% 0.160 - $164.00
Inferred CRB 74.018 2.71 200,589 2.1% 0.000 - $164.00
Total 3,783.842 9,764,513 100.0% 0.275 2,685,820 $164.00
Block Cave 3 Inferred K4 2,800.965 2.59 7,254,499 71.0% 0.400 2,901,799 $164.00
700m– 920m
levels
Inferred K6 1,153.812 2.56 2,953,759 28.9% 0.100 295,376 $164.00
Inferred K8 0.000 2.64 - 0.0% 0.160 - $164.00
Inferred CRB 3.577 2.71 9,694 0.1% 0.000 - $164.00
Total 3,958.354 10,217,952 100.0% 0.313 3,197,175 $164.00
Lace Mine Indicated 2,900.443 2.57 7,457,276 19.4% 0.191 1,427,642 $164.00
Totals
Inferred 11,965.54 2.59 31,031,451 80.6% 0.256 7,958,475 $164.00
Total 14,865.979 2.59 38,488,727 100.0% 0.244 9,386,117 $164.00
Based
All figures are gross. DiamondCorp Plc owns a 74% equity interest in the project
based on a recoverable grade model for the current Lace plant configuration (+1.25mm bottom cut-off screen size).
Diamond price based on bulk sample parcels and January 2016 price book.
Effective date 1 February 2016.
Reserve Statement (Unaudited)
The UK4 Mining block constitutes a portion of the above Indicated Resource, with reserves estimated as per the following
table:
Plant recovery 100% of recoverable grade, mining recovery 100%.
Health and safety remains a priority for management. The Lost Time Injury Frequency Rate (LTIFR) for 2015 was 2.34, up
considerably from 0.72 in 2014. Lace had eight lost time injuries and 76,772 lost time injury free shifts during 2015.
Management aims for zero harm to its employees and targets a LTIFR of less than 0.5. (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). PricewaterhouseCoopers LLP 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. A concerted effort is underway to reduce the LTIFR
during 2016.
Last month, the Company enlarged its underground mining fleet by acquiring an additional four secondhand low mileage
Sandvik 20-tonne dump trucks, two Sandvik 7-tonne loaders and two Sandvik single boom drill rigs for a quarter of the cost of
new equipment which will help Lace achieve its target of 30,000 tonnes per month of kimberlite throughput by July.
The Company looks forward to the rest of 2016 as the year we restart commercial sales of diamonds from the Lace mine for
the first time since 1931. This will be a watershed year for the Company as we finally make the long and difficult transition to
diamond producer.
Finally, I would like to thank all of our loyal employees for their efforts in contributing to the successful transition of the Lace
project from development to producer. In particular, I would like to thank our outgoing Chief Operating Officer Steve West who
has retired early due to personal health challenges. Without Steve's unfaltering commitment the Company and the Lace
project, would not be in the solid position we are in today.
Mr. P R Loudon
Chief Executive Officer
03 May 2016
Consolidated and Separate Income Statement
Group Group Company Company
2015 2014 2015 2014
Note £ £ £ £
Other income 23 311 39 097 2 700 3 500
Operating expenses (1,879,990) (1,605,381) (816,015) (318,970)
Operating loss 20 (1,856,679) (1,566,284) (813,315) (315,470)
Finance income 16 909 49 110 49
Fair value adjustments (570,257) (1,685,439) (217,699) (679,367)
Finance costs 22 - - (151,308) (253,466)
Loss before taxation (2,410,027) (3,251,674) (1,182,212) (1,248,254)
Taxation 23 - - - -
Loss for the year (2,410,027) (3,251,674) (1,182,212) (1,248,254)
Loss attributable to :
Owners of the parent (2,254,597) (3,141,615) (1,182,212) (1,248,254)
Non-controlling interest (155,430) (110,059) - -
(2,410,027) (3,251,674) (1,182,212) (1,248,254)
Loss per share
Per share information
Basic and diluted loss per share (pence) 26 (0.64) (1.02) - -
Consolidated and Separate Statement of Comprehensive Income
Group Group Company Company
2015 2014 2015 2014
Restated
Note £ £ £ £
Loss for the year (2,410,027) (3,251,674) (1,182,212) (1,248,254)
Other comprehensive loss:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations (2,895,221) (369,402) - -
Other comprehensive loss for the year 25 (2,895,221) (369,402) - -
Total comprehensive loss (5,305,248) (3,621,076) (1,182,212) (1,248,254)
Total comprehensive loss attributable to:
Owners of the parent (4,628,485) (3,420,581) (1,182,212) (1,248,254)
Non-controlling interest (676,763) (200,495) - -
(5,305,248) (3,621,076) (1,182,212) (1,248,254)
Consolidated and Separate Statement of Financial Position as at
31 December 2015
Group Company
2015 2014 2013 2015 2014
Restated Restated
Note £ £ £ £ £
Assets
Non-Current Assets
Property, plant and equipment 4 27,472,410 23,993,549 14,892,223 237,804 257,622
Goodwill 5 2,403,483 3,069,294 3,195,164 - -
Investments in subsidiaries 6 - - - 4,672,501 4,672,501
Loans to group companies 7 - - - 20,804,406 14,307,300
Rehabilitation Deposit 9 128,113 101,199 43,632 - -
Restricted cash 12 60,913 70,232 73,108 - -
30,064,919 27,234,274 18,204,127 25,714,711 19,237,423
Current Assets
Inventories 10 627,535 455,684 557,085 - -
Current tax receivable 5,003 6,651 6,651 - -
Trade and other receivables 11 371,120 648,810 880,990 - -
Cash and cash equivalents 12 1,722,486 2,531,420 2,220,130 1,618,259 1,054,175
2,726,144 3,642,565 3,664,856 1,618,259 1,054,175
Total Assets 32,791,063 30,876,839 21,868,983 27,332,970 20,291,598
Equity and Liabilities
Equity
Equity Attributable to Equity Holders
of Parent
Share capital 13 44,626,346 37,161,667 35 190 544 44,626,346 37,161,667
Reserves (5,927,267) (3,503,973) (3,218,098) 561,818 611,222
Accumulated loss (28,303,519) (26,048,922) (22,907,307) (21,781,392) (20,599,180)
10,395,560 7,608,772 9,065,139 23,406,772 17,173,709
Non-controlling interest (2,824,126) (2,147,363) (1,946,868) - -
Total Equity 7,571,434 5,461,409 7,118,271 23,406,772 17,173,709
Liabilities
Non-Current Liabilities
Other financial liabilities 17 16,974,515 17,972,843 9,239,447 455,000 455,000
Provisions 18 518,301 581,756 528,828 - -
17,492,816 18,554,599 9,768,275 455,000 455,000
Current Liabilities
Compound instruments - debt component 16 2,684,835 2,811,742 2,532,981 1,363,050 1,234,488
Compound instruments - derivative 16 3,596,870 3,730,434 2,107,849 1,480,203 1,409,446
component
Trade and other payables 19 1,445,108 318,655 341,607 627,945 18,955
7,726,813 6,860,831 4,982,437 3,471,198 2,662,889
Total Liabilities 25,219,629 25,415,430 14,750,712 3,926,198 3,117,889
Total Equity and Liabilities 32,791,063 30,876,839 21,868,983 27,332,970 20,291,598
The financial statements on pages 27 to 76, of DiamondCorp plc, registered number 5400982, were approved by the Board of Directors and authorised for
issue on 26 April 2016 and signed on behalf of the Board of Directors. Mr. E A Worthington, Director
Consolidated and Separate Statement of Changes in Equity
Share Warrant
