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Dominion Diamond Corporation Reports Fiscal 2014 First Quarter Results

June 5, 2013

TORONTO, June 5, 2013 /PRNewswire/ – Dominion Diamond Corporation (TSX:DDC,
NYSE:DDC) (the “Company”) today announced its first quarter results for
the period ending April 30, 2013.

Robert Gannicott, Chairman and Chief Executive Officer stated: “Diavik is performing well and we are pleased with what we see at Ekati.
We have strengthened the senior management team in a focused effort to
deliver value through both extended mine life and enhanced operating
efficiencies.”

First Quarter Highlights:

During the quarter, the Company completed the acquisition of the Ekati
Diamond Mine and the sale of the Harry Winston Luxury Brand Segment to
Swatch Group.

        --  The acquisition of the Ekati Diamond Mine was completed on
            April 10, 2013 for a total cash purchase price of approximately
            $553.1 million. On the date of closing Ekati had cash on hand
            of approximately $65 million and diamond inventory with an
            approximate market value of $135 million.

        --  The sale of the Harry Winston Luxury Brand Segment was
            completed on March 26, 2013 for aggregate cash consideration of
            approximately $746 million, plus the assumption of existing
            indebtedness by the Swatch Group.

First Quarter Consolidated Operating Highlights

        --  The Company recorded a consolidated net profit attributable to
            shareholders of $500.2 million or $5.89 per share for the
            quarter, compared to a net profit attributable to shareholders
            of $11.6 million or $0.14 per share in the first quarter of the
            prior year. Included in this amount is a $497.6 million gain on
            the sale of the Luxury Brand Segment.

        --  Net profit from continuing operations attributable to
            shareholders (which now represents the Diavik, Ekati and
            Corporate segments) was $2.8 million or $0.03 per share
            compared to $6.0 million or $0.07 per share in the comparable
            quarter of the prior year.

        --  Consolidated rough diamond sales from continuing operations for
            the first quarter totaled $108.8 million, consisting of Diavik
            rough diamond sales of $88.9 million and Ekati rough diamond
            sales of $19.9 million (Ekati rough diamond sales are only from
            April 10, 2013, the date the Ekati Diamond Mine Acquisition was
            completed, to April 30, 2013). Gross margin increased 44% to
            $27.3 million from $18.9 million in the comparable quarter of
            the prior year.

        --  As at April 30, 2013, the Company had unrestricted cash and
            cash equivalents of $231.2 million and restricted cash of
            $125.7 million. The restricted cash is being used to support
            letters of credit to the Government of Canada in the aggregate
            amount of $126 million in support of the reclamation
            obligations for the Ekati Diamond Mine.

        --  In connection with the Ekati Diamond Mine Acquisition, the
            Company arranged new secured credit facilities consisting of a
            $400 million term loan, a $100 million revolving credit
            facility and a $140 million letter of credit facility
            (expandable to $265 million in aggregate). The Company
            ultimately determined to fund the Ekati Diamond Mine
            Acquisition by way of cash on hand and did not draw on these
            new facilities.

Diavik Diamond Mine

        --  Production for the first calendar quarter at the Diavik Diamond
            Mine was 1.9 million carats on a 100% basis.  Rough diamond
            production was 21% higher than the prior calendar quarter
            primarily due to improved grades in each of the kimberlite
            pipes.

        --  During the first quarter, the Company sold approximately 0.78
            million carats from the Diavik Diamond Mine for a total of
            $88.9 million for an average price per carat of $114 compared
            to 1.0 million carats for a total of $89.0 million for an
            average price per carat of $88 in the comparable quarter of the
            prior year. The 23% decrease in volume and 29% increase in
            price of carats sold versus the prior quarter resulted
            primarily from the sale during the first quarter of the prior
            year of almost all of the remaining lower priced goods
            originally held back in inventory by the Company at October 31,
            2011 due to an oversupply in the market at that time.

        --  Had the Company sold only the last production shipped in the
            first quarter, the estimated achieved price would have been
            approximately $125 per carat based on the prices achieved in
            the May 2013 sale.

Ekati Diamond Mine

        --  During the period from April 10 to April 30, 2013, the Company
            sold approximately 0.01 million carats from the Ekati Diamond
            Mine for a total of $19.9 million for an average price per
            carat of $1,620. The above-average achieved price per carat
            resulted from the timing of Ekati sales. Sales in April
            consisted only of Ekati's high value, high quality diamonds.

        --  The Company's cost of sales for the Ekati Diamond Mine for the
            period from April 10 to April 30, 2013, was $19.6 million,
            resulting in a gross margin of 1.4% reflecting the purchase of
            inventory at market values as part of the Ekati Diamond Mine
            Acquisition. The Company estimates cost of sales would have
            been approximately $13 million excluding this market value
            adjustment.

        --  Had the Company sold only the last production shipped in the
            first quarter, the estimated achieved price would have been
            approximately $350 per carat based on the prices achieved in
            the May 2013 sale.

        --  A new mine plan and budget for the Ekati Diamond Mine for the
            next operating period is currently under review.

Corporate Segment

        --  Corporate Segment Selling, general & administrative expenses
            for the first quarter included $11.3 million of transaction
            costs related to the Ekati Diamond Mine Acquisition.

Developments subsequent to the end of the reporting period

        --  On May 27, 2013 the Company announced the appointment of Mr.
            Chantal Lavoie to the position of President and Chief Operating
            Officer of Dominion Diamond Ekati Corporation. Mr. Lavoie has
            25 years of experience in open pit and underground mining.
            Amongst his previous roles, he was Chief Operating Officer for
            De Beers' Canadian mining operations which included the Victor
            Mine in Ontario and the Snap Lake Mine and the Gahcho Kue
            project in the Northwest Territories. As of July 1st, Mr.
            Lavoie will be responsible for the Company's mining operations
            and will be based in Yellowknife, Northwest Territories.

        --  The Company maintains a senior secured revolving credit
            facility with Standard Chartered Bank. On May 31, 2013, the
            Company repaid the $50.0 million outstanding.

Conference Call and Webcast
Beginning at 8:30AM (ET) on Thursday, June 6th, the Company will host a
conference call for analysts, investors and other interested parties.
Listeners may access a live broadcast of the conference call on the
Company’s investor relations web site at www.ddcorp.ca or by dialing 866-271-5140 within North America or 617-213-8893 from
international locations and entering passcode 21655189.

An online archive of the broadcast will be available by accessing the
Company’s investor relations web site at www.ddcorp.ca. A telephone replay of the call will be available one hour after the
call through 11:00PM (ET), Thursday, June 20th, 2013 by dialing
888-286-8010 within North America or 617-801-6888 from international
locations and entering passcode 85917665.

About Dominion Diamond Corporation
Dominion Diamond Corporation is a Canadian diamond mining company with
ownership interests in two of the world’s most valuable diamond mines.
Both mines are located in the low political risk environment of the
Northwest Territories of Canada. The Company is the fourth largest
diamond producer by value globally and the largest diamond mining
company by market capitalization, listed on the Toronto and New York
stock exchanges.

The Company operates the Ekati Diamond Mine through its 80% ownership as
well as a 58.8% ownership in the surrounding areas containing
prospective resources. It also sells diamonds from its 40% ownership
in the Diavik Diamond Mine.

For more information, please visit www.ddcorp.ca

Highlights
(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED)

During the quarter, Dominion Diamond Corporation (the “Company”)
completed the acquisition of the Ekati Diamond Mine and the sale of the
Luxury Brand Segment to Swatch Group. The acquisition of the Ekati
Diamond Mine was completed on April 10, 2013. As a result of the Ekati
Diamond Mine acquisition, the Company acquired an 80% interest in the
Core Zone, which includes the current operating mine and other
permitted kimberlite pipes, as well as a 58.8% interest in the Buffer
Zone, an adjacent area hosting kimberlite pipes with both development
and exploration potential. The sale of the Luxury Brand Segment was
completed on March 26, 2013 and as a result of the sale, the Company’s
corporate group underwent name changes to remove references to “Harry
Winston”. See “Discontinued Operations”. Accordingly, the Company’s
consolidated results from continuing operations are for the Diavik
Diamond Mine and Ekati Diamond Mine (from April 10(th), the date of acquisition by the Company). Continuing operations no
longer include the operations of the Luxury Brand Segment and the
results of this segment are now treated as discontinued operations for
reporting purposes.

The Company recorded a consolidated net profit attributable to
shareholders of $500.2 million or $5.89 per share for the quarter,
compared to a net profit attributable to shareholders of $11.6 million
or $0.14 per share in the first quarter of the prior year. Included in
this amount is a $497.6 million gain on the sale of the Luxury Brand
Segment. Net profit from continuing operations attributable to
shareholders (which now represents the Diavik and Ekati mining
segments) was $2.8 million or $0.03 per share compared to $6.0 million
or $0.07 per share in the comparable quarter of the prior year.
Continuing operations includes all costs related to the Company’s
mining operations.

Consolidated sales from continuing operations were $108.8 million for
the first quarter compared to $89.0 million for the comparable quarter
of the prior year, resulting in an operating profit of $10.5 million
compared to an operating profit of $12.2 million in the comparable
quarter of the prior year. Gross margin increased 44% to $27.3 million
from $18.9 million in the comparable quarter of the prior year.
Consolidated EBITDA from continuing operations was $30.7 million
compared to $34.3 million in the comparable quarter of the prior year.
Prior year numbers relate only to results from the Diavik Diamond Mine.

Included in consolidated sales are $88.9 million for the Diavik Diamond
Mine and $19.9 million for the Ekati Diamond Mine. Diavik sales were
consistent with the prior quarter. The 29% increase in achieved rough
diamond prices as compared to the prior quarter was offset by a 23%
decrease in volume of carats sold during the quarter. Diavik rough
diamond production during the first calendar quarter was 21% higher
than the comparable quarter of the prior year.

The corporate segment, which includes all costs not specifically related
to the operations of the Diavik and Ekati mines, recorded selling,
general and administrative expenses of $15.2 million, compared to $5.8
million in the comparable quarter of the prior year. The increase from
the comparable quarter of the prior year was primarily due to $11.3
million of expenses related to the Ekati Diamond Mine Acquisition.

The net earnings from discontinued operations of $497.4 million are
presented separately in the unaudited interim condensed consolidated
income statements, and comparative periods have been recast
accordingly. Included in this amount is a $497.6 million gain on the
sale of the Luxury Brand Segment.

Management’s Discussion and Analysis
PREPARED AS OF JUNE 5, 2013 (ALL FIGURES ARE IN UNITED STATES DOLLARS
UNLESS OTHERWISE INDICATED)

On March 26, 2013, Harry Winston Diamond Corporation changed its name to
Dominion Diamond Corporation (“Dominion Diamond Corporation” or the
“Company”). The following is management’s discussion and analysis
(“MD&A”) of the results of operations for Dominion Diamond Corporation
for the three months ended April 30, 2013, and its financial position
as at April 30, 2013. This MD&A is based on the Company’s unaudited
interim condensed consolidated financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board, and should
be read in conjunction with the unaudited interim condensed
consolidated financial statements and notes thereto for the three
months ended April 30, 2013, and the audited consolidated financial
statements for the year ended January 31, 2013. Unless otherwise
specified, all financial information is presented in United States
dollars. Unless otherwise indicated, all references to “first quarter”
refer to the three months ended April 30.

Certain information included in this MD&A may constitute forward-looking
information within the meaning of Canadian and United States securities
laws. In some cases, forward-looking information can be identified by
the use of terms such as “may”, “will”, “should”, “expect”, “plan”,
“anticipate”, “foresee”, “appears”, “believe”, “intend”, “estimate”,
“predict”, “potential”, “continue”, “objective”, “modeled”, “hope”,
“forecast” or other similar expressions concerning matters that are not
historical facts. Forward-looking information may relate to
management’s future outlook and anticipated events or results, and may
include statements or information regarding plans, timelines and
targets for construction, mining, development, production and
exploration activities at the Company’s mineral properties, future
mining and processing at the Company’s mineral properties, projected
capital expenditure requirements and the funding thereof, liquidity and
working capital requirements and sources, estimated reserves and
resources at, and production from, the Company’s mineral properties,
the number and timing of expected rough diamond sales, the demand for
rough diamonds, expected diamond prices and expectations concerning the
diamond industry, expected cost of sales and gross margin trends.
Actual results may vary from the forward-looking information. See
“Risks and Uncertainties” on page 17 for material risk factors that
could cause actual results to differ materially from the
forward-looking information.

Forward-looking information is based on certain factors and assumptions
regarding, among other things, mining, production, construction and
exploration activities at the Company’s mineral properties, world and
US economic conditions and diamond supply. In making statements
regarding expected diamond prices and expectations concerning the
diamond industry, the Company has made assumptions regarding, among
other things, the state of world and US economic conditions, and
worldwide diamond production levels. While the Company considers these
assumptions to be reasonable based on the information currently
available to it, they may prove to be incorrect. See “Risks and
Uncertainties” on page 17.