capital Share premium Total share Foreign currency Share option reserve Reserves Accumulated Total attributable Non-controlling
capital translation reserve loss to owner of the interest
reserve parent
£ £ £ £ £ £ £ £ £ £
Group
Balance at 1 January 2014 as previously stated 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 (1,580,044)
Restatement of goodwill (Note 5) - - - (1,410,862) - - (1,410,862) - (1,410,862) (366,824)
Balance at 1 January 2014 restated 8,305,184 26,885,360 35,190,544 (3,836,229) 526,131 92,000 (3,218,098) (22,907,307) 9,065,139 (1,946,868)
Loss for the year - - - - - - - (3,141,615) (3,141,615) (110,059)
Other comprehensive loss - - - (278,966) - - (278,966) - (278,966) (90,436)
Total comprehensive loss for the year - - - (278,966) - - (278,966) (3,141,615) (3,420,581) (200,495)
Issue of shares 41,526 1,929,597 1,971,123 - - - - - 1,971,123 -
Value attributed for equity based shared based - - - - 5,899 - 5,899 - 5,899 -
payments
Fair value adjustment of reserve - - - - - (12,808) (12,808) - (12,808) -
Total contributions by and distribution to
owners 41,526 1,929,597 1,971,123 - 5,899 (12,808) (6,909) - 1,964,214 -
of company recognised directly in equity
Balance at 01 January 2015 8,346,710 28,814,957 37,161,667 (4,115,195) 532,030 79,192 (3,503,973) (26,048,922) 7,608,772 (2,147,363)
Loss for the year - - - - - - - (2,254,597) (2,254,597) (155,430)
Other comprehensive loss - - - (2,373,890) - - (2,373,890) - (2,373,890) (521,333)
Consolidated and Separate Statement of Changes in Equity
(continued)
Share Share Foreign Share Warrant Total
capital premium Total share currency option reserve Reserves Accumulated Total attributable Non-controlling equity
capital translation reserve loss to owner of the interest
reserve parent
£ £ £ £ £ £ £ £ £ £ £
Group (continued)
Total comprehensive loss for the year - - - (2,373,890) - - (2,373,890) (2,254,597) (4,628,487) (676,763) (5,305,250)
Issue of shares 92,711 7,292,776 7,385,487 - - - - - 7,385,487 - 7,385,487
Value attributed for equity based shared based
payments - - - - 29,788 - 29,788 - 29,788 - 29,788
Warrants issued during the year - 79,192 79,192 - - (79,192) (79,192) - - - -
Total contributions by and distribution to
owners 92,711 7,371,968 7,464,679 - 29,788 (79,192) (49,404) - 7,415,275 - 7,415,275
of company recognised directly in equity
Balance at 31 December 2015 8,439,421 36,186,925 44,626,346 (6,489,085) 561,818 - (5,927,267) (28,303,519) 10,395,560 (2,824,126) 7,571,434
Note 13 13 13 14 15
Consolidated and Separate Statement of Changes in Equity
Foreign Share Total
Share Share currency option Warrant Accumulated attributable to Non-controlling
capital premium Total share capital translation reserve reserve Reserves loss owner of the interest Total euity
reserve parent
£ £ £ £ £ £ £ £ £ £ £
Company
Balance at 01 January 2014 8,305,184 26,885,360 35,190,544 - 526,131 92,000 618,131 (19,350,926) 16,457,749 - 16,457,749
Loss for the year - - - - - - - (1,248,254) (1,248,254) - (1,248,254)
Total comprehensive loss for the year - - - - - - - (1,248,254) (1,248,254) - (1,248,254)
Issue of shares 41,526 1,929,597 1,971,123 - - - - - 1,971,123 - 1,971,123
Value attributed for equity settled share based
payments - - - - 5,899 - 5,899 - 5,899 - 5,899
Fair value adjustment of reserve - - - - - (12,808) (12,808) - (12,808) - (12,808)
Total contributions by and distributions to
owners 41,526 1,929,597 1,971,123 - 5,899 (12,808) (6,909) - 1,964,214 - 1,964,214
of company recognised directly in equity
Balance at 01 January 2015 8,346,710 28,814,957 37,161,667 - 532,030 79,192 611,222 (20,599,180) 17,173,709 - 17,173,709
Loss for the year - - - - - - - (1,182,212) (1,182,212) - (1,182,212)
Total comprehensive loss for the year - - - - - - - (1,182,212) (1,182,212) - (1,182,212)
Issue of shares 92,711 7,292,776 7,385,487 - 29,788 - 29,788 - 7,415,275 - 7,415,275
Warrants exercised during the year - 79,192 79,192 - - (79,192) (79,192) - - - -
Total contributions by and distributions to
owners 92,711 7,371,968 7.464,679 - 29,788 (79,192) (49,404) - 7,415,275 - 7,415,275
of company recognised directly in equity
Balance at 31 December 2015 8,439,421 36,186,925 44,626,346 - 561,818 - 561,818 (21,781,392) 23,406,772 - 23,406,772
Note 13 13 13 14 15
Consolidated and Separate Statement of Cash Flows
Group Company
2015 2014 2015 2014
Note £ £ £ £
Cash flows from operating activities
Cash used in operations 27 (554,640) (879,829) (233,911) (560,646)
Finance costs - - (20,103) -
Tax received 1,648 - - -
Net cash used in operating activities (552,992) (879,829) (254,014) (560,646)
Cash flows from investing activities
Purchase of property, plant and equipment 4 (7,284,396) (7,971,705) - -
Sale of property, plant and equipment 4 5,139 - - -
Loans advanced to group companies - - (6,497,106) (362,330)
Outflow relating to other non-current asset (26,914) (57,567) - -
Interest Income 16,909 49 110 49
Net cash used in investing activities (7,289,262) (8,029,223) (6,496,996) (362,281)
Cash flows from financing activities
Proceeds on share issue 13 7,464,680 1,971,122 7,464,679 1,971,123
Proceeds from other financial liabilities - 8,733,396 - -
Repayment of compound instruments - - (149,585) -
Net cash generated from financing activities 7,464,680 10,704,518 7,315,094 1,971,123
Total cash movement for the year (377,574) 1,795,466 564,084 1,048,196
Cash at the beginning of the year 2,531,420 2.220,130 1,054,175 5,979
Effect of exchange rate movement on cash balances (431,360) (1,484,176) - -
Total cash at end of the year 12 1,722,486 2,531,420 1,618,259 1,054,175
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.
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.
Basis of Preparation and Accounting Policies
1.2 Consolidation (continued)
Basis of consolidation (continued)
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. Refer to note 5 for the prior period restatement of goodwill.
Basis of Preparation and Accounting Policies
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 are 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 in note 1.2 and estimates in note 5.
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.
During the year management have improved the Group?s liquidity position for the next 12 months by raising funds from the share
placing and rescheduling the repayment of the loan to IDC. The Group expects to commence commercial production in the
third quarter 2016 and thus the current liquidity model is based on the judgements around the adequate production rates and sales prices.
Whilst there are uncertainties in relation to certain judgements, management have concluded that no material uncertainty exist in relation to
the ability of the Group to continue as a going concern.
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.
Basis of Preparation and Accounting Policies
1.4 Property, plant and equipment (continued)
Initial recognition (continued)
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred
subsequently to add to, replace part of, service it, the initial estimate of the rehabilitation obligation, and for qualifying
assets (where relevant), borrowing costs. If a replacement cost is recognised in the carrying amount of an item of property,
plant and equipment, the carrying amount of the replaced part is derecognised. The purchase price or construction cost is
the aggregate amount paid and the fair value any other consideration given to acquire the asset.
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.
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 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.
Basis of Preparation and Accounting Policies
1.4 Property, plant and equipment (continued)
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 (FVTPL)
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.
Basis of Preparation and Accounting Policies
1.5 Financial liabilities / assets (continued)
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.
Basis of Preparation and Accounting Policies
1.5 Financial liabilities / assets (continued)
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.
Basis of Preparation and Accounting Policies
1.6 Tax (continued)
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
Consumable inventories are measured at the weighted average basis, and diamond inventories are measured at the 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.
Basis of Preparation and Accounting Policies
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 aquired 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.
Basis of Preparation and Accounting Policies
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.
Basis of Preparation and Accounting Policies
1.14 Translation of foreign currencies (continued)
Group and Company
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included
in the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at
fair value are included in the income statement for the period except for differences arising on the retranslation of non-
monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any
exchange component of that gain or loss is also recognised directly in equity.
In addition, in the case of presenting consolidated financial statements, any foreign exchange differences arising on
elimination of intercompany loan balances upon consolidation of the Group Companies, are classified as equity and
transferred to the Group?s translation reserve, as these loans are for long term investment purposes.
Determining the rate of exchange to be used
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group?s foreign operations
are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as other
comprehensive income and transferred to the Group?s translation reserve. Such translation differences are recognised in
the income statement in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
1.15 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 deposit
Contributions for the rehabilitation liability are made to an investment with 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.
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations
2.1 Standards and interpretations effective and adopted in the current year
In the current year, the group has adopted the following standards and interpretations that are effective for the current financial
year and that are relevant to its operations:
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 has adopted the amendment for the first time in the 2015 audited consolidated and separate financial statements.
The impact of the amendment is not material.
Amendment to IFRS 8: Operating Segments: Annual improvements project
Management is 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 has adopted the amendment for the first time in the 2015 audited consolidated and separate financial statements.
The adoption of this amendment has not had a material impact on the results of the group, but has resulted in more disclosure
than would have previously been provided in the audited consolidated and separate financial statements.
Amendment to IAS 16: Property, Plant and Equipment: Annual improvements project
The amendment adjusts the option to proportionately restate accumulated depreciation when an item of property, plant and
equipment is revalued. Instead, the gross carrying amount is to be adjusted in a manner consistent with the revaluation of the
carrying amount. The accumulated depreciation 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 has adopted the amendment for the first time in the 2015 audited consolidated and separate financial statements.
The impact of the amendment is not material.
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 has adopted the amendment for the first time in the 2015 audited consolidated and separate financial statements.
The impact of the amendment is not material.
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations (continued)
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 2016 or later periods:
IFRS 9 Financial Instruments
This new standard is the result of a three phase project to replace IAS 39 Financial Instruments: Recognition and
Measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial assets
and liabilities as well as new hedging requirements. The following are main changes from IAS 39:
Financial assets will be categorised as those subsequently measured at fair value or at amortised cost.
Financial assets at amortised cost are those financial assets where the business model for managing the assets is
to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of principal
and interest only). All other financial assets are to be subsequently measured at fair value.
For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is
classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the
provisions of IAS 39 still apply.
Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the group changes
its business model for the management of financial assets. In such circumstances, reclassification takes place
prospectively from the beginning of the first reporting period after the date of change of the business model.
Investments in equity instruments may be measured at fair value through other comprehensive income. When such
an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled
to profit or loss on derecognition of the investment. The election may be made per individual investment.
IFRS 9 does not allow for investments in equity instruments to be measured at cost.
The classification categories for financial liabilities remains unchanged. However, where a financial liability is
designated as at fair value through profit or loss, the change in fair value attributable to changes in the liabilities
credit risk shall be presented in other comprehensive income. This excludes situations where such presentation will
create or enlarge an accounting mismatch, in which case, the full fair value adjustment shall be recognised in profit
or loss.
The new hedging provisions align hedge accounting more closely with the actual risk management approach.
Certain non-derivative financial instruments are now allowed as hedging instruments.
Additional exposures are allowed as hedged items. These exposures include risk components of non-financial items,
net positions and layer components of items, aggregated exposures combining derivative and non-derivative
exposures and equity instruments at fair value through other comprehensive income.
The hedge effectiveness criteria have been amended, including the removal of the 80%-125% "bright line test" to
qualify for hedge accounting.
The concept of rebalancing has been introduced when the hedging relationship is ineffective because the hedge
ratio is no longer appropriate. When rebalancing is required, and provided the risk management objective remains
the same, the hedge ratio is adjusted rather than discontinuing the hedging relationship.
Additional disclosure requirements have been introduced for hedging.
The effective date has not yet been established as the project is currently incomplete. The IASB has communicated that the
effective date will not be before years beginning on or after 01 January 2018. IFRS 9 may be early adopted. If IFRS 9 is early
adopted, the new hedging requirements may be excluded until the effective date.
The group expects to adopt the standard for the first time in the first annual financial period after the effective date.
The impact of this standard is currently being assessed.
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.
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations (continued)
2.2 Standards and interpretations not yet effective (continued)
IFRS 15 Revenue from Contracts with Customers (continued)
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.
IFRS 16 Leases
After ten years of joint drafting by the IASB and FASB they decided that lessees should be required to recognise assets and
liabilities arising from all leases (with limited exceptions) on the balance sheet. Lessor accounting has not substantially
changed in the new standard.
The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an
obligation to pay for that right. In response to concerns expressed about the cost and complexity to apply the requirements to
large volumes of small assets, the IASB decided not to require a lessee to recognise assets and liabilities for short-term leases
(less than 12 months), and leases for which the underlying asset is of low value (such as laptops and office furniture).
A lessee measures lease liabilities at the present value of future lease payments. A lessee measures lease assets, initially at
the same amount as lease liabilities, and also includes costs directly related to entering into the lease. Lease assets are
amortised in a similar way to other assets such as property, plant and equipment. This approach will result in a more faithful
representation of a lessee?s assets and liabilities and, together with enhanced disclosures, will provide greater transparency of
a lessee?s financial leverage and capital employed.
One of the implications of the new standard is that there will be a change to key financial ratios derived from a lessee?s assets
and liabilities (for example, leverage and performance ratios).
IFRS 16 supersedes IAS 17, „Leases?, IFRIC 4, „Determining whether an Arrangement contains a Lease?, SIC 15, „Operating
Leases – Incentives? and SIC 27, „Evaluating the Substance of Transactions Involving the Legal Form of a Lease?.
The effective date of the standard is for years beginning on or after 01 January 2019.
The group expects to adopt the standard for the first time in the 2019 audited consolidated and separate financial statements.
Notes to the Consolidated and Separate Financial Statements
3. Segmental information
The Group is currently operating the Lace Diamond Mine. This operation is located in the northern part of the Free State
province in South Africa, 200 kilometres from Johannesburg, 30 kilometres from Kroonstad and 30 kilometres from
Viljoenskroon. The Lace Diamond Mine operation is treated as a single operation with the corporate head office and other
subsidiaries reported separately, including consolidation entries.