Forward-looking information is subject to certain factors, including
risks and uncertainties, which could cause actual results to differ
materially from what we currently expect. These factors include, among
other things, the uncertain nature of mining activities, including
risks associated with underground construction and mining operations,
risks associated with joint venture operations, including risks
associated with the inability to control the timing and scope of future
capital expenditures, the risk that the operator of the Diavik Diamond
Mine may make changes to the mine plan and other risks arising because
of the nature of joint venture activities, risks associated with the
remote location of and harsh climate at the Company’s mineral property
sites, risks resulting from the Eurozone financial crisis, risks
associated with regulatory requirements, fluctuations in diamond prices
and changes in US and world economic conditions, the risk of
fluctuations in the Canadian/US dollar exchange rate and cash flow and
liquidity risks. Please see page 17 of this MD&A, as well as the
Company’s current Annual Information Form, available at www.sedar.com and www.sec.gov, respectively, for a discussion of these and other risks and
uncertainties involved in the Company’s operations.

Readers are cautioned not to place undue importance on forward-looking
information, which speaks only as of the date of this MD&A, and should
not rely upon this information as of any other date. Due to
assumptions, risks and uncertainties, including the assumptions, risks
and uncertainties identified above and elsewhere in this MD&A, actual
events may differ materially from current expectations. The Company
uses forward-looking statements because it believes such statements
provide useful information with respect to the currently expected
future operations and financial performance of the Company, and
cautions readers that the information may not be appropriate for other
purposes. While the Company may elect to, it is under no obligation and
does not undertake to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise at
any particular time, except as required by law. Additional information
concerning factors that may cause actual results to materially differ
from those in such forward-looking statements is contained in the
Company’s filings with Canadian and United States securities regulatory
authorities and can be found at www.sedar.com and www.sec.gov, respectively.

Summary Discussion
Dominion Diamond Corporation is focused on the mining and marketing of
rough diamonds to the global market. The Company supplies rough
diamonds to the global market from its operation of the Ekati Diamond
Mine (in which it owns a controlling interest) and its 40% ownership
interest in the Diavik Diamond Mine, located in Canada’s Northwest
Territories.

The Company has an ownership interest in the Diavik group of mineral
claims. The Diavik Joint Venture (the “Diavik Joint Venture”) is an
unincorporated joint arrangement between Diavik Diamond Mines Inc.
(“DDMI”) (60%) and Dominion Diamond Diavik Limited Partnership
(formerly known as Harry Winston Diamond Limited Partnership) (“DDDLP”)
(40%) where DDDLP holds an undivided 40% ownership interest in the
assets, liabilities and expenses of the Diavik Diamond Mine. DDMI is
the operator of the Diavik Diamond Mine. DDMI and DDDLP are
headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary
of Rio Tinto plc of London, England.

On April 10, 2013, the Company completed the $553.1 million acquisition
from BHP Billiton Canada Inc. and its various affiliates of all of BHP
Billiton’s diamond assets, including its controlling interest in the
Ekati Diamond Mine as well as the associated diamond sorting and sales
facilities in Yellowknife, Canada, and Antwerp, Belgium (the “Ekati
Diamond Mine Acquisition”). The Ekati Diamond Mine consists of the Core
Zone, which includes the current operating mine and other permitted
kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting
kimberlite pipes having both development and exploration potential. In
connection with the Ekati Diamond Mine Acquisition, the Company
arranged new secured credit facilities consisting of a $400 million
term loan, a $100 million revolving credit facility and a $140 million
letter of credit facility (expandable to $265 million in aggregate).
The Company ultimately determined to fund the Ekati Diamond Mine
Acquisition by way of cash on hand and did not draw on these new
facilities. The Company controls and consolidates the Ekati Diamond
Mine and minority shareholders are presented as non-controlling
interests on the unaudited interim condensed consolidated financial
statements.

On March 26, 2013, the Company completed the disposition of the Luxury
Brand Segment to Swatch Group (the “Luxury Brand Divestiture”). As a
result of the Luxury Brand Divestiture, the Company’s corporate group
underwent name changes to remove references to “Harry Winston”. On
March 26, 2013, the Company’s name changed to “Dominion Diamond
Corporation” and its common shares trade on both the Toronto and New
York stock exchanges under the symbol “DDC”.

Market Commentary
The Diamond Market
The quarter began with a stable market for both rough and polished
diamonds as a result of improved market conditions at the end of fiscal
2013. Strong polished diamond sales encouraged manufacturers to
increase their purchases of rough diamonds at a time of reduced supply,
pushing rough diamond prices upwards during the first quarter. Rough
diamond supply was impacted by delivery problems at certain diamond
mines combined with lower than expected Russian rough diamond supply.
However, with the exception of high demand in the lower-priced ranges,
polished diamond prices remained flat, restricting the upward movement
in rough diamond prices at the end of the quarter. The retail jewelry
market outlook remains positive, led by the resilient US market. The
East Asian and Indian markets were less positive but the market still
anticipates resurgence in demand in the second half of the year as
retailers there restock. At the recent show in Basel, Switzerland,
better-quality, larger goods sold well, but less interest was evident
in the smaller sizes of polished goods commonly used in watches.

Consolidated Financial Results
On March 26, 2013, the Company completed the disposition of the Luxury
Brand Segment to Swatch Group. See “Discontinued Operations”.
Accordingly, the Company’s consolidated results from continuing
operations relate solely to its mining operations, which include the
production, sorting and sale of rough diamonds. The results of the
Luxury Brand Segment are treated as discontinued operations for
accounting and reporting purposes and current and prior period results
have been recast accordingly. The following is a summary of the
Company’s consolidated quarterly results for the eight quarters ended
April 30, 2013.


    (expressed in thousands of United States dollars except per share amounts and where otherwise noted)
    (unaudited)

                                                                                                                          Three       Three
                                                                                                                         months      months
                                                                                                                          ended       ended
                                                                                                                          April       April
                           2014        2013        2013        2013        2013        2012        2012        2012         30,         30,

                             Q1          Q4          Q3          Q2          Q1          Q4          Q3          Q2        2013        2012

    Sales             $ 108,837   $ 110,111   $  84,818   $  61,473   $  89,009   $ 102,232   $  36,239   $  89,608   $ 108,837   $  89,009

    Cost of sales        81,535      79,038      71,663      46,784      70,099      72,783      34,112      67,613      81,535      70,099

    Gross margin         27,302      31,073      13,155      14,689      18,910      29,449       2,127      21,995      27,302      18,910

    Gross margin
    (%)                   25.1%       28.2%       15.5%       23.9%       21.2%       28.8%        5.9%       24.5%       25.1%       21.2%

    Selling,
    general and
    administrative
    expenses             16,843      10,086       7,581       5,750       6,739       5,464       5,390       5,709      16,843       6,739

    Operating
    profit (loss)
    from continuing
    operations           10,459      20,987       5,574       8,939      12,171      23,985     (3,263)      16,286      10,459      12,171

    Finance
    expenses            (3,994)     (2,382)     (2,308)     (2,151)     (2,242)     (1,616)     (2,691)     (3,787)     (3,994)     (2,242)

    Exploration
    costs               (1,039)       (306)       (673)       (568)       (254)       (177)       (600)       (781)     (1,039)       (254)

    Finance and
    other income            804         601          60          67          52          51         256          78         804          52

    Foreign
    exchange gain
    (loss)                  732         116       (301)       1,048       (370)         680         285         846         732       (370)

    Profit (loss)
    before income
    taxes from
    continuing
    operations            6,962      19,016       2,352       7,335       9,357      22,923     (6,013)      12,642       6,962       9,357

    Income tax
    expense
    (recovery)            4,699       6,977       1,583       3,386       3,330      10,281     (1,574)       4,517      4, 699       3,330

    Net profit
    (loss) from
    continuing
    operations        $   2,263   $  12,039   $     769   $   3,949   $   6,027   $  12,642   $ (4,439)   $   8,125   $   2,623   $   6,027

    Net profit
    (loss) from
    discontinued
    operations          497,385       2,802       3,245         804       5,583       3,946       (292)       1,863     497,385       5,583

    Net profit
    (loss)            $ 499,648   $  14,841   $   4,014   $   4,753   $  11,610   $  16,588   $ (4,731)   $   9,988   $ 499,648   $  11,610

    Net profit
    (loss) from
    continuing
    operations
    attributable to                                                                                                                        

    Shareholders      $   2,822   $  12,146   $     152   $   3,951   $   6,027   $  12,654   $ (4,436)   $   8,123   $   2,822   $   6,027

    Non-controlling
    interest              (559)       (107)         617         (2)           -        (12)         (3)           2       (559)           -

    Net profit
    (loss)
    attributable to                                                                                                                        

    Shareholders      $ 500,207   $  14,948   $   3,397   $   4,755   $  11,610   $  16,600   $ (4,728)   $   9,986   $ 500,207   $  11,610

    Non-controlling
    interest              (559)       (107)         617         (2)           -        (12)         (3)           2       (559)           -

    Earnings (loss)
    per share -
    continuing
    operations                                                                                                                             

      Basic           $    0.03   $    0.14   $     (2)   $    0.05   $    0.07   $    0.15   $  (0.05)   $    0.10   $    0.03   $    0.07

      Diluted         $    0.03   $    0.14   $     (2)   $    0.05   $    0.07   $    0.15   $  (0.05)   $    0.09   $    0.03   $    0.07

    Earnings (loss)
    per share                                                                                                                              

      Basic           $    5.89   $    0.18   $    0.04   $    0.06   $    0.14   $    0.20   $  (0.06)   $    0.12   $    5.89   $    0.14

      Diluted         $    5.82   $    0.18   $    0.04   $    0.06   $    0.14   $    0.19   $  (0.06)   $    0.12   $    5.82   $    0.14

    Cash dividends
    declared per
    share             $    0.00   $    0.00   $    0.00   $    0.00   $    0.00   $    0.00   $    0.00   $    0.00   $    0.00   $    0.00

    Total assets
    (i)               $   2,412   $   1,710   $   1,733   $   1,660   $   1,716   $   1,607   $   1,656   $   1,671   $   2,412   $   1,716

    Total long-term
    liabilities (i)   $     695   $     269   $     682   $     461   $     472   $     641   $     661   $     633   $     695   $     472

    Operating
    profit (loss)
    from continuing
    operations        $  10,459   $  20,987   $   5,574   $   8,939   $  12,171   $  23,985   $ (3,263)   $  16,286   $  10,459   $  12,171

    Depreciation
    and
    amortization
    (ii)                 20,211      24,346      20,588      13,160      22,172      24,284      19,933      17,461      20,211      22,172

    EBITDA from
    continuing
    operations
    (iii)             $  30,670   $  45,333   $  26,162   $  22,099   $  34,343   $  48,269   $  16,670   $  33,747   $  30,670   $  34,343


    (i)     Total assets and total long-term liabilities are expressed in
            millions of United States dollars.

    (ii)    Depreciation and amortization included in cost of sales and
            selling, general and administrative expenses.

    (iii)   Earnings before interest, taxes, depreciation and amortization
            ("EBITDA"). See "Non-IFRS Measures" on page 15.

Three Months Ended April 30, 2013 Compared to Three Months Ended April
30, 2012

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a first quarter consolidated net profit
attributable to shareholders of $500.2 million or $5.89 per share
compared to a net profit attributable to shareholders of $11.6 million
or $0.14 per share in the first quarter of the prior year. Included in
this amount is a $497.6 million gain on the sale of the luxury brand
segment. Net profit from continuing operations attributable to
shareholders was $2.8 million or $0.03 per share compared to $6.0
million or $0.07 per share in the comparable quarter of the prior year.
Discontinued operations represented $497.4 million of net profit or
$5.86 per share compared to $5.6 million or $0.07 per share in the
first quarter of the prior year.

CONSOLIDATED SALES

Sales for the first quarter totalled $108.8 million, consisting of
Diavik rough diamond sales of $88.9 million and Ekati rough diamond
sales of $19.9 million. This compares to sales of $89.0 million in the
comparable quarter of the prior year (Diavik rough diamond sales of
$89.0 million and Ekati rough diamond sales of $nil). The Ekati rough
diamond sales are for the period from April 10, 2013, which was the
date the Ekati Diamond Mine Acquisition was completed, to April 30,
2013.

The Company expects that results for its mining operations will continue
to fluctuate depending on the seasonality of production at its mineral
properties, the number of sales events conducted during the quarter,
rough diamond prices and the volume, size and quality distribution of
rough diamonds delivered from the Company’s mineral properties and sold
by the Company in each quarter. See “Segmented Analysis” on page 8 for
additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN
The Company’s first quarter cost of sales was $81.5 million resulting in
a gross margin of 25.1% compared to a cost of sales of $70.1 million
and a gross margin of 21.2% for the comparable quarter of the prior
year. The Company’s cost of sales includes costs associated with mining
and rough diamond sorting activities. See “Segmented Analysis” on
page 8 for additional information.

CONSOLIDATED INCOME TAXES
The Company recorded a net income tax expense of $4.7 million during the
first quarter, compared to a net income tax expense of $3.3 million in
the comparable quarter of the prior year. The Company’s combined
federal and provincial statutory income tax rate for the quarter is
26.5%. There are a number of items that can significantly impact the
Company’s effective tax rate, including foreign currency exchange rate
fluctuations, the Northwest Territories mining royalty, and earnings
subject to tax different than the statutory rate. As a result, the
Company’s recorded tax provision can be significantly different than
the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency
exchange rate fluctuations. The Company’s functional and reporting
currency is US dollars; however, the calculation of income tax expense
is based on income in the currency of the country of origin. As such,
the Company is continually subject to foreign exchange fluctuations,
particularly as the Canadian dollar moves against the US dollar. During
the first quarter, the Canadian dollar weakened against the US dollar.
As a result, the Company recorded an unrealized foreign exchange gain
of $1.8 million on the revaluation of the Company’s Canadian dollar
denominated deferred income tax liability. This compares to an
unrealized foreign exchange loss of $3.0 million in the comparable
quarter of the prior year. The unrealized foreign exchange gain is
recorded as part of the Company’s deferred income tax recovery, and is
not taxable for Canadian income tax purposes. During the first quarter,
the Company also recognized a deferred income tax expense of $3.1
million for temporary differences arising from the difference between
the historical exchange rate and the current exchange rate translation
of foreign currency non-monetary items. This compares to a deferred
income tax recovery of $1.5 million recognized in the comparable
quarter of the prior year. The recorded tax provision during the
quarter also included a net income tax recovery of $1.2 million
relating to foreign exchange differences between income in the currency
of the country of origin and US dollars. This compares to a net income
tax recovery of $1.9 million recognized in the comparable quarter of
the prior year.

Due to the number of factors that can potentially impact the effective
tax rate and the sensitivity of the tax provision to these factors, as
discussed above, it is expected that the Company’s effective tax rate
will fluctuate in future periods.

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The principal components of selling, general and administrative (“SG&A”)
expenses include expenses for salaries and benefits, professional fees,
consulting and travel. The Company incurred SG&A expenses of $16.8
million for the first quarter, compared to $6.7 million in the
comparable quarter of the prior year. The increase from the comparable
quarter of the prior year was primarily due to $11.3 million of
transaction costs related to the Ekati Diamond Mine Acquisition.
See “Segmented Analysis” on page 8 for additional information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expenses for the first quarter were $4.0 million compared to
$2.2 million for the comparable quarter of the prior year. Also
included in consolidated finance expense is accretion expense of $2.2
million (three months ended April 30, 2012 – $0.7 million) related to
the Diavik Diamond Mine’s and Ekati Diamond Mine’s future site
restoration liabilities.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $1.0 million was incurred during the first
quarter compared to $0.3 million in the comparable quarter of the prior
year.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $0.8 million was recorded during the first
quarter compared to $0.1 million in the comparable quarter of the prior
year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange gain of $0.7 million was recognized during the
first quarter compared to a net foreign exchange loss of $0.4 million
in the comparable quarter of the prior year. The Company does not
currently have any significant foreign exchange derivative instruments
outstanding.

Segmented Analysis
The operating segments of the Company include the Diavik Diamond Mine,
the Ekati Diamond Mine and Corporate segments. The Corporate segment
captures costs not specifically related to operating the Diavik and
Ekati mines.

Diavik Diamond Mine
This segment includes the production, sorting and sale of rough diamonds
from the Diavik Diamond Mine.


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                                  Three      Three
                                                                                                                 months     months
                                                                                                                  ended      ended
                                                                                                                  April      April
                         2014        2013       2013       2013       2013        2012       2012       2012        30,        30,

                           Q1          Q4         Q3         Q2         Q1          Q4         Q3         Q2       2013       2012

    Sales                                                                                                                         

      North
      America        $  6,179   $   4,604   $  7,697   $  2,269   $  7,432   $   2,727   $  8,835   $    447   $  6,179   $  7,432

      Europe           61,642      84,346     57,438     50,514     54,370      78,846     21,993     80,131     61,642     54,370

      India            21,095      21,161     19,683      8,690     27,207      20,659      5,411      9,030     21,095     27,207

    Total sales        88,916     110,111     84,818     61,473     89,009     102,232     36,239     89,608     88,916     89,009

    Cost of sales      61,888      79,038     71,663     46,784     70,099      72,783     34,112     67,613     61,888     70,099

    Gross margin       27,028      31,073     13,155     14,689     18,910      29,449      2,127     21,995     27,028     18,910

    Gross margin
    (%)                 30.4%       28.2%      15.5%      23.9%      21.2%       28.8%       5.9%      24.5%      30.4%      21.2%

    Selling,
    general and
    administrative
    expenses            1,110       1,860      1,279      1,050        972       1,308      1,026        889      1,110        972

    Operating
    profit (loss)    $ 25,918   $  29,213   $ 11,876   $ 13,639   $ 17,938   $  28,141   $  1,101   $ 21,106   $ 25,918   $ 17,938

    Depreciation
    and
    amortization
    (i)                19,906      24,042     20,283     12,874     21,876      23,849     19,709     17,172     19,906     21,865

    EBITDA (ii)      $ 45,824   $  53,255   $ 32,159   $ 26,513   $ 39,814   $  51,990   $ 20,810   $ 38,278   $ 45,824   $ 39,803

    (i)     Depreciation and amortization included in cost of sales and
           selling, general and administrative expenses.

    (ii)   Earnings before interest, taxes, depreciation and amortization
           ("EBITDA"). See "Non-IFRS Measure" on page 15.

Three Months Ended April 30, 2013 Compared to Three Months Ended April
30, 2012

DIAVIK SALES
During the first quarter, the Company sold approximately 0.78 million
carats from the Diavik Diamond Mine for a total of $88.9 million for an
average price per carat of $114 compared to 1.0 million carats for a
total of $89.0 million for an average price per carat of $88 in the
comparable quarter of the prior year. The 29% increase in the Company’s
achieved average rough diamond prices and the 23% decrease in volume of
carats sold versus the prior quarter resulted primarily from the sale
during the first quarter of the prior year of almost all of the
remaining lower priced goods originally held back in inventory by the
Company at October 31, 2011 due to an oversupply in the market at that
time.

Had the Company sold only the last production shipped in the first
quarter, the estimated achieved price would have been approximately
$125 per carat based on the prices achieved in the May 2013 sale.

DIAVIK COST OF SALES AND GROSS MARGIN
The Company’s first quarter cost of sales for the Diavik Diamond Mine
was $61.9 million resulting in a gross margin of 30.4% compared to a
cost of sales of $70.1 million and a gross margin of 21.2% in the
comparable quarter of the prior year. Cost of sales for the first
quarter included $19.5 million of depreciation and amortization
compared to $21.5 million in the comparable quarter of the prior year.
The gross margin is anticipated to fluctuate between quarters,
resulting from variations in the specific mix of product sold during
each quarter and rough diamond prices.

A substantial portion of consolidated cost of sales is mining operating
costs, which are incurred at the Diavik Diamond Mine. During the first
quarter, the Diavik cash cost of production was $42.9 million compared
to $44.0 million in the comparable quarter of the prior year. Cost of
sales also includes sorting costs, which consists of the Company’s cost
of handling and sorting product in preparation for sales to third
parties, and depreciation and amortization, the majority of which is
recorded using the unit-of-production method over estimated proven and
probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance
measure, in order to provide investors with information about the
measure used by management to monitor performance. This information is
used to assess how well the Diavik Diamond Mine is performing compared
to the mine plan and prior periods. Cash cost of production includes
mine site operating costs such as mining, processing and
administration, but is exclusive of amortization, capital, and
exploration and development costs. Cash cost of production does not
have any standardized meaning prescribed by IFRS and differs from
measures determined in accordance with IFRS. This performance measure
is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. This measure is not necessarily
indicative of net profit or cash flow from operations as determined
under IFRS. The following table provides a reconciliation of cash cost
of production to the Diavik Diamond Mine’s cost of sales disclosed for
the three months ended April 30, 2013 and 2012.


    (expressed in thousands
    of United States              Three months ended     Three months ended
    dollars)                          April 30, 2013         April 30, 2012

    Diavik cash cost of
    production                  $             42,919     $           44,036

    Private royalty                            1,194                  2,638

    Other cash costs                           1,070                  1,429

    Total cash cost of
    production                                45,183                 48,103

    Depreciation and
    amortization                              22,909                 13,772

    Total cost of
    production                                68,092                 61,875

    Adjusted for stock
    movements                                (6,204)                  8,225

    Total cost of sales         $             61,888     $           70,100

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Diavik Diamond Mine segment was $1.1 million
compared to $1.0 million in the comparable period of the prior year.

OPERATIONAL UPDATE
Production for first calendar quarter at the Diavik Diamond Mine was 1.9
million carats at 100%. Total production includes reprocessed plant
rejects (“RPR”), which are not included in the Company’s reserves and
resource statement and are therefore incremental to production. Rough
diamond production was 21% higher than the prior calendar quarter due
primarily to improved grades in each of the kimberlite pipes.

DOMINION DIAMOND DIAVIK LIMITED PARTNERSHIP’S 40% SHARE OF DIAVIK
DIAMOND MINE PRODUCTION
(reported on a one-month lag)


    For the three months
    ended March 31, 2013                                                

                             Ore Processed     Carats              Grade
    Pipe                     (000s tonnes)     (000s)     (carats/tonne)

    A-154 South                         60        282               4.71

    A-154 North                         70        162               2.32

    A-418                               71        291               4.11

    RPR                                  1         43                  -

    Total                              202        778            3.67(a)

    (a)  Grade has been adjusted to exclude RPR

    For the three months
    ended March 31, 2012                                                

                             Ore Processed     Carats              Grade
    Pipe                     (000s tonnes)     (000s)     (carats/tonne)

    A-154 South                         15         49               3.24

    A-154 North                         40         70               1.73

    A-418                              155        491               3.17

    RPR                                  1         32                  -

    Total                              211        642            2.90(a)

    (a)  Grade has been adjusted to exclude RPR

Diavik Operations Outlook
PRODUCTION
A mine plan and budget for calendar 2013 has been approved by Rio Tinto
plc (“Rio Tinto”) and the Company. The plan for calendar 2013, which
originally included Diavik Diamond Mine production of approximately 6
million carats, currently foresees production of approximately 6.6
million carats from the mining and processing of approximately 1.6
million tonnes of ore and the processing of approximately 2.0 million
tonnes of material from both mining and stockpiles. The approximately
11% increase in carats in expected production for calendar 2013, as
compared to the previously disclosed plan, relates primarily to the
processing of more stockpiled ore during the calendar year. Mining
activities will be exclusively underground with approximately 0.7
million tonnes expected to be sourced from A-154 North, approximately
0.4 million tonnes from A-154 South and approximately 0.5 million
tonnes from A-418 kimberlite pipes. Included in the estimated
production for calendar 2013 is approximately 0.4 million carats from
RPR and 0.2 million carats from the improved recovery process for small
diamonds. These RPR and small diamond recoveries are not included in
the Company’s reserves and resource statement and are therefore
incremental to production.

Rio Tinto is continuing its strategic review of its diamond business. It
is currently anticipated that a decision to develop the A-21 kimberlite
pipe will await a new operating owner for the 60% Diavik interest
currently held by Rio Tinto.

PRICING
Based on prices from the Company’s rough diamond sales during the first
quarter and the current diamond recovery profile of the Diavik
processing plant, the Company has modeled the current approximate rough
diamond price per carat for each of the Diavik ore types in the table
that follows:


                          Sales cycle ended
                                   May 2013

                          average price per
                                      carat
    Ore type                (in US dollars)

    A-154 South         $               140

    A-154 North                         180

    A-418                               100

    RPR                                  50

COST OF SALES AND CASH COST OF PRODUCTION
The Company currently expects cost of sales for the Diavik Diamond Mine
in fiscal 2014 to be approximately $285 million (including depreciation
and amortization of approximately $90 million). The Company’s share of
the cash cost of production at the Diavik Diamond Mine for calendar
2013 is expected to be approximately $175 million at an assumed average
Canadian/US dollar exchange rate of $1.00.

CAPITAL EXPENDITURES
During fiscal 2014, DDDLP’s 40% share of the planned capital
expenditures for the Diavik Diamond Mine is expected to be
approximately $28 million at an assumed average Canadian/US dollar
exchange rate of $1.00. During the first quarter, DDDLP’s share of
capital expenditures was $10.2 million.