The Lace Diamond Mine segment will derive income primarily from the production and sale of rough and polished diamonds.
All the other segments namely DiamondCorp plc, DiamondCorp Holdings Ltd and Soapstone Investment Ltd are primarily
focused on administrative and financing activities.
2015
Separately
disclosable
Income items
Loss for
Total other the Depreciation Interest Interest Taxation
income year and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mines
(Pty) Ltd 20 611 (597,807) - 16 756 - -
All other segments 2 700 (1,241,963) (19,818) 153 - -
Total 23 311 (1,839,770) (19,818) 16 909 - -
Reconciling items
Fair value adjustments (570,257)
Loss after tax (2,410,027)
2014
Separately
disclosable
Income items
Loss for
Total other the Depreciation Interest Interest Taxation
income year and income expense
amortisation
£ £ £ £ £ £
Lace Diamond Mines
(Pty) Ltd 5 597 (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)
Notes to the Consolidated and Separate Financial Statements
3 Segmental information (continued)
Reconciliation of other income Total Inter- Income from Total Inter- Income
from
segment segment external segment segment external
income income customers income income customers
2015 2015 2015 2014 2014 2014
£ £ £ £ £ £
Lace Diamond Mines (Pty) Ltd
Profit on foreign exchange transactions 15 472 - 15 472 21 309 - 21 309
Sundry income 5 139 - 5 139 14 288 - 14 288
DiamondCorp Holdings Ltd
Marketing fee - - - 8 871 (8,871) -
DiamondCorp plc
Rental income 2 700 - 2 700 3 500 - 3 500
23 311 - 23 311 47 968 (8,871) 39 097
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.
2015
Additions to
Total
non-current assets
assets
£ £
Lace Diamond Mines (Pty) Ltd 10 049 105 26 834 984
All other segments 652 722 5 956 079
Total 10 701 827 32 791 063
2014
Additions to
Total
non-current assets
assets
£ £
Lace Diamond Mines (Pty) Ltd 9 850 018 25 359 311
All other segments 726 519 5 517 528
Total 10 576 537 30 876 839
Notes to the Consolidated and Separate Financial Statements
4 Property, plant and equipment
Group 2015 2014
Accumulated Accumulated Carrying
Cost / Carrying value Cost / value
Valuation depreciation / Valuation depreciation /
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Land & Buildings 759 506 (217 075) 542 431 941 662 (231,275) 710 387
Plant and machinery 6 259 799 (3 454 193) 2 805 606 7 202 535 (3,725,078) 3 477 457
Mining Rights 523 591 (209 439) 314 152 558 840 (195,595) 363 245
Construction in
Progress 25 590 008 (1,779,787) 23 810 221 21 671 561 (2,229,101) 19 442 460
Total 33 132 904 (5 660 494) 27 472 410 30 374 598 (6,381,049) 23 993 549
Company 2014
Accumulated Carrying
Cost / Cost / value
Valuation depreciation / Valuation depreciation /
amortisation / amortisation /
exchange exchange
differences differences
£ £ £ £ £ £
Mining Rights 396 343 (158,539) 237 804 396 343 (138,721) 257 622
Reconciliation of property, plant and equipment - Group - 2015
Opening Additions Disposals * Foreign Depreciation Total
balance exchange
movements
£ £ £ £ £ £
Land & Buildings 710 387 26 059 - (151,624) (42,391) 542 431
Plant and machinery 3 477 457 797 116 (10,099) (642,411) (816,457) 2 805 606
Mining Rights 363 245 - - (21,777) (27,316) 314 152
Construction in
Progress 19 442 460 9 878 652 (25,318) (5,485,573) - 23 810 221
23 993 549 10 701 827 (35,417) (6,301,385) (886,164) 27 472 410
* The foreign exchange movements is due to the devaluation of 28% in the ZAR/GBP exchange rate in 2015.
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
Notes to the Consolidated and Separate Financial Statements
4 Property, plant and equipment (continued)
Reconciliation of property, plant and equipment - Company - 2015
Opening Depreciation Total
balance
£ £ £
Mining Rights 257 622 (19,818) 237 804
Reconciliation of property, plant and equipment - Company - 2014
Opening Depreciation Total
balance
£ £ £
Mining Rights 277 440 (19,818) 257 622
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 SA 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 2015 2014
Cost Accumulated Carrying value Cost Accumulated Carrying value
impairment impairment
£ £ £ £ £ £
Goodwill 2 403 483 - 2 403 483 3 069 294 - 3 069 294
The goodwill relates to the acquisition of DiamondCorp Holdings Ltd in 2006. The goodwill was previously denominated in
pounds (GBP). However, as the goodwill relates to the Lace diamond mine cash generating unit, which has a rand (ZAR)
functional currency, it is more appropriate to denominate this balance in rand (ZAR). Goodwill was therefore retrospectively
restated to reflect goodwill at a fixed ZAR 55,247,900 and retranslated to the Group presentation currency being pounds
(GBP). This restatement did not have any income statement, cash flow statement or earnings per share impact.
Group
As previously stated As restated 1 As previously stated As restated 31
1 January 2014 January 2014 31 December 2014 December 2014
£ £ £ £
Goodwill 4 606 026 3 195 164 4 606 026 3 069 294
Foreign currency translation
reserve (2,425,367) (3,836,229) (2,578,463) (4,115,195)
Other Comprehensive Income 243 532 369 402
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% (2014: 15%) has been
used.
5 Goodwill (continued)
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 per year of kimberlite in 2019 and run
through 2040. Diamond production is expected to ramp up in 2016 reaching full production in 2019 with an average grade
of 36.2 carats per hundred tonnes as indicated in the Resource Statement included in the Letter from the Chief Executive
Officer. The fair value less cost to sell 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.
The 2015 key unobservable assumptions used in the valuation are:
Significant unobservable Range of unobservable Relationship of unobservable assumptions
assumptions assumptions
The ZAR/US$ exchange rate ZAR 13.00 to ZAR 18.00 The higher the ZAR/US$ exchange rate, the
higher the fair value
The average US$ price per carat for US$ 120 to US$ 200 The higher the price per carat, the higher the
diamonds fair value
The yield of diamonds in carats per 25 carat per 100 tonnes to 40 The higher the yield per hundred tonnes, the
hundred tonnes carat per 100 tonnes higher the fair value
Average yearly tonnes processed in 1,000,000 tonnes to 1,400,000 The higher the average yearly tonnes, the
the processing plant tonnes higher the fair value
Discount rate applied (post tax) 10% to 15% The higher the discount rate, the lower the fair
value
6.0 Investments in subsidiaries
The following table lists the entities which are controlled by the company, either directly or indirectly through subsidiaries.
Name of company Held by % % Carrying Carrying
holding holding amount amount
and and
voting voting
power power
2015 2014 2015 2014
£ £
DiamondCorp Holdings Ltd DiamondCorp plc 100.00% 100.00% 4 217 500 4 217 500
- incorporated in the British Virgin Islands
Botswana DiamondCorp Ltd 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 Ltd
Soapstone Investment Ltd DiamondCorp 100.00% 100.00% 455 000 455 000
- incorporated in South Africa Holdings Ltd
DCP Exploration (Pty) Ltd Botswana 100.00% 100.00% - -
- incorporated in Botswana DiamondCorp Ltd
DCP Diamonds International BVBA DiamondCorp 100.00% -% - -
- incorporated in Belgium Holdings Ltd
4 672 501 4 672 501
6 Investments in subsidiaries (continued)
Subsidiaries with material non-controlling interests
The following information is provided for subsidiaries with non-controlling interests which are material to the reporting
company.The summarised financial information is provided prior to intercompany eliminations.