Ekati Diamond Mine
This segment includes the production, sorting and sale of rough diamonds
from the Ekati Diamond Mine.


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                  Three      Three
                                                                                                 months     months
                                                                                                  ended      ended
                                                                                                  April      April
                         2013     2012     2012     2012     2012     2011     2011     2011        30,        30,

                           Q1       Q4       Q3       Q2       Q1       Q4       Q3       Q2       2013       2012

    Sales                                                                                                         

      North
    America          $      -   $    -   $    -   $    -   $    -   $    -   $    -   $    -   $      -   $      -

      Europe           19,921        -        -        -        -        -        -        -     19,921          -

      India                 -        -        -        -        -        -        -        -          -          -

    Total sales        19,921        -        -        -        -        -        -        -     19,921          -

    Cost of sales      19,647        -        -        -        -        -        -        -     19,647          -

    Gross margin          274        -        -        -        -        -        -        -        274          -

    Gross margin
    (%)                  1.4%       -%       -%       -%       -%       -%       -%       -%       1.4%         -%

    Selling,
    general and
    administrative
    expenses              520        -        -        -        -        -        -        -        520          -

    Operating
    profit (loss)    $  (246)   $    -   $    -   $    -   $    -   $    -   $    -   $    -   $  (246)   $      -

    Depreciation
    and
    amortization
    (i)                     -        -        -        -        -        -        -        -          -          -

    EBITDA (ii)      $  (246)   $    -   $    -   $    -   $    -   $    -   $    -   $    -   $  (246)   $      -

    (i)    Depreciation and amortization included in cost of sales and
           selling, general and administrative expenses. All sales are
           related to inventory purchased as a part of the Ekati Diamond
           Mine Acquisition, and accordingly are accounted for as cash cost
           of sales.

    (ii)   Earnings before interest, taxes, depreciation and amortization
           ("EBITDA"). See "Non-IFRS Measure" on page 15.

Period from April 10 to April 30, 2013
EKATI SALES
During the period from April 10 to April 30, 2013, the Company sold
approximately 0.01 million carats from the Ekati Diamond Mine for a
total of $19.9 million for an average price per carat of $1,620. The
above-average achieved price per carat resulted from the timing of
Ekati sales. Sales in April consisted only of Ekati’s high value, high
quality diamonds. Had the Company sold only the last production shipped
in the first quarter, the estimated achieved price would have been
approximately $350 per carat based on the prices achieved in the May
2013 sale.

EKATI COST OF SALES AND GROSS MARGIN
The Company’s cost of sales for the Ekati Diamond Mine for the period
from April 10 to April 30, 2013, was $19.6 million, resulting in a
gross margin of 1.4%. Cost of sales for the first quarter reflected the
purchase of inventory at market values as part of the Ekati Diamond
Mine Acquisition. Cost of sales would have been approximately $13
million excluding the market value adjustment made as part of the Ekati
Diamond Mine Acquisition. The gross margin is anticipated to fluctuate
between quarters, resulting from variations in the specific mix of
product sold during each quarter and rough diamond prices and the sale
of inventory purchased at market values as part of the Ekati Diamond
Mine Acquisition.

A substantial portion of consolidated cost of sales is mining operating
costs, which are incurred at the Ekati Diamond Mine. During the period
from April 10 to April 30, 2013, the Ekati cash cost of production was
$17.4 million. Cost of sales also includes sorting costs, which
consists of the Company’s cost of handling and sorting product in
preparation for sales to third parties, and depreciation and
amortization, the majority of which is recorded using the
unit-of-production method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance
measure, in order to provide investors with information about the
measure used by management to monitor performance. This information is
used to assess how well the Ekati Diamond Mine is performing compared
to the mine plan and prior periods. Cash cost of production includes
mine site operating costs such as mining, processing and
administration, but is exclusive of amortization, capital, and
exploration and development costs. Cash cost of production does not
have any standardized meaning prescribed by IFRS and differs from
measures determined in accordance with IFRS. This performance measure
is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. This measure is not necessarily
indicative of net profit or cash flow from operations as determined
under IFRS. The following table provides a reconciliation of cash cost
of production to the Ekati Diamond Mine’s operations’ cost of sales
disclosed for the period April 10 to April 30, 2013.


    (expressed in thousands of United States         Period April 10 to
    dollars)                                             April 30, 2013

    Ekati cash cost of production                  $             17,381

    Other cash costs including inventory
    acquisition                                                 134,647

    Total cash cost of production                               152,028

    Depreciation and amortization                                 6,544

    Total cost of production                                    158,572

    Adjusted for stock movements                              (138,925)

    Total cost of sales                            $             19,647

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Ekati Diamond Mine segment were $0.5 million.

Ekati Operations Outlook
PRODUCTION
A new mine plan and budget for the Ekati Diamond Mine for the next
operating period is currently under review. This plan foresees
production (on a 100% basis) for the period from April 10, 2013 (the
date of acquisition by the Company of its interest in the Ekati Diamond
Mine) to the calendar 2013 year-end of approximately 1.0 million carats
from the mining of approximately 3.5 million tonnes from mineral
reserve, and the processing of approximately 3.9 million tonnes, with
the additional material being made up of diamond bearing kimberlite
from a satellite body in the Misery open pit that is excavated as part
of the waste stripping as the pit profile is advanced.

PRICING
Based on prices from the Company’s rough diamond sales during April and
the current diamond recovery profile of the Ekati processing plant, the
Company has modeled the current approximate rough diamond price per
carat for each of the Ekati ore types in the table that follows:


                            Sales cycle ended
                                     May 2013

                            average price per
                                        carat
    Ore type                  (in US dollars)

    Koala Phase 5         $               370

    Koala Phase 6                         430

    Koala North                           450

    Fox                                   325

COST OF SALES AND CASH COST OF PRODUCTION
The Company currently expects cost of sales at the Ekati Diamond Mine in
fiscal 2014 to be approximately $405 million (including depreciation
and amortization of approximately $40 million). The cash cost of
production at the Ekati Diamond Mine for fiscal 2014 is expected to be
approximately $320 million at an assumed average Canadian/US dollar
exchange rate of $1.00.

CAPITAL EXPENDITURES
During fiscal 2014, the planned capital expenditures for the Ekati
Diamond Mine are expected to be approximately $85 million at an assumed
average Canadian/US dollar exchange rate of $1.00. During the period
April 10 to April 30, capital expenditures were approximately $8.8
million.

Corporate

The corporate segment captures costs not specifically related to the
operations of the Diavik and Ekati diamond mines.


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                                           Three       Three
                                                                                                                          months      months
                                                                                                                           ended       ended
                                                                                                                           April       April
                           2014        2013        2013        2013        2013        2012        2012        2012          30,         30,

                             Q1          Q4          Q3          Q2          Q1          Q4          Q3          Q2         2013        2012

    Sales            $        -   $       -   $       -   $       -   $       -   $       -   $       -   $       -   $        -   $       -

    Cost of sales             -           -           -           -           -           -           -           -            -           -

    Gross margin              -           -           -           -           -           -           -           -            -           -

    Gross margin
    (%)                      -%          -%          -%          -%          -%          -%          -%          -%           -%          -%

    Selling,
    general and
    administrative
    expenses             15,213       8,227       6,302       4,700       5,767       4,153       4,364       4,820       15,213       5,767

    Operating loss   $ (15,213)   $ (8,227)   $ (6,302)   $ (4,700)   $ (5,767)   $ (4,153)   $ (4,364)   $ (4,820)   $ (15,213)   $ (5,767)

    Depreciation
    and
    amortization
    (i)                     305         304         306         286         296         434         223         289          305         296

    EBITDA (ii)      $ (14,908)   $ (7,923)   $ (5,996)   $ (4,414)   $ (5,471)   $ (3,719)   $ (4,141)   $ (4,531)   $ (14,908)   $ (5,471)

    (i)    Depreciation and amortization included in cost of sales and
           selling, general and administrative expenses.

    (ii)   Earnings before interest, taxes, depreciation and amortization
           ("EBITDA"). See "Non-IFRS Measure" on page 15.

Three Months Ended April 30, 2013 Compared to Three Months Ended April
30, 2012

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the corporate segment increased by $9.5 million from
the comparable quarter of the prior year primarily due to $11.3 million
of transaction costs related to the Ekati Diamond Mine Acquisition.

Discontinued Operations
On March 26, 2013, the Company completed the disposition of the Luxury
Brand Segment to Swatch Group. As a result of the Luxury Brand
Divestiture, the Company’s consolidated results no longer include the
operations of the Luxury Brand Segment and the results of the Luxury
Brand Segment are now treated as discontinued operations for reporting
purposes. Current and prior period results have been restated to
reflect this change.

Liquidity and Capital Resources
Working Capital
As at April 30, 2013, the Company had unrestricted cash and cash
equivalents of $231.2 million and restricted cash of $125.7 million
compared to $104.3 million and $nil at January 31, 2013. The restricted
cash is used to support letters of credit to the Government of Canada
of $126 million in support of the reclamation obligations for the Ekati
Diamond Mine. During the quarter ended April 30, 2013, the Company
reported a use of cash from operations of $9.5 million compared to a
source of cash of $24.9 million in the comparable period of the prior
year.

Working capital increased to $470.4 million at April 30, 2013 from
$361.5 million at January 31, 2013. During the quarter, the Company
increased accounts receivable from continuing operations by $3.2
million, decreased other current assets from continuing operations by
$1.8 million, increased inventory and supplies from continuing
operations by $31.0 million, increased trade and other payables from
continuing operations by $4.7 million and decreased employee benefit
plans from continuing operations by $1.0 million.

The Company’s liquidity requirements fluctuate from quarter to quarter
depending on, among other factors, the seasonality of production at the
Company’s mineral properties, seasonality of mine operating expenses,
capital expenditure programs, the number of rough diamond sales events
conducted during the quarter, and the volume, size and quality
distribution of rough diamonds delivered from the Company’s mineral
properties and sold by the Company in each quarter.

The Company assesses liquidity and capital resources on a consolidated
basis. The Company’s requirements are for cash operating expenses,
working capital, contractual debt requirements and capital
expenditures. The Company believes that it will generate sufficient
liquidity to meet its anticipated requirements for the next twelve
months.

Financing Activities
The Company maintains a senior secured revolving credit facility with
Standard Chartered Bank. At April 30, 2013, $50.0 million was
outstanding. On May 31, 2013, the Company repaid the $50.0 million
outstanding.

In connection with the Ekati Diamond Mine Acquisition, the Company
arranged new secured credit facilities with The Royal Bank of Canada
and Standard Chartered Bank consisting of a $400 million term loan, a
$100 million revolving credit facility and a $140 million letter of
credit facility (expandable to $265 million in aggregate). The Ekati
Diamond Mine Acquisition was completed on April 10, 2013. The Company
ultimately determined to fund the Ekati Diamond Mine Acquisition by way
of cash on hand and did not draw on these new facilities.

As at April 30, 2013, $27.9 million and $nil was outstanding under the
Company’s revolving financing facility relating to its Belgian
subsidiary, Dominion Diamond International NV, and its Indian
subsidiary, Dominion Diamond (India) Private Limited, respectively,
compared to $nil and $1.1 million at January 31, 2013.

Investing Activities
During the fiscal quarter, the Company purchased property, plant and
equipment of $19.7 million for its continuing operations, of which
$10.9 million was purchased for the Diavik Diamond Mine and $8.8
million for the Ekati Diamond Mine.