Country of % Ownership interest held
Subsidiary incorporation by non-controlling interest
2015 2014
Lace Diamond Mines (Pty) Ltd South Africa 26% 26%
Summarised statement of financial position
Lace Diamond Mines (Pty)
Ltd
2015 2014
£ £
Assets
Non-current assets 25 807 092 22 980 382
Current assets 1 027 892 2 378 950
Total assets 26 834 984 25 359 332
Liabilities
Non-current liabilities 33 237 639 33 622 121
Current liabilities 1 016 101 563 287
Total liabilities 34 253 740 34 185 408
Total net liabilities (7,418,756) (8,826,076)
Carrying amount of non-controlling interest (2,824,125) (2,147,362)
Summarised statement of financial performance
Lace Diamond Mines (Pty)
Ltd
2015 2014
£ £
Other income and expenses (597,807) (423,303)
Loss before tax (597,807) (423,303)
Loss for the year (597,807) (423,303)
Total comprehensive loss (597,897) (771,133)
Loss allocated to non-controlling interest (155,430) (200,494)
Notes to the Consolidated and Separate Financial Statements
6 Investments in subsidiaries (continued)
Summarised statement of cash flows
Lace Diamond Mines (Pty) Ltd
2015 2014
£ £
Cash flows used in operating activities (47,757) (177,599)
Cash flows used in investing activities (7,288,860) (7,552,003)
Cash flows from financing activities 6 196 400 7 203 248
Net (decrease) in cash and cash equivalents (1,140,217) (526 354)
7 Loans to group companies
Company
2015 2014
£ £
Subsidiaries
DiamondCorp Holdings Ltd 30 728 532 24 231 426
30 728 532 24 231 426
Impairment of loans to subsidiaries (9,924,126) (9,924,126)
20 804 406 14 307 300
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 requested to support its
subsidiary in this position.
Company
2015 2014
£ £
Non-current assets net after impairment 20 804 406 14 307 300
8 Deferred tax
Any deferred tax asset relating to the tax loss has only been recognised to the extent that there is deferred tax liabilities.
Unutilised deferred tax assets in the Group amounting to £3,742,223 (2014: £4,890,206) and in the Company amounting to
£2,755,622 (2014: £2,754,924) have not been recognised due to the uncertainty of the timing and probability of future
taxable profits that it can be utilised against. The Group's tax losses have no expiry date.
Notes to the Consolidated and Separate Financial Statements
8 Deferred tax (continued)
The unrecognised deferred tax asset comprises of:
Group Company
2015 2014 2015 2014
£ £ £ £
Capital allowances (830,030) 509 961 15 854 12 782
Tax losses 2 587 428 2 004 922 754 942 608 455
Temporary differences (Impairment of loan) 1 984 825 2 375 323 1 984 826 2 133 687
3 742 223 4 890 206 2 755 622 2 754 924
9 Rehabilitation deposit
Group Company
2015 2014 2015 2014
£ £ £ £
At amortised cost:
Rehabilitation deposit 128 113 101 199 - -
Contributions to an insurance and investment product to cover future environmental rehabilitation and closure cost. The
premiums and investment returns thereon are recognised as a rehabilitation deposit. 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
2015 2014 2015 2014
£ £ £ £
Diamond inventories 490 288 188 827 - -
Consumable and other inventories 137 247 266 857 - -
627 535 455 684 - -
Diamond inventories at 31 December 2015 totalled 6,207.35 (2014: 2,815.12) carats. There was no write down of
inventories (2014: nil) or any reversal of inventory write downs during the year.
11 Trade and other receivables
Group Company
2015 2014 2015 2014
£ £ £ £
Trade receivables 5 091 57 636 - -
Prepayments 57 369 128 672 - -
VAT 308 660 462 502 - -
371 120 648 810 - -
The Directors consider that the carrying amount of these assets approximates their fair value. All receivables balances are
non-interest bearing.
Notes to the Consolidated and Separate Financial Statements
11 Trade and other receivables (continued)
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
2015, £ - (2014: £ -) were past due but not impaired. Trade and other receivables are considered to be past due after three
months of outstanding balances.
The ageing of amounts past due but not impaired is as follows:
Group Company
2015 2014 2015 2014
£ £ £ £
3 months past due 5 091 57 636 - -
There are no external credit ratings available to assess the credit quality of trade receivables reflected above. Management
reviews the credit worthiness of all customers before entering into transactions.
12 Cash and cash equivalents
Group Company
2015 2015 2014
£ £ £ £
Cash & cash equivalents - current 1 722 486 2 531 420 1 618 259 1 054 175
Restricted cash - non-current 60 913 70 232 - -
1 783 399 2 601 652 1 618 259 1 054 175
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
2015 2014 2015 2014
£ £ £ £
Credit rating
A- 1 658 014 1 983 275 1 618 259 1 054 175
BBB 124 145 616 505 - -
Other 1 240 1 872 - -
1 783 399 2 601 652 1 618 259 1 054 175
Notes to the Consolidated and Separate Financial Statements
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
2015 2014 2015 2014
No. No. No. No.
Reconciliation of number of shares issued:
Ordinary shares of 0.1 pence each (2014: 0.1 pence) 318 365 478 276 839 478 318 365 478 276 839 478
Issue of shares - ordinary shares 92 711 102 41 526 000 92 711 102 41 526 000
Total number of ordinary shares 411 076 580 318 365 478 411 076 580 318 365 478
Reconciliation of number of shares issued:
Ordinary shares of 0.1 pence each (2014: 0.1 pence) 411 076 580 318 365 478 411 076 580 318 365 478
Deferred ordinary shares of 2.9 pence each (2014: 2.9 276 839 478 276 839 478 276 839 478 276 839 478
pence)
Total number of ordinary shares 687 916 058 595 204 956 687 916 058 595 204 956
- 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).
- 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 effectively have a zero value, are 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.
- In May 2015 the Company issued 5,000,000 ordinary shares of 0.1 pence each at a price of 9 pence per share for a cash
consideration of £450,000. This was issued to Darwin Strategic Limited whom exercised their 5,000,000 warrants.
- On 8 June 2015, the Company issued 31,837,000 ordinary shares of 0.1 pence each at a price of 10 pence per share for
gross proceeds of £3,183,700, and transaction cost of £150,826.
- On 6 July 2015, the Company issued 20,894,263 ordinary shares of 0.1 pence each at a price of 10 pence per share for
gross proceeds of £2,089,426. These shares were issued in response to the Company's open offer where eligible
shareholders were able to purchase 1 open offer share for every 17 existing ordinary shares.
- On 22 December 2015, the Company issued 32,337,000 ordinary shares of 0.1 pence per share at a price of 6 pence per
share gross proceeds of £1,940,220. This was the first tranch of a two phase placing. On 4 January 2016 the Company
issued 34,329,667 ordinary shares at 0.1 pence at a price of 6 pence per share for gross proceeds of £2,059,780.
Notes to the Consolidated and Separate Financial Statements
13 Share capital (continued)
- On 22 December 2015, the Company issued 2,642,839 ordinary shares of 0.1 pence each at a price of 5.6 pence per
share. This was in response to bondholder converting his bonds.
Group Company
2015 2014 2015 2014
£ £ £ £
Issued
Ordinary shares of 0.1 pence each (2014: 0.1 pence) 411 076 318 365 411 076 318 365
Deferred ordinary shares of 2.9 pence each (2014: 2.9 8 028 345 8 028 345 8 028 345 8 028 345
pence)
Share premium at shares of 5 pence and 3.5 pence 36 186 925 28 814 957 36 186 925 28 814 957
each (2014: 5 pence and 3.5 pence)
44 626 346 37 161 667 44 626 346 37 161 667
14 Share based payments
Equity-settled share option scheme
The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the
average quoted market price of the Company's shares on the date of grant. If the options remain unexercised after a period
of ten years from the date of grant the options expire. Options are generally forfeited if the employee leaves the Group
before the options vest.
`
Details of the share options outstanding during the year are as follows. 2015 Number 2014 Number
Outstanding at the beginning of the year 12 845 000 8 345 000
Granted during the year - 4 500 000
Forfeited during the year 50 000 -
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 12 795 000 12 845 000
Exercisable at the end of the year 12 795 000 12 845 000
At 31 December 2015, 12,795,000 (2014: 12,845,000) options were outstanding at a weighted average exercise price of
13.2 pence (2014: 13 pence), and a weighted average remaining contractual life of 5.25 years (2014: 6.25 years).
During 2015, the Group recognised an expense of £29,788 (2014: £5,899) 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
Vesting period 3 Years 5 Years 3 Years 3 Years 3 Years
Expected dividend yield Nil Nil Nil Nil Nil
Risk free interest rate 1,961% 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
Notes to the Consolidated and Separate Financial Statements
14 Share based payments (continued)
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 2015, 2,130,000 options were outstanding under this plan (2014 - 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 2015, the number of options outstanding under this plan was 555,000 (2014 - 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 2015, 3,660,000 options were outstanding under this plan (2014 - 3,660,000).
Notes to the Consolidated and Separate Financial Statements
14 Share based payments (continued)
2013 Option Plan ("2013 Plan")
During 2013, options over 2,000,000 ordinary shares of 0.10 pence each were granted to Mr. E A 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 2015, 2,000,000 options were outstanding under this plan (2014 - 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, and no options vested in 2015.
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 2015, 4,450,000 options were outstanding under this plan (2014 - 4,500,000).
15 Warrant Reserve
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 31 December 2015 - -
GROUP AND COMPANY Warrants in Warrant
issue reserve
£
Outstanding at 31 December 2014 5 000 000 79 192
Darwin Warrants
In respect of agreeing to provide a standby equity finance facility of up to £10,000,000 which could be drawn upon at the
Company?s discretion during a period of 36 months ending on 18 October 2015, the Company grants 5,000,000 warrants to
Darwin Strategic Limited, a unit of Henderson Global Investors, which are exercisable at 9 pence on or before 18 October
2015. During May 2015 Darwin Strategic Limited exercised their right to convert the warrant at 9 pence.
The warrants were exercised during the financial year.
These warrants were valued by the Directors using the Black-Scholes valuation model, based on the assumptions as
detailed below.
Notes to the Consolidated and Separate Financial Statements
15 Warrant Reserve (continued)
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
2015 2014 2015 2014
£ £ £ £
Warrant Reserve - End of the year - 79 192 - 79 192
16.0 Compound instruments
The compound instruments have been split in a debt component and derivative as presented below:
Group Company
2015 2014 2015 2014
£ £ £ £
At amortised cost
Current liabilities 2 684 835 2 811 742 1 363 050 1 234 488
2 684 835 2 811 742 1 363 050 1 234 488
At fair value through profit or loss
Derivative financial instruments 3 596 870 3 730 434 1 480 203 1 409 446
3 596 870 3 730 434 1 480 203 1 409 446
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 Ltd, 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) Ltd. £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).
Notes to the Consolidated and Separate Financial Statements
16 Compound instruments (continued)
SA Bonds
On 14 December 2012, Soapstone Investment Ltd (“Soapstone”), wholly-owned subsidiary of the Company, issued
ZAR40,000,000 (£2,868,864 at spot rate 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 Ltd, 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 Investment Ltd and have a reversionary interest in the assets of Lace Diamond Mines (Pty) Ltd. 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 4 of the financial statements.
Fair Value
Refer to note 36 of the financial statements for the valuation techniques and assumptions applied for the purposes of
measuring fair value.
17 Other financial liabilities
Group Company
2015 2014 2015 2014
£ £ £ £
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 11 790 454 13 442 518 - -
SA Limited
Loan from Laurelton Diamonds Inc. 5 184 061 4 530 325 - -
Total financial liabilities 16 974 515 17 972 843 455 000 455 000
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 SA Limited (“IDC”) whereby IDC will provide a project loan facility
of ZAR 220,000,000. The initial term of the loan was 7 years from the initial drawdown date which was 14 August 2013 with
an interest rate of South Africa Prime Rate + 2%. Interest was capitalised for two years, subject to a maximum of ZAR
20,141,000 and thereafter is payable bi-annually in arrears. The loan was 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. In December 2015 the IDC agreed to
capitalise the interest on the loan for a further 12 months against the outstanding balance. The terms of the agreement
were amended. The term of the loan is extended to 8 years with an amended interest rate of South Africa prime plus 3.2%.
Interest will be capitalised to a maximum of ZAR44,633,117 repayable in equal quarterly instalments, the first of which will
be 1 February 2017. 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.
Notes to the Consolidated and Separate Financial Statements
17 Other financial liabilities (continued)
from Laurelton Diamonds Inc
On 4 January 2013 DiamondCorp Holdings Ltd, a wholly-owned subsidiary of the Company, entered into an agreement with
Laurelton Diamonds Inc ("Laurelton") whereby Laurelton would 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 would be
capitalised for 3 years and the interest accrued 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.
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.
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 (2014: £455,000) as recognised as a liability in
the company stand-alone financial statements.
Group Company
2015 2014 2015 2014
£ £ £ £
Non-current liabilities
Fair value through profit or loss - - 455 000 455 000
At amortised cost 16 974 515 17 972 843 - -
16 974 515 17 972 843 455 000 455 000
18 Provisions
Reconciliation of provisions - Group - 2015
Opening Additions Exchange Closing
balance differences balance
£ £ £ £
Rehabilitation provision 581 756 93 394 (156,849) 518 301
Notes to the Consolidated and Separate Financial Statements
18 Provisions (continued)
Reconciliation of provisions - Group - 2014
Opening Additions Exchange Closing
balance differences balance
£ £ £ £
Rehabilitation provision 528 828 74 368 (21,440) 581 756
A provision is recognised for the site restoration and decommissioning of current mining activities based on current
environmental and regulatory requirements. The additions of £93,394 (2014: £74,368) have been capitalised to construction
in progress (mine development costs).