Contractual Obligations

The Company has contractual payment obligations with respect to
interest-bearing loans and borrowings and, through its participation in
the Diavik Joint Venture and the Ekati Diamond Mine, future site
restoration costs at both the Ekati and Diavik Diamond Mine level.
Additionally, at the Diavik Joint Venture level, contractual
obligations exist with respect to operating purchase obligations, as
administered by DDMI, the operator of the mine. In order to maintain
its 40% ownership interest in the Diavik Diamond Mine, DDDLP is
obligated to fund 40% of the Diavik Joint Venture’s total expenditures
on a monthly basis. Not reflected in the table below are capital
expenditures for the calendar years 2013 to 2017 of approximately
$70 million assuming a Canadian/US average exchange rate of $1.00 for
each of the five years relating to DDDLP’s current projected share of
the planned capital expenditures (excluding the A-21 pipe) at the
Diavik Diamond Mine. Also not reflected are capital expenditures for
Ekati Diamond Mine. The most significant contractual obligations for
the ensuing five-year period can be summarized as follows:


    CONTRACTUAL
    OBLIGATIONS

                                        Less
                                        than       Year      Year     After

    (expressed in
    thousands of
    United States                                                         5
    dollars)               Total      1 year        2-3       4-5     years

    Interest-bearing
    loans and
    borrowings (a)
    (b)                $  84,675   $  79,291   $  2,438   $ 2,438   $   508

    Environmental
    and
    participation
    agreements
    incremental
    commitments (c)      217,450     208,017      4,768         -     4,665

    Operating lease
    obligations (d)       19,234       4,950     10,115     4,169         -

    Total
    contractual
    obligations        $ 321,359   $ 292,258   $ 17,321   $ 6,607   $ 5,173

    (a)   (i) Interest-bearing loans and borrowings presented in the
          foregoing table include current and long-term portions. The
          Company maintains a senior secured revolving credit facility with
          Standard Chartered Bank for $125.0 million. The facility has an
          initial maturity date of June 24, 2013, with two one-year
          extensions at the Company's option. There are no scheduled
          repayments required before maturity. At April 30, 2013, $50.0
          million was outstanding, and was subsequently repaid on May 31,
          2013. In connection with the Ekati Diamond Mine Acquisition, the
          Company arranged new secured credit facilities with The Royal
          Bank of Canada and Standard Chartered Bank consisting of a $400
          million term loan, a $100 million revolving credit facility and a
          $140 million letter of credit facility (expandable to $265
          million in aggregate). The Ekati Diamond Mine Acquisition was
          completed on April 10, 2013. The Company ultimately determined to
          fund the Ekati Diamond Mine Acquisition by way of cash on hand
          and did not draw on these new facilities.

          (ii) The Company has available a $45.0 million revolving
          financing facility (utilization in either US dollars or Euros)
          with Antwerp Diamond Bank for inventory and receivables funding
          in connection with marketing activities through its Belgian
          subsidiary, Dominion Diamond International NV, and its Indian
          subsidiary, Dominion Diamond (India) Private Limited. Borrowings
          under the Belgian facility bear interest at the bank's base rate
          plus 1.5%. Borrowings under the Indian facility bear an interest
          rate of 13.5%. At April 30, 2013, $27.9 million and $nil was
          outstanding under this facility relating to Dominion Diamond
          International NV and Dominion Diamond (India) Private Limited,
          respectively. The facility is guaranteed by Dominion Diamond
          Corporation.

          (iii) The Company's first mortgage on real property has scheduled
          principal payments of approximately $0.2 million quarterly, may
          be prepaid at any time, and matures on September 1, 2018. On
          April 30, 2013, $5.4 million was outstanding on the mortgage
          payable.

    (b)    Interest on loans and borrowings is calculated at various fixed
          and floating rates. Projected interest payments on the current
          debt outstanding were based on interest rates in effect at April
          30, 2013, and have been included under interest-bearing loans and
          borrowings in the table above. Interest payments for the next
          twelve months are approximated to be $0.2 million.

    (c)   Both the Diavik Joint Venture and Ekati Diamond Mine, under
          environmental and other agreements, must provide funding for the
          Environmental Monitoring Advisory Board. These agreements also
          state that the mines must provide security deposits for the
          performance of their reclamation and abandonment obligations
          under all environmental laws and regulations. The operator of the
          Diavik Joint Venture has fulfilled such obligations for the
          security deposits by posting letters of credit, of which DDDLP's
          share as at April 30, 2013 was $82.0 million based on its 40%
          ownership interest in the Diavik Diamond Mine. There can be no
          assurance that the operator will continue its practice of posting
          letters of credit in fulfillment of this obligation, in which
          event DDDLP would be required to post its proportionate share of
          such security directly, which would result in additional
          constraints on liquidity. The requirement to post security for
          the reclamation and abandonment obligations may be reduced to the
          extent of amounts spent by the Diavik Joint Venture on those
          activities. The Company has posted letter of credits of $126
          million with the Government of Canada supported by restricted
          cash in support of the reclamation obligations for the Ekati
          Diamond Mine. Both the Diavik and Ekati Diamond Mines have also
          signed participation agreements with various native groups. These
          agreements are expected to contribute to the social, economic and
          cultural well-being of area Aboriginal bands. The actual cash
          outlay for obligations under these agreements is not anticipated
          to occur until later in the life of the mines.

    (d)   Operating lease obligations represent future minimum annual
          rentals under non-cancellable operating leases at the Ekati
          Diamond Mine.

Non-IFRS Measures
In addition to discussing earnings measures in accordance with IFRS, the
MD&A provides the following non-IFRS measures, which are also used by
management to monitor and evaluate the performance of the Company.

Cash Cost of Production
The MD&A refers to cash cost of production, a non-IFRS performance
measure, in order to provide investors with information about the
measure used by management to monitor performance. This information is
used to assess how well each of the Diavik Diamond Mine and Ekati
Diamond Mine is performing compared to the mine plan and prior periods.
Cash cost of production includes mine site operating costs such as
mining, processing and administration, but is exclusive of
amortization, capital, and exploration and development costs. Cash cost
of production does not have any standardized meaning prescribed by IFRS
and differs from measures determined in accordance with IFRS. This
performance measure is intended to provide additional information and
should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS. This measure is not
necessarily indicative of net profit or cash flow from operations as
determined under IFRS.

EBITDA
The term EBITDA (earnings before interest, taxes, depreciation and
amortization) does not have a standardized meaning according to IFRS
and therefore may not be comparable to similar measures presented by
other issuers. The Company defines EBITDA as sales minus cost of sales
and selling, general and administrative expenses, meaning it represents
operating profit before depreciation and amortization.

EBITDA is a measure commonly reported and widely used by investors and
analysts as an indicator of the Company’s operating performance and
ability to incur and service debt and as a valuation metric. EBITDA
margin is defined as the ratio obtained by dividing EBITDA by sales.

CONSOLIDATED


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                               Three      Three
                                                                                                              months     months
                                                                                                               ended      ended
                                                                                                               April      April
                       2014       2013       2013       2013       2013       2012        2012       2012        30,        30,

                         Q1         Q4         Q3         Q2         Q1         Q4          Q3         Q2       2013       2012

    Operating
    profit
    (loss) from
    continuing
    operations     $ 10,459   $ 20,987   $  5,574   $  8,939   $ 12,171   $ 23,985   $ (3,263)   $ 16,286   $ 10,459   $ 12,171

    Depreciation
    and
    amortization     20,211     24,346     20,588     13,160     22,172     24,284      19,933     17,461     20,211     22,172

    EBITDA from
    continuing
    operations     $ 30,670   $ 45,333   $ 26,162   $ 22,099   $ 34,343   $ 48,269   $  16,670   $ 33,747   $ 30,670   $ 34,343

DIAVIK DIAMOND MINE SEGMENT


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                              Three      Three
                                                                                                             months     months
                                                                                                              ended      ended
                                                                                                              April      April
                       2014       2013       2013       2013       2013       2012       2012       2012        30,        30,

                         Q1         Q4         Q3         Q2         Q1         Q4         Q3         Q2       2013       2012

    Operating
    profit         $ 25,918   $ 29,213   $ 11,876   $ 13,639   $ 17,938   $ 28,141   $  1,101   $ 21,106   $ 25,918   $ 17,938

    Depreciation
    and
    amortization     19,906     24,042     20,283     12,874     21,876     23,849     19,709     17,172     19,906     21,865

    EBITDA         $ 45,824   $ 53,255   $ 32,159   $ 26,513   $ 39,814   $ 51,990   $ 20,810   $ 38,278   $ 45,824   $ 39,803

EKATI DIAMOND MINE SEGMENT


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                               Three      Three
                                                                                              months     months
                                                                                               ended      ended
                                                                                               April      April
                      2014     2013     2013     2013     2013     2012     2012     2012        30,        30,

                        Q1       Q4       Q3       Q2       Q1       Q4       Q3       Q2       2013       2012

    Operating
    profit
    (loss)         $ (246)   $    -   $    -   $    -   $    -   $    -   $    -   $    -   $  (246)   $      -

    Depreciation
    and
    amortization         -        -        -        -        -        -        -        -          -          -

    EBITDA         $ (246)   $    -   $    -   $    -   $    -   $    -   $    -   $    -   $  (246)   $      -

CORPORATE SEGMENT


    (expressed in thousands of United States dollars)
    (unaudited)

                                                                                                                         Three       Three
                                                                                                                        months      months
                                                                                                                         ended       ended
                                                                                                                         April       April
                         2014        2013        2013        2013        2013        2012        2012        2012          30,         30,

                           Q1          Q4          Q3          Q2          Q1          Q4          Q3          Q2         2013        2012

    Operating
    loss           $ (15,213)   $ (8,227)   $ (6,302)   $ (4,700)   $ (5,767)   $ (4,153)   $ (4,364)   $ (4,820)   $ (15,213)   $ (5,767)

    Depreciation
    and
    amortization          305         304         306         286         296         434         223         289          305         296

    EBITDA         $ (14,908)   $ (7,923)   $ (5,996)   $ (4,414)   $ (5,471)   $ (3,719)   $ (4,141)   $ (4,531)   $ (14,908)   $ (5,471)

Risks and Uncertainties
Dominion Diamond Corporation is subject to a number of risks and
uncertainties as a result of its operations. In addition to the other
information contained in this MD&A and the Company’s other publicly
filed disclosure documents, readers should give careful consideration
to the following risks, each of which could have a material adverse
effect on the Company’s business prospects or financial condition.

Nature of Mining
The Company’s mineral operations are subject to risks inherent in the
mining industry, including variations in grade and other geological
differences, unexpected problems associated with required water
retention dikes, water quality, surface and underground conditions,
processing problems, equipment performance, accidents, labour disputes,
risks relating to the physical security of the diamonds, force majeure
risks and natural disasters. Particularly with underground mining
operations, inherent risks include variations in rock structure and
strength as it impacts on mining method selection and performance,
de-watering and water handling requirements, achieving the required
crushed rock-fill strengths, and unexpected local ground conditions.
Hazards, such as unusual or unexpected rock formations, rock bursts,
pressures, collapses, flooding or other conditions, may be encountered
during mining. Such risks could result in personal injury or fatality;
damage to or destruction of mining properties, processing facilities or
equipment; environmental damage; delays, suspensions or permanent
reductions in mining production; monetary losses; and possible legal
liability.

The Company’s mineral properties, because of their remote northern
location and access only by winter road or by air, are subject to
special climate and transportation risks. These risks include the
inability to operate or to operate efficiently during periods of
extreme cold, the unavailability of materials and equipment, and
increased transportation costs due to the late opening and/or early
closure of the winter road. Such factors can add to the cost of mine
development, production and operation and/or impair production and
mining activities, thereby affecting the Company’s profitability.

Nature of Interest in Diavik Diamond Mine
DDDLP holds an undivided 40% interest in the assets, liabilities and
expenses of the Diavik Diamond Mine and the Diavik group of mineral
claims. The Diavik Diamond Mine and the exploration and development of
the Diavik group of mineral claims is a joint arrangement between DDMI
(60%) and DDDLP (40%), and is subject to the risks normally associated
with the conduct of joint ventures and similar joint arrangements.
These risks include the inability to exert influence over strategic
decisions made in respect of the Diavik Diamond Mine and the Diavik
group of mineral claims, including the inability to control the timing
and scope of capital expenditures, and risks that DDMI may change the
mine plan. By virtue of DDMI’s 60% interest in the Diavik Diamond Mine,
it has a controlling vote in virtually all Diavik Joint Venture
management decisions respecting the development and operation of the
Diavik Diamond Mine and the development of the Diavik group of mineral
claims. Accordingly, DDMI is able to determine the timing and scope of
future project capital expenditures, and therefore is able to impose
capital expenditure requirements on DDDLP that the Company may not have
sufficient cash to meet. A failure to meet capital expenditure
requirements imposed by DDMI could result in DDDLP’s interest in the
Diavik Diamond Mine and the Diavik group of mineral claims being
diluted. Rio Tinto plc, the parent of DDMI, announced a review of its
diamond operations in early 2012.

Diamond Prices and Demand for Diamonds
The profitability of the Company is dependent upon the Company’s mineral
properties and the worldwide demand for and price of diamonds. Diamond
prices fluctuate and are affected by numerous factors beyond the
control of the Company, including worldwide economic trends, worldwide
levels of diamond discovery and production, and the level of demand
for, and discretionary spending on, luxury goods such as diamonds. Low
or negative growth in the worldwide economy, renewed or additional
credit market disruptions, natural disasters or the occurrence of
terrorist attacks or similar activities creating disruptions in
economic growth could result in decreased demand for luxury goods such
as diamonds, thereby negatively affecting the price of diamonds.
Similarly, a substantial increase in the worldwide level of diamond
production or the release of stocks held back during recent periods of
low demand could also negatively affect the price of diamonds. In each
case, such developments could have a material adverse effect on the
Company’s results of operations.

Cash Flow and Liquidity
The Company’s liquidity requirements fluctuate from quarter to quarter
and year to year depending on, among other factors, the seasonality of
production at the Company’s mineral properties, the seasonality of mine
operating expenses, exploration expenses, capital expenditure programs,
the number of rough diamond sales events conducted during the quarter,
and the volume, size and quality distribution of rough diamonds
delivered from the Company’s mineral properties and sold by the Company
in each quarter. The Company’s principal working capital needs include
investments in inventory, prepaid expenses and other current assets,
and accounts payable and income taxes payable. There can be no
assurance that the Company will be able to meet each or all of its
liquidity requirements. A failure by the Company to meet its liquidity
requirements could result in the Company failing to meet its planned
development objectives, or in the Company being in default of a
contractual obligation, each of which could have a material adverse
effect on the Company’s business prospects or financial condition.

Economic Environment
The Company’s financial results are tied to the global economic
conditions and their impact on levels of consumer confidence and
consumer spending. The global markets have experienced the impact of a
significant US and international economic downturn since autumn 2008. A
return to a recession or weak recovery, due to recent disruptions in
financial markets in the US, the Eurozone or elsewhere, budget policy
issues in the US and political upheavals in the Middle East, could
cause the Company to experience revenue declines due to deteriorated
consumer confidence and spending, and a decrease in the availability of
credit, which could have a material adverse effect on the Company’s
business prospects or financial condition. The credit facilities
essential to the diamond polishing industry are largely underwritten by
European banks that are currently under stress with the European
sovereign debt issue. The withdrawal or reduction of such facilities
could also have a material adverse effect on the Company’s business
prospects or financial condition. The Company monitors economic
developments in the markets in which it operates and uses this
information in its continuous strategic and operational planning in an
effort to adjust its business in response to changing economic
conditions.

Currency Risk
Currency fluctuations may affect the Company’s financial performance.
Diamonds are sold throughout the world based principally on the
US dollar price, and although the Company reports its financial results
in US dollars, a majority of the costs and expenses of the Company’s
mineral properties are incurred in Canadian dollars. Further, the
Company has a significant deferred income tax liability that has been
incurred and will be payable in Canadian dollars. The Company’s
currency exposure relates to expenses and obligations incurred by it in
Canadian dollars. The appreciation of the Canadian dollar against the
US dollar, therefore, will increase the expenses of the Company’s
mineral properties and the amount of the Company’s Canadian dollar
liabilities relative to the revenue the Company will receive from
diamond sales. From time to time, the Company may use a limited number
of derivative financial instruments to manage its foreign
currency exposure.

Licences and Permits
The Company’s mining operations require licences and permits from the
Canadian and Northwest Territories governments. The Diavik Diamond Mine
Type “A” Water Licence was renewed by the regional Wek’eezhii Land and
Water Board to October 31, 2015. While the Company anticipates that
DDMI, the operator of the Diavik Diamond Mine, will be able to renew
this licence and other necessary permits in the future, there can be no
guarantee that DDMI will be able to do so or obtain or maintain all
other necessary licences and permits that may be required to maintain
the operation of the Diavik Diamond Mine or to further explore and
develop the Diavik property. While the Company anticipates it will be
able to renew the necessary licences and permits for the Ekati Diamond
Mine, there can be no guarantee that it will be able to do so or to
obtain or maintain all other necessary licences and permits that may be
required to maintain the operation of the Ekati Diamond Mine or to
further explore and develop the Ekati property.

Regulatory and Environmental Risks
The operation of the Company’s mineral properties are subject to various
laws and regulations governing the protection of the environment,
exploration, development, production, taxes, labour standards,
occupational health, waste disposal, mine safety and other matters. New
laws and regulations, amendments to existing laws and regulations, or
more stringent implementation or changes in enforcement policies under
existing laws and regulations could have a material adverse effect on
the Company by increasing costs and/or causing a reduction in levels of
production from the Company’s mineral properties.

Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products
occurring as a result of mining operations. To the extent that the
Company’s operations are subject to uninsured environmental
liabilities, the payment of such liabilities could have a material
adverse effect on the Company.

Climate Change
The Canadian government has established a number of policy measures in
response to concerns relating to climate change. While the impact of
these measures cannot be quantified at this time, the likely effect
will be to increase costs for fossil fuels, electricity and
transportation; restrict industrial emission levels; impose added costs
for emissions in excess of permitted levels; and increase costs for
monitoring and reporting. Compliance with these initiatives could have
a material adverse effect on the Company’s results of operations.

Resource and Reserve Estimates
The Company’s figures for mineral resources and ore reserves are
estimates, and no assurance can be given that the anticipated carats
will be recovered. The estimation of reserves is a subjective process.
Forecasts are based on engineering data, projected future rates of
production and the timing of future expenditures, all of which are
subject to numerous uncertainties and various interpretations. The
Company expects that its estimates of reserves will change to reflect
updated information as well as to reflect depletion due to production.
Reserve estimates may be revised upward or downward based on the
results of current and future drilling, testing or production levels,
and on changes in mine design. In addition, market fluctuations in the
price of diamonds or increases in the costs to recover diamonds from
the Company’s mineral properties may render the mining of ore reserves
uneconomical.

Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Due to the uncertainty that may attach to inferred
mineral resources, there is no assurance that mineral resources will be
upgraded to proven and probable ore reserves.

Insurance
The Company’s business is subject to a number of risks and hazards,
including adverse environmental conditions, industrial accidents,
labour disputes, unusual or unexpected geological conditions, risks
relating to the physical security of diamonds held as inventory or in
transit, changes in the regulatory environment, and natural phenomena
such as inclement weather conditions. Such occurrences could result in
damage to the Company’s mineral properties, personal injury or death,
environmental damage to the Company’s mineral properties, delays in
mining, monetary losses and possible legal liability. Although
insurance is maintained to protect against certain risks in connection
with the Company’s mineral properties and the Company’s operations, the
insurance in place will not cover all potential risks. It may not be
possible to maintain insurance to cover insurable risks at economically
feasible premiums.

Fuel Costs
The expected fuel needs for the Company’s mineral properties are
purchased periodically during the year for storage, and transported to
the mine site by way of the winter road. These costs will increase if
transportation by air freight is required due to a shortened “winter
road season” or unexpected high fuel usage.

The cost of the fuel purchased is based on the then prevailing price and
expensed into operating costs on a usage basis. The Company’s mineral
properties currently have no hedges for their future anticipated fuel
consumption.

Reliance on Skilled Employees
Production at the Company’s mineral properties is dependent upon the
efforts of certain skilled employees. The loss of these employees or
the inability to attract and retain additional skilled employees may
adversely affect the level of diamond production.

The Company’s success in marketing rough diamonds is dependent on the
services of key executives and skilled employees, as well as the
continuance of key relationships with certain third parties, such as
diamantaires. The loss of these persons or the Company’s inability to
attract and retain additional skilled employees or to establish and
maintain relationships with required third parties may adversely affect
its business and future operations in marketing diamonds.

Changes in Internal Control over Financial Reporting

Limitation on Scope of Design
Management has limited the scope of design of its disclosure controls
and procedures and internal controls over financial reporting to
exclude controls, policies and procedures of entities acquired as part
of the Ekati Diamond Mine Acquisition.

Since the acquisition was closed 20 days prior to the end of the first
quarter of fiscal 2014, management was unable to adequately test the
internal control systems in place. While management believes that
internal controls were operating effectively, since it was unable to
test these systems, it elected to exclude them from the scope of
certification as allowed by NI 52-109. Management intends performing
such testing by the end of fiscal 2014.

The chart below presents the summary financial information for entities
acquired as part of the Ekati Diamond Mine Acquisition included in the
Company’s unaudited interim condensed consolidated financial
statements:


    As at April 30, 2013             

    Current assets                  357,289

    Long-term assets                848,826

    Current liabilities              67,768

    Long-term liabilities           557,583

Critical Accounting Estimates
Management is often required to make judgments, assumptions and
estimates in the application of IFRS that have a significant impact on
the financial results of the Company. Certain policies are more
significant than others and are, therefore, considered critical
accounting policies. Accounting policies are considered critical if
they rely on a substantial amount of judgment (use of estimates) in
their application, or if they result from a choice between accounting
alternatives and that choice has a material impact on the Company’s
financial performance or financial position.

The critical accounting estimates applied in the preparation of the
Company’s unaudited interim condensed consolidated financial statements
are consistent with those applied and disclosed in the Company’s MD&A
for the year ended January 31, 2013.

Changes in Accounting Policies
The International Accounting Standards Board (“IASB”) has issued a new
standard, IFRS 9, “Financial Instruments” (“IFRS 9″), which will
ultimately replace IAS 39, “Financial Instruments: Recognition and
Measurement” (“IAS 39″). IFRS 9 provides guidance on the classification
and measurement of financial assets and financial liabilities. This
standard becomes effective for the Company’s fiscal year end beginning
February 1, 2015. The Company is currently assessing the impact of the
new standard on its financial statements.

(a) New Accounting Standards

(i) IFRS 10 – CONSOLIDATED FINANCIAL STATEMENTS
IFRS 10, “Consolidated Financial Statements” (“IFRS 10″) replaces the
consolidation requirements in SIC-12, “Consolidation – Special Purpose
Entities” and IAS 27, “Consolidated and Separate Financial Statements”.
The new standard establishes control as the basis for determining which
entities are consolidated in the consolidated financial statements and
provides guidance to assist in the determination of control where it is
difficult to assess. IFRS 10 did not have a material impact on the
Company’s consolidated financial statements upon its adoption on
February 1, 2013.

(ii) IFRS 11 – JOINT ARRANGEMENTS
IFRS 11, “Joint Arrangements” (“IFRS 11″) replaces IAS 31, “Interest in
Joint Ventures”. The new standard applies to the accounting for
interests in joint arrangements where there is joint control. Under
IFRS 11, joint arrangements are classified as either joint ventures or
joint operations. The structure of the joint arrangement will no longer
be the most significant factor in determining whether a joint
arrangement is either a joint venture or a joint operation. For a joint
venture, proportionate consolidation will no longer be allowed and will
be replaced by equity accounting. IFRS 11 did not have a material
impact on the Company’s unaudited interim condensed consolidated
financial statements upon its adoption on February 1, 2013.

(iii) IFRS 13 – FAIR VALUE MEASURMENT
IFRS 13, “Fair Value Measurement” (“IFRS 13″) generally makes IFRS
consistent with generally accepted accounting principles in the United
States (“US GAAP”) on measuring fair value and related fair value
disclosures. The new standard creates a single source of guidance for
fair value measurements. The adoption of IFRS 13 did not have an effect
on the Company’s unaudited interim condensed consolidated financial
statements. The disclosure requirements of IFRS 13 will be incorporated
in the Company’s annual consolidated financial statements for the year
ended January 31, 2014. This will include disclosures about fair values
of financial assets and liabilities measured on a recurring basis and
non-financial assets and liabilities measured on a non-recurring basis.
The Company will also include disclosures about assumptions used in
calculating fair value less cost of disposal for its annual goodwill
impairment test.

(iv) IFRIC 20 – STRIPPING COSTS IN THE PRODUCTION PHASE OF A SURFACE
MINE
The International Financial Reporting Interpretations Committee
(“IFRIC”) issued IFRIC 20, “Stripping Costs in the Production Phase of
a Surface Mine” (“IFRIC 20″), which clarifies the requirements for
accounting for stripping costs associated with waste removal in surface
mining, including when production stripping costs should be recognized
as an asset, how the asset is initially recognized, and subsequent
measurement. IFRIC 20 did not have a material impact on the Company’s
unaudited interim condensed consolidated financial statements upon its
adoption on February 1, 2013.

(v) IAS 19 – EMPLOYEE BENEFITS
Amendments to IAS 19, “Employee Benefits” (“IAS 19″) eliminates the
option to defer the recognition of actuarial gains and losses through
the “corridor” approach, revises the presentation of changes in assets
and liabilities arising from defined benefit plans and enhances the
disclosures for defined benefit plans. IAS 19 is effective for the
Company’s fiscal year end beginning February 1, 2013, with early
adoption permitted. IAS 19 did not have a material impact on the
Company’s unaudited interim condensed consolidated financial statements
upon its adoption on February 1, 2013.

(vi) IAS 1 – PRESENTATION OF FINANCIAL STATEMENTS
Amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1″)
have been adopted by the Company on February 1, 2013, with
retrospective application. The amendments to IAS 1 require the grouping
of items within other comprehensive income that may be reclassified to
profit or loss and those that will not be reclassified. The Company has
amended its consolidated statement of comprehensive income for all
periods presented in these unaudited interim condensed consolidated
financial statements to reflect the presentation changes required under
the amended IAS 1. Since these changes are reclassifications within the
statement of comprehensive income, there is no net impact on the
Company’s comprehensive income.