19 Trade and other payables
Group Company
2015 2014 2015 2014
£ £ £ £
Trade payables 1 363 512 263 309 627 945 18 955
Accrued leave pay 81 596 82 346 - -
1 445 108 318 655 627 945 18 955
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
2015 2014 2015 2014
£ £ £ £
Other income
Gain on foreign exchange transactions 15 472 21 309 - -
Sundry income - 14 288 - -
Office rental income 2 700 3 500 2 700 3 500
Profit on sale of non-current asset 5 139 - - -
23 311 39 097 2 700 3 500
Operating lease charges
Premises
Contractual
amounts 62 454 61 526 62 454 61 526
Notes to the Consolidated and Separate Financial Statements
20 Operating loss (continued)
Group Company
2015 2014 2015 2014
£ £ £ £
Share based payment expense 29 788 5 899 29 788 5 899
Reversal of impairment on loans to group companies - - - (230,460)
Loss on exchange differences 168 197 285 060 - -
Depreciation on property, plant and equipment (not 19 818 19 818 19 818 19 818
capitalised)
General and administrative expenses 599 942 254 269 526 544 225 713
Employee costs 932 662 913 606 149 811 200 770
Auditors' remuneration 67 129 65 203 27 600 35 704
Attributable depreciation costs of £866,346 (2014: £779,064) were capitalised to mine development cost.
21 Employee cost
Employee costs including Directors' emoluments of the Group and Company were:
Group Company
2015 2014 2015 2014
£ £ £ £
Wages and salaries 765 209 756 996 129 976 183 819
Social security costs 19 835 16 951 19 835 16 951
Other pension and medical aid costs 147 618 139 659 - -
Share-based payment 29 788 5 899 29 788 5 899
962 450 919 505 179 599 206 669
Additional attributable payroll costs of £2,475,807 were capitalised to mine development cost (2014: £2,033,557).
Average monthly number of persons employed during the year was:
Group Company
2015 2014 2015 2014
No. No. No. No.
£ £ £ £
Administration 13 11 2 2
Operational 249 234 - -
262 245 2 2
Notes to the Consolidated and Separate Financial Statements
22 Finance costs
Group Company
2015 2014 2015 2014
£ £ £ £
Effective interest cost on Bonds - - 151 308 253 466
Borrowing costs for the Group capitalised to qualifying assets (mine development) are disclosed as below:
Reconciliation of Group finance cost capitalised - 2015 Finance cost Capitalised Total as per
Income
Statement
2015 2015 2015
£ £ £
IDC interest 1 489 551 (1,489,551) -
Soapstone Investment Ltd interest 382 394 (382,394) -
Laurelton interest 414 990 (414,990) -
Effective interest cost on bonds 539 776 (539 776 -
2 826 711 (2 826 711) -
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 Ltd 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) -
23 Taxation
There was no tax expense during the year.
Reconciliation
Reconciliation between accounting loss and tax expense.
Group Company
2015 2014 2015 2014
£ £ £ £
Accounting loss (2,410,027) (3,251,674) (1,182,212) (1,248,254)
Tax at the applicable weighted UK tax rate of
20% (482,005) (650,335) (236,442) (249,651)
(2014: 20%)
Tax effect of adjustments on taxable income
Expenses not tax deductible 174 402 424 438 43 540 135 873
Deferred tax not recognised (4,944,155) (4,967,297) (2,562,720) (2,648,274)
Effect of different tax rates 359 093 249 039 - 199 332
Tax losses carried forward 4 892 665 4 944 155 2 755 622 2 562 720
- - - -
Notes to the Consolidated and Separate Financial Statements
23 Taxation (continued)
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.
Factors affecting future tax charges
The main UK corporation tax rate was reduced from 21% to 20% with effect from 1 April 2015. Further reductions in the
applicable rate of corporation tax to 19% with effect from 1 April 2017 and to 18% with effect from 1 April 2020 were
enacted on 26 October 2015. On the basis the Company does not have any recognised deferred tax assets or liabilities at
the balance sheet date, no re-measurement of these balances is necessary.
24 Auditors' remuneration
Group Company
2015 2014 2015 2014
£ £ £ £
Fees payable to the Company's auditors and it's 27 600 35 704 27 600 35 704
associates for the audit of parent company and
consolidated financial statements
Fees payable to the Company's auditors and its
associates for audit services:
- The audit of company's subsidiaries 39 529 29 499 - -
Total auditors' remuneration 67 129 65 203 27 600 35 704
There were no non-audit services in 2015 (2014: nil).
25 Other comprehensive loss for the year
Components of other comprehensive loss - Group - 2015
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 (2,895,221) - (2,895,221) 521 333 (2,373,888)
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 (369,402) - (369,402) 90 436 (278,966)
Notes to the Consolidated and Separate Financial Statements
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
2015 2014
£ £
Basic loss per share
From continuing operations (pence per share) (0.64) (1.02)
Basic loss per share was based on loss of £ 2,254,597 (2014: £ 3,141,615) and a weighted average number of ordinary
shares of 352,438,990 (2014: 307,671,111).
Reconciliation of loss for the year to basic loss
Loss for the year attributable to equity holders of the (2,254,597) (3,141,615)
parent
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
2015 2014
£ £
Headline loss per share (pence) (0.64) (1.02)
Notes to the Consolidated and Separate Financial Statements
27 Cash used in operations
Group Company
2015 2014 2015 2014
£ £ £ £
Loss before taxation (2,410,027) (3,251,674) (1,182,212) (1,248,254)
Adjustments for:
Depreciation (not capitalised) 19 818 19 818 19 818 19 818
Profit on sale of assets (5,139) - - -
Loss on foreign exchange 152 455 306 369 - -
Interest received - investment (16,909) (49) (110) (49)
Finance costs - 151 308 253 466
Fair value adjustments 570 257 1 685 439 217 699 679 367
Impairment loss - - (230,460)
Movements in provisions (63,455) 52 928 - -
Share option expense 29 788 5 899 29 788 5 899
Other non-cash loss 3 619 - -
Adjustment for warrant reserve (79,192) (12,808) (79,192) (12,808)
Changes in working capital:
Inventories (171,851) 101 401 - -
Trade and other receivables 277 690 232 180 - -
Trade and other payables 1 141 925 (22,951) 608 990 (27,625)
(554,640) (879,829) (233,911) (560,646)
28 Related parties
`
Relationships
Subsidiaries Refer to note 6
Directors Refer to directors' report
Company of which Mr. P R Loudon Gelndree Capital Management Limited
Company of which Mr. P R Loudon and Dr. J Willis-Richards
are directors Loeb Aron & Company Limited
Company of which Mr. M Toxvaerd is a director European Islamic Investment Bank plc
Company of which Mr. H Scholes is a director Malan Scholes Attorneys
Related party balances
Group Company
2015 2014 2015 2014
£ £ £ £
Loan accounts - Owing (to) by related parties
DiamondCorp Holdings Ltd (before impairment - 30 728 532 24 231 426
provision)
Bonds held by related parties
Loeb Aron & Company Limited 60 000 60 000 60 000 60 000
Mr. E A Worthington 100 000 100 000 100 000 100 000
Mr. P R Loudon 100 000 100 000 100 000 100 000
Financial Guarantees to bondholders of
Soapstone Investment Ltd - 455 000 455 000
Notes to the Consolidated and Separate Financial Statements
28 Related parties (continued)
Related party transactions
Group Company
2015 2014 2015 2014
£ £ £ £
Directors Remuneration paid to related parties
Glendree Capital Management Limited 134 190 129 114 134 190 129 114
European Islamic Investment Bank plc 15 000 15 000 15 000 15 000
Legal Fees paid to related parties
Malan Scholes Attorneys 12 747 - 6 744 -
29 Directors' emoluments
Executive and Non-executive
2015
Share
Medical and Fees paid to Bonuses based Total
payment
Medical and pension third party s
benefit
£ £ £ £ £ £
Mr. E A Worthington (Chairman) * 90 000 - - - 2 678 92 678
Mr. R N Allen ** 15 000 - - - 2 008 17 008
Mr. P R Loudon * 45 810 4 487 134 190 - 5 355 189 842
Dr. J Willis-Richards ** 15 000 - - - 2 008 17 008
Mr. M Toxvaerd ** - - 15 000 - 2 008 17 008
Mr. H Scholes ** 12 000 - - - 2 008 14 008
177 810 4 487 149 190 - 16 065 347 552
2014
Share
Emoluments Medical and Fees paid to Bonuses based Total
payment
pension third party s
benefit
£ £ £ £ £ £
Mr. E A Worthington (Chairman) * 90 000 - - - 524 90 524
Mr. R N Allen ** 15 000 - - - 393 15 393
Mr. P R Loudon * 50 886 4 904 129 114 - 1 049 185 953
Dr. J Willis-Richards ** 15 000 - - - 393 15 393
Mr. M Toxvaerd ** - - 15 000 - 393 15 393
Mr. H Scholes ** 16 000 - - - 393 16 393
186 886 4 904 144 114 - 3 145 339 049
Indicator Type of Director
* Executive
** Non-executive
Notes to the Consolidated and Separate Financial Statements
30 Compensation to key personnel
Group Company
2015 2014 2015 2014
£ £ £ £
Short term employee benefits 271 775 264 111 - -
Contribution to pension fund 17 429 18 355 - -
Share based payment 9 929 1 966 - -
299 133 284 432 - -
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. All directors are regarded as key personnel. Their salaries are not
included above, refer to note 29 for their remuneration.