Outstanding Share Information


    As at MAY 31, 2013                                

    Authorized                               Unlimited

    Issued and outstanding shares           84,990,031

    Options outstanding                      2,036,000

    Fully diluted                           87,026,031

Additional Information
Additional information relating to the Company, including the Company’s
most recently filed Annual Information Form, can be found on SEDAR at www.sedar.com, and is also available on the Company’s website at www.ddcorp.ca.


                            Condensed Consolidated Balance Sheets

           (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                     April 30, 2013       January 31, 2013

    ASSETS                                                                

    Current assets                                                        

       Cash and cash
       equivalents                 $        231,245     $          104,313

       Accounts receivable                    8,044                  3,705

       Inventory and supplies
       (note 5)                             439,786                115,627

       Other current assets                  28,204                 29,486

       Assets held for sale
       (note 6)                                   -                718,804

                                            707,279                971,935

    Property, plant and
    equipment                             1,519,568                727,489

    Restricted cash (note 7)                125,658                      -

    Goodwill                                 42,204                      -

    Other non-current assets                  9,810                  6,937

    Deferred income tax assets                7,112                  4,095

    Total assets                   $      2,411,631     $        1,710,456

    LIABILITIES AND EQUITY                                                

    Current liabilities                                                   

       Trade and other
       payables                    $        114,876     $           39,053

       Employee benefit plans
       (note 9)                               1,672                  2,634

       Income taxes payable                  41,842                 32,977

       Current portion of
       interest-bearing loans
       and borrowings (note
       10)                                   78,526                 51,508

       Liabilities held for
       sale (note 6)                              -                484,252

                                            236,916                610,424

    Interest-bearing loans and
    borrowings (note 10)                      4,538                  4,799

    Deferred income tax
    liabilities                             238,687                181,427

    Employee benefit plans
    (note 9)                                 23,000                  3,499

    Provisions (note 4)                     428,828                 79,055

    Total liabilities                       931,969                879,204

    Equity                                                                

       Share capital                        508,401                508,007

       Contributed surplus                   21,423                 20,387

       Retained earnings                    795,945                295,738

       Accumulated other
       comprehensive income                     893                  6,357

       Total shareholders'
       equity                             1,326,662                830,489

       Non-controlling
       interest                             153,000                    763

    Total equity                          1,479,662                831,252

    Total liabilities and
    equity                         $      2,411,631     $        1,710,456

    Subsequent event (note 10)                           

The accompanying notes are an integral part of these consolidated
financial statements.


                          Condensed Consolidated Income Statements

     (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT
                              PER SHARE AMOUNTS)

                                         Three months         Three months
                                                ended                ended
                                       April 30, 2013       April 30, 2012

    Sales                            $        108,837     $         89,009

    Cost of sales                              81,535               70,099

    Gross margin                               27,302               18,910

    Selling, general and
    administrative expenses                    16,843                6,739

    Operating profit                           10,459               12,171

    Finance expenses                          (3,994)              (2,242)

    Exploration costs                         (1,039)                (254)

    Finance and other income                      804                   52

    Foreign exchange gain (loss)                  732                (370)

    Profit before income taxes                  6,962                9,357

    Income tax expense                          4,699                3,330

    Net profit from continuing
    operations                                  2,263                6,027

    Net profit from discontinued
    operations (note 6)                       497,385                5,583

    Net profit                       $        499,648     $         11,610

    Net profit (loss) from
    continuing operations
    attributable to                                                       

      Shareholders                   $          2,822     $          6,027

      Non-controlling interest                  (559)                    -

    Net profit (loss)
    attributable to                                                       

      Shareholders                   $        500,207               11,610

      Non-controlling interest                  (559)     $              -

    Earnings per share -
    continuing operations                                                 

      Basic                          $           0.03     $           0.07

      Diluted                                    0.03                 0.07

    Earnings per share                                                    

      Basic                                      5.89                 0.14

      Diluted                                    5.82                 0.14

    Weighted average number of
    shares outstanding                     84,890,564           84,874,781

The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.


             Condensed Consolidated Statements of Comprehensive Income

          (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                        Three months         Three months
                                               ended                ended
                                      April 30, 2013       April 30, 2012

    Net profit                      $        499,648     $         11,610

    Other comprehensive income                                           

      Items that may be
      reclassified to profit                                             

        Net gain (loss) on
        translation of net
        foreign operations (net
        of tax of nil)                      (10,735)                  137

      Items that will not be
      reclassified to profit                                             

        Actuarial loss on
        employee benefit plans
        (net of tax of $0.7
        million )                              5,271                    -

    Other comprehensive income,
    net of tax                               (5,464)                  137

    Total comprehensive income      $        494,184     $         11,747

      Comprehensive income from
      continuing operations         $          2,133     $          6,012

      Comprehensive income from
      discontinued operations                492,051                5,735

    Comprehensive income (loss)
    attributable to                                                      

      Shareholders                  $        494,743     $         11,747

      Non-controlling interest                 (559)                    -

The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.


               Condensed Consolidated Statements of Changes in Equity

          (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                        Three months         Three months
                                               ended                ended
                                      April 30, 2013       April 30, 2012

    Common shares:                                                       

    Balance at beginning of
    period                          $        508,007     $        507,975

    Issued during the period                     394                    -

    Balance at end of period                 508,401              507,975

    Contributed surplus:                                                 

    Balance at beginning of
    period                                    20,387               17,764

    Stock-based compensation
    expense                                    1,036                  406

    Balance at end of period                  21,423               18,170

    Retained earnings:                                                   

    Balance at beginning of
    period                                   295,738              261,028

    Net profit attributable to
    common shareholders                      500,207               11,610

    Balance at end of period                 795,945              272,638

    Accumulated other
    comprehensive income:                                                

    Balance at beginning of
    period                                     6,357               10,086

    Other comprehensive income                                           

      Items that may be
      reclassified to profit                                             

        Net gain (loss) on
        translation of net
        foreign operations (net
        of tax of nil)                      (10,735)                  137

      Items that will not be
      reclassified to profit                                             

        Actuarial loss on
        employee benefit plans
        (net of tax of $0.7
        million )                              5,271                    -

    Balance at end of period                     893               10,223

    Non-controlling interest:                                            

    Balance at beginning of
    period                                       763                  255

    Non-controlling interest                 152,237                    -

    Balance at end of period                 153,000                  255

    Total equity                    $      1,479,662     $        809,261

The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.


                      Condensed Consolidated Statements of Cash Flows

           (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                          Three months         Three months
                                                 ended                ended
                                        April 30, 2013       April 30, 2012

    Cash provided by (used
    in)                                                                    

    OPERATING                                                              

    Net profit                   $             499,648     $          6,027

      Depreciation and
      amortization                              20,211               22,169

      Deferred income tax
      recovery                                 (8,740)              (2,568)

      Current income tax
      expense                                   13,439                5,898

      Finance expenses                           3,994                2,242

      Stock-based
      compensation                               1,036                  406

      Other non-cash items                       (859)                    -

      Foreign exchange
      (gain) loss                              (1,037)                  843

      Loss (gain) on
      disposition of assets                        362                (330)

      Net loss on
      discontinued
      operations                                   257                    -

      Gain on sale of luxury
      brand segment                          (497,642)                    -

    Change in non-cash
    operating working
    capital, excluding taxes
    and finance expenses                      (28,671)              (8,606)

    Cash provided by (used
    in) operating activities                     1,998               26,081

      Interest paid                            (1,212)              (1,258)

      Income and mining
      taxes paid                              (10,249)              (6,874)

    Cash provided by (used
    in) operating activities
    - continuing operations                    (9,463)               17,949

    Cash provided by (used
    in) operating activities
    - discontinued
    operations                                       -                6,996

    Net cash from (used in)
    operating activities                       (9,463)               24,945

    FINANCING                                                              

    Decrease in
    interest-bearing loans
    and borrowings                               (196)                (185)

    Increase in revolving
    credit                                      27,863               27,542

    Decrease in revolving
    credit                                     (1,128)                (495)

    Issue of common shares,
    net of issue costs                             394                    -

    Cash provided from
    financing activities -
    continuing operations                       26,933               26,862

    Cash provided from
    financing activities -
    discontinued operations                          -                1,861

    Cash provided from
    financing activities                        26,933               28,723

    INVESTING                                                              

    Acquisition of Ekati                     (553,142)                    -

    Cash proceeds from sale
    of luxury brand                            746,738                    -

    Property, plant and
    equipment - Diavik                        (10,938)             (18,149)

    Property, plant and
    equipment - Ekati                          (8,780)                    -

    Net proceeds from sale
    of property, plant and
    equipment                                    1,796                2,619

    Other non-current assets                   (3,125)                   87

    Cash provided in
    investing activities -
    continuing operations                      172,549             (15,443)

    Cash provided in
    investing activities -
    discontinued operations                          -              (4,976)

    Cash used in investing
    activities                                 172,549             (20,419)

    Foreign exchange effect
    on cash balances                               354                1,453

    Increase in cash and
    cash equivalents                           190,373               34,702

    Cash and cash
    equivalents, beginning
    of period - Ekati                           62,217                    -

    Cash and cash
    equivalents, beginning
    of period - Diavik                         104,313               78,116

    Cash and equivalents,
    end of period                              356,903              112,818

    Less cash and
    equivalents of
    discontinued operations,
    end of period                                    -               24,579

    Cash and cash
    equivalents of
    continuing operations,
    end of period                $             356,903     $         88,239

    Change in non-cash
    operating working
    capital, excluding taxes
    and finance expenses                                                   

    Accounts receivable                        (3,182)                1,285

    Inventory and supplies                    (31,011)             (23,291)

    Other current assets                         1,780                1,261

    Trade and other payables                     4,735               10,746

    Employee benefit plans                       (993)                1,393

                                 $            (28,671)     $        (8,606)

The accompanying notes are an integral part of these consolidated
financial statements.

Notes to Condensed Consolidated Financial Statements

APRIL 30, 2013 WITH COMPARATIVE FIGURES
(TABULAR AMOUNTS IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT AS
OTHERWISE NOTED)

Note 1:
Nature of Operations

Effective March 26, 2013, Harry Winston Diamond Corporation changed its
name to Dominion Diamond Corporation (“Dominion Diamond Corporation” or
the “Company”) and its common shares trade on both the Toronto and New
York stock exchanges under the symbol “DDC”. Dominion Diamond
Corporation is focused on the mining and marketing of rough diamonds to
the global market.

The Company is incorporated and domiciled in Canada and its shares are
publicly traded on the Toronto Stock Exchange and the New York Stock
Exchange. The address of its registered office is Toronto, Ontario.

The Company has ownership interests in the Diavik and the Ekati group of
mineral claims. The Diavik Joint Venture (the “Diavik Joint Venture”)
is an unincorporated joint arrangement between Diavik Diamond Mines
Inc. (“DDMI”) (60%) and Dominion Diamond Diavik Limited Partnership
(“DDDLP”) (40%) where DDDLP holds an undivided 40% ownership interest
in the assets, liabilities and expenses of the Diavik Diamond Mine.
DDMI is the operator of the Diavik Diamond Mine. DDMI and DDDLP are
headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary
of Rio Tinto plc of London, England, and DDDLP is a wholly owned
subsidiary of Dominion Diamond Corporation of Toronto, Canada. The
Company records its interest in the assets, liabilities and expenses of
the Diavik Joint Venture in its unaudited interim condensed
consolidated financial statements with a one-month lag. The accounting
policies described below include those of the Diavik Joint Venture.

On April 10, 2013, the Company completed the $553.1 million acquisition
from BHP Billiton Canada Inc. and its various affiliates of all of BHP
Billiton’s diamond assets, including its controlling interest in the
Ekati Diamond Mine as well as the associated diamond sorting and sales
facilities in Yellowknife, Canada, and Antwerp, Belgium (the “Ekati
Diamond Mine Acquisition”). The Ekati Diamond Mine consists of the Core
Zone, which includes the current operating mine and other permitted
kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting
kimberlite pipes having both development and exploration potential. As
a result of the completion of the Ekati Diamond Mine Acquisition on
April 10, 2013, the Company acquired an 80% interest in the Core Zone
and a 58.8% interest in the Buffer Zone. In connection with the Ekati
Diamond Mine Acquisition, the Company arranged new secured credit
facilities consisting of a $400 million term loan, a $100 million
revolving credit facility and a $140 million letter of credit facility
(expandable to $265 million in aggregate). The Company ultimately
determined to fund the Ekati mine acquisition by way of cash on hand
and did not draw on these new facilities. The Company controls and
consolidates the Ekati Diamond Mine and minority shareholders are
presented as non-controlling interests on the condensed consolidated
balance sheet.

On March 26, 2013, the Company completed the sale of the Luxury Brand
Segment to Swatch Group (the “Luxury Brand Divestiture”). As a result
of the sale, the current and prior period results of the Luxury Brand
Segment have been presented as discontinued operations.