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 & 35, 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.
Notes to the Consolidated and Separate Financial Statements
31 Risk management (continued)
Categories of financial instruments (continued)
Group Group Company Company
Carrying Carrying Carrying Carrying
amount amount amount amount
2015 2014 2015 2014
£ £ £ £
FINANCIAL ASSETS
Loans and receivables (Including cash and cash 2 093 606 3 180 230 22 422 665 15 361 475
equivalents)
FINANCIAL LIABILITIES
Amortised cost 21 104 458 21 103 241 1 990 995 1 253 443
Financial guarantee contracts - - 455 000 455 000
Derivative instruments designated as fair value through 3 596 870 3 730 434 1 480 203 1 409 446
profit and loss (FVTPL)
The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
Valuation techniques and assumptions applied for the purposes of measuring fair
value
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a
discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-
optional derivatives, and option pricing models for optional derivatives. The fair value of the embedded derivative
component of the convertible bonds (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
2015 2014
Term range 5 years 5 years
Expected dividend yield Nil Nil
Risk free interest rate 1.96% 1.68%
Share price volatility 90.70% 90.09%
Share price at time of valuation 6.8 pence 7.4 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.
Notes to the Consolidated and Separate Financial Statements
31 Risk management (continued)
Credit risk management (continued)
The Company transacts with the following financial institutions:
Financial Institution External
credit rating
Barclays A-
ABSA A-
KBC Bank 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)
2015 2014
£ £
Cash denominated in South African Rand 618 302 1 106 488
Loan denominated in South African Rand (11,790,454) (13,442,518)
Cash denominated in United States Dollar 7 027 433 355
Loan denominated in United States Dollar (5,184,061) (4,530,325)
(16,349,186) (16,433,000)
Notes to the Consolidated and Separate Financial Statements
31 Risk management (continued)
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 2015 2014
£ £
Gain due to a 20% depreciation of the ZAR 2 234 430 2 467 206
Loss due to a 20% appreciation of the ZAR (2,234,430) (2,467,206)
USD Currency Impact 2015 2014
£ £
Gain due to a 20% depreciation of the USD 1 035 407 819 394
Loss due to a 20% appreciation of the USD (1,035,407) (819,394)
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 and more
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
More than
GROUP Weighted Less than 1 More than 1 Weighted Less than 1 1
average year year average year year
effective effective
interest rate interest rate
2015 2015 2015 2014 2014 2014
% £ £ % £ £
Non-interest bearing -% 3 596 870 - -% 4 049 090 -
Fixed interest rate instruments 12.0 % 3 007 015 21 881 454 13.0 % 3 177 268 26 150 487
Notes to the Consolidated and Separate Financial Statements
Risk management
31 (continued)
Liquidity and interest risk tables (continued)
LIABILITIES (continued)
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
2015 2015 2015 2014 2014 2014
% £ £ % £ £
Non-interest bearing -% 2 108 141 - -% 1 428 401 -
Fixed interest rate instruments 14.0 % 1 553 877 - 23.0 % 1 518 420 -
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 2016 and this will contribute to the Group cash flows.
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
2015 2015 2015 2014 2014 2014
% £ £ % £ £
Non-interest bearing -% 371 120 128 113 -% 648 810 101 199
Interest bearing 1.0 % 1 728 402 54 997 4.0 % 2 531 420 70 232
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
2015 2015 2015 2014 2014 2014
% £ £ % £ £
Non-interest bearing -% - 20 790 116 -% - 14 307 300
Interest bearing -% 1 618 259 - -% 1 054 175 -
Notes to the Consolidated and Separate Financial Statements
31 Risk management (continued)
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 2015 the Group incurred a loss of £2,410,027 (2014: £3,251,674 loss).
After reviewing the existing cash resources, facilities and Life of Mine model and the ongoing ramp up of production the Directors
have a reasonable expectation that the Group can meet all its liabilities as they fall due,
therefore they continue to adopt the going concern basis of presentation of the financial statements. (Refer 1.3 Going concern)
33 Contingent liabilities
A claim was submitted by Acrux Resources (Pty) Ltd against Lace Diamond Mines (Pty) Ltd for an amount of £207,229
plus interest during the financial year. The claim submitted is for the structuring fee of a terminated contract between Acrux
Resources (Pty) Ltd and Lace Diamond Mines (Pty) Ltd. The claim is disputed by Lace Diamond Mines (Pty) Ltd and
management is of the opinion that the claim will be unsuccessful. Management anticipates that the outcome of the claim
will only be resolved in 2017.
34 Events after the reporting year
On 4 January 2016, the Company issued 34,329,667 ordinary shares of 0.1 pence each at a price of 6 pence per share for
gross proceeds of £2,059,780.
35 Operating lease
Group Company
2015 2014 2015 2014
£ £ £ £
Minimum lease payments due
- within one year 41 677 50 012 41 677 50 012
- in second to fifth year inclusive - 41 677 - 41 677
Present value of minimum lease payments 41 677 91 689 41 677 91 689
The operating lease on the premises expires in October 2016.
Notes to the Consolidated and Separate Financial Statements
36 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
2015 2015 2015 2014
£ £ £ £
Liabilities Note 17
Financial liabilities at fair value through profit or
loss
Derivative financial instruments 3 596 870 3 730 434 1 480 203 1 409 446
Financial guarantees - - 455 000 455 000
Total 3 596 870 3 730 434 1 935 203 1 864 446
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 2014 or 2015 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
2015 2014
Term range 5 years 5 years
Expected dividend yield Nil Nil
Risk free interest rate 1.96% 1,68%
Share price volatility 90.70% 90.09%
Share price at time of grant 6.8 pence 7.4 pence
Description of valuation method and inputs of another class of level 2 fair values.
For the valuation method and assumptions used for the Darwin Warrants refer to note 15 of the financial statements.
4 May 2016
Johannesburg
Sponsor: Sasfin Capital (a division of Sasfin Bank Limited)
Date: 04/05/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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