Note 2:
Basis of Preparation

(a) Statement of compliance

These unaudited interim condensed consolidated financial statements
(“interim financial statements”) have been prepared in accordance with
IAS 34 “Interim Financial Reporting” (“IAS 34″). The accounting
policies applied in these unaudited interim financial statements are
consistent with those used in the annual audited consolidated financial
statements for the year ended January 31, 2013, except as disclosed in
Note 3.

These unaudited interim condensed financial statements do not include
all disclosures required by International Financial Reporting Standards
(“IFRS”) for annual audited consolidated financial statements and
accordingly should be read in conjunction with the Company’s annual
audited consolidated financial statements for the year ended January
31, 2013 prepared in accordance with IFRS as issued by the
International Accounting Standards Board (“IASB”).

(b) Currency of presentation

These unaudited interim condensed consolidated financial statements are
expressed in United States dollars, which is the functional currency of
the Company. All financial information presented in United States
dollars has been rounded to the nearest thousand.

(c) Use of estimates, judgments and assumptions

The preparation of the unaudited interim condensed consolidated
financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and liabilities
and contingent liabilities at the date of the unaudited interim
condensed consolidated financial statements, and the reported amounts
of sales and expenses during the reporting period. Estimates and
assumptions are continually evaluated and are based on management’s
experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. However,
actual outcomes can differ from these estimates.

Note 3:
Significant Accounting Policies

These unaudited interim condensed consolidated financial statements have
been prepared following the same accounting policies and methods of
computation as the annual audited consolidated financial statements
for the year ended January 31, 2013, except for the following
accounting standards that apply as a result of the Ekati Diamond Mine
Acquisition and new accounting standards and amendment to standards and
interpretations, which were effective February 1, 2013, and applied in
preparing these unaudited interim condensed consolidated financial
statements. The Company evaluated the impact to its unaudited interim
condensed consolidated financial statements as a result of the new
standards. These are summarized as follows:

(a) Accounting Standards Applied on Ekati Diamond Mine Acquisition

(i) STRIPPING COSTS

Mining costs associated with stripping activities in an open pit mine
are expensed unless the stripping activity can be shown to represent a
betterment to the mineral property, in which case the stripping costs
would be capitalized and included in mining assets. Capitalized
stripping costs are charged against earnings on a unit-of-production
basis over the life of the mineral reserves.

(ii) EMPLOYEE BENEFIT PLANS

The Company operates defined benefit pension plans, which require
contributions to be made to separately administered funds. The cost of
providing benefits under the defined benefit plans is determined
separately using the projected unit credit valuation method by
qualified actuaries. Actuarial gains and losses are recognized
immediately in other comprehensive income.

The defined benefit asset or liability comprises the present value of
the defined benefit obligation, less the fair value of plan assets out
of which the obligations are to be settled directly. The value of any
asset is restricted to the present value of any economic benefits
available in the form of refunds from the plan or reductions in future
contributions to the plan.

(b) New Accounting Standards

(i) IFRS 10 – CONSOLIDATED FINANCIAL STATEMENTS

IFRS 10, “Consolidated Financial Statements” (“IFRS 10″) replaces the
consolidation requirements in SIC-12, “Consolidation – Special Purpose
Entities” and IAS 27, “Consolidated and Separate Financial Statements”.
The new standard establishes control as the basis for determining which
entities are consolidated in the consolidated financial statements and
provides guidance to assist in the determination of control where it is
difficult to assess. IFRS 10 did not have a material impact on the
Company’s unaudited interim condensed consolidated financial statements
upon its adoption on February 1, 2013.

(ii) IFRS 11 – JOINT ARRANGEMENTS

IFRS 11, “Joint Arrangements” (“IFRS 11″) replaces IAS 31, “Interest in
Joint Ventures”. The new standard applies to the accounting for
interests in joint arrangements where there is joint control. Under
IFRS 11, joint arrangements are classified as either joint ventures or
joint operations. The structure of the joint arrangement will no longer
be the most significant factor in determining whether a joint
arrangement is either a joint venture or a joint operation. For a joint
venture, proportionate consolidation will no longer be allowed and will
be replaced by equity accounting. IFRS 11 did not have a material
impact on the Company’s unaudited interim condensed consolidated
financial statements upon its adoption on February 1, 2013.

(iii) IFRS 13 – FAIR VALUE MEASURMENT

IFRS 13, “Fair Value Measurement” (“IFRS 13″) generally makes IFRS
consistent with generally accepted accounting principles in the United
States (“US GAAP”) on measuring fair value and related fair value
disclosures. The new standard creates a single source of guidance for
fair value measurements. The adoption of IFRS 13 did not have an effect
on the Company’s unaudited interim condensed consolidated financial
statements. The disclosure requirements of IFRS 13 will be incorporated
in the Company’s annual consolidated financial statements for the year
ended January 31, 2014. This will include disclosures about fair values
of financial assets and liabilities measured on a recurring basis and
non-financial assets and liabilities measured on a non-recurring basis.
The Company will also include disclosures about assumptions used in
calculating fair value less cost of disposal for its annual goodwill
impairment test.

(iv) IFRIC 20 – STRIPPING COSTS IN THE PRODUCTION PHASE OF A SURFACE
MINE

The International Financial Reporting Interpretations Committee
(“IFRIC”) issued IFRIC 20, “Stripping Costs in the Production Phase of
a Surface Mine” (“IFRIC 20″), which clarifies the requirements for
accounting for stripping costs associated with waste removal in surface
mining, including when production stripping costs should be recognized
as an asset, how the asset is initially recognized, and subsequent
measurement. IFRIC 20 did not have a material impact on the Company’s
unaudited interim condensed consolidated financial statements upon its
adoption on February 1, 2013.

(v) IAS 19 – EMPLOYEE BENEFITS

Amendments to IAS 19, “Employee Benefits” (“IAS 19″) eliminates the
option to defer the recognition of actuarial gains and losses through
the “corridor” approach, revises the presentation of changes in assets
and liabilities arising from defined benefit plans and enhances the
disclosures for defined benefit plans. IAS 19 is effective for the
Company’s fiscal year end beginning February 1, 2013, with early
adoption permitted. IAS 19 did not have a material impact on the
Company’s unaudited interim condensed consolidated financial statements
upon its adoption on February 1, 2013.

(vi) IAS 1 – PRESENTATION OF FINANCIAL STATEMENTS

Amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1″)
have been adopted by the Company on February 1, 2013, with
retrospective application. The amendments to IAS 1 require the grouping
of items within other comprehensive income that may be reclassified to
profit or loss and those that will not be reclassified. The Company has
amended its consolidated statement of comprehensive income for all
periods presented in these unaudited interim condensed consolidated
financial statements to reflect the presentation changes required under
the amended IAS 1. Since these changes are reclassifications within the
statement of comprehensive income, there is no net impact on the
Company’s comprehensive income.

Note 4:
Acquisition

On April 10, 2013, the Company completed the $553.1 million acquisition
from BHP Billiton Canada Inc. and its various affiliates of all of BHP
Billiton’s diamond assets, including its controlling interest in the
Ekati Diamond Mine as well as the associated diamond sorting and sales
facilities in Yellowknife, Canada, and Antwerp, Belgium.

Acquisitions are accounted for under the acquisition method of
accounting, and the results of operations since the respective dates of
acquisition are included in the statement of comprehensive income.
From time to time, as a result of the timing of acquisitions in
relation to the Company’s reporting schedules and the availability of
information, certain information relating to the purchase allocations
and valuations may not be finalized at the time of reporting. Purchase
price allocations are completed after the vendor’s final financial
statements and income tax returns have been prepared and accepted by
the Company within one year of acquisition. Such preliminary purchase
price allocations are based on management’s best estimates of the fair
value of the acquired asset and liabilities. Upon finalization,
adjustments to the initial estimates may be required. The preliminary
allocation of the purchase price to the fair values of assets acquired
and liabilities assumed is set forth below. The final purchase price
allocation is expected to be finalized in the next fiscal quarter.


    Consideration                                        $   553,142

    Cash and cash equivalents                            $    62,217

    Accounts receivable and other current assets               7,465

    Inventory and supplies                                   300,248

    Property, plant and equipment                            800,741

    Trade and other payables                                (70,618)

    Income taxes payable                                     (6,085)

    Provisions, future site restoration costs              (348,230)

    Deferred income tax liabilities                         (62,985)

    Other long-term liabilities                             (19,017)

    Non-controlling interest                               (152,798)

    Total net identifiable assets acquired                   510,938

    Goodwill                                                  42,204

                                                         $   553,142

From the closing date of the business combination, revenues of $19.9
million and a net loss of $0.1 million were generated by Ekati’s
operations. The Company has incurred total transaction costs of $14.5
million related to the Ekati Diamond Mine Acquisition, of which $11.3
million has been expensed during the current quarter, with the balance
of $3.2 million expensed in fiscal 2013.

Provisions
Future site restoration costs


    At April 10, 2013 (date of acquisition)         $ 348,230

    Accretion of provision                              1,757

    At April 30, 2013                               $ 349,987

The undiscounted estimated expenditures required to settle the
obligation totals approximately $435 million through 2048 at an assumed
average Canadian/US dollar exchange rate of $1.00. The expenditures are
discounted using a credit-adjusted risk-free rate of 3.5%. The Company
is required to provide financial guarantees to regulatory authorities
as security for future site closure and reclamation costs for the Ekati
Diamond Mine’s operations and for various permits and licenses. As at
April 30, 2013, the Company provided $126 million in letters of credit
as security with various regulatory authorities.

Note 5:
Inventory and Supplies


                                         April 30,       January 31,
                                              2013              2013

    Rough diamonds                     $   202,111     $      45,467

    Supplies inventory                     237,675            70,160

    Total inventory and supplies       $   439,786     $     115,627

Total inventory and supplies is net of a provision for obsolescence of
$0.1 million ($0.4 million at January 31, 2013).

Note 6:
Assets Held for Sale (Discontinued Operations)

On March 26, 2013, the Company completed the sale of the Luxury Brand
Segment to Swatch Group (the “Luxury Brand Divestiture”). As a result
of the sale, the Company’s corporate group underwent name changes to
remove references to “Harry Winston”. The Company’s name was changed
to “Dominion Diamond Corporation” and its common shares trade on both
the Toronto and New York stock exchanges under the symbol “DDC”.

The major classes of assets and liabilities of the discontinued
operations were as follows at the date of disposal:


                                                             March 26,
                                                                  2013

    Cash and cash equivalents                            $    25,914

    Accounts receivable and other current assets              61,080

    Inventory and supplies                                   403,157

    Property, plant and equipment                             76,700

    Intangible assets, net                                   126,779

    Other non-current assets                                   7,478

    Deferred income tax assets                                54,017

    Trade and other payables                                (96,246)

    Income taxes payable                                     (2,465)

    Interest-bearing loans and borrowings                  (292,709)

    Deferred income tax liabilities                        (106,137)

    Other long-term liabilities                              (8,472)

    Net assets                                           $   249,096

    Consideration received, satisfied in cash            $   746,738

    Cash and cash equivalents disposed of                   (25,914)

    Net cash inflow                                      $   720,824

Results of the discontinued operations are presented separately as net
profit from discontinued operations in the unaudited interim condensed
consolidated income statements, and comparative periods have been
adjusted accordingly.


                                                              Three months
                                         Period ended                ended
                                       March 26, 2013       April 30, 2012

    Sales                            $         63,799     $        103,452

    Cost of sales                            (31,355)             (49,035)

    Other expenses                           (30,964)             (49,568)

    Other income and foreign
    exchange gain (loss)                      (1,551)                   19

    Net income tax (expense)
    recovery                                    (186)                  715

    Net profit (loss) from
    discontinued operations
    before gain                      $          (257)     $          5,583

    Gain on sale                              497,642                    -

    Net profit from discontinued
    operations                                497,385                5,583

    Earnings per share -
    discontinued operations                                               

      Basic                          $           5.86     $           0.07

      Diluted                                    5.79                 0.07

Note 7:
Restricted Cash

The Company provides letters of credit to the Government of Canada of
$126 million in support of the reclamation obligations for the Ekati
Diamond Mine.

Note 8:
Diavik Joint Venture

The following represents DDDLP’s 40% proportionate interest in the
Diavik Joint Venture as at March 31, 2013 and December 31, 2012:


                                      April 30, 2013       January 31, 2013

    Current assets                  $        115,328     $          102,299

    Non-current assets                       664,296                677,808

    Current liabilities                       39,184                 30,517

    Non-current liabilities and              740,440                749,590
    participant's account


                                         Three months         Three months
                                                ended                ended
                                       April 30, 2013       April 30, 2012

    Expenses net of interest         $         66,647     $         56,738
    income (a) (b)

    Cash flows used in operating             (44,828)             (42,353)
    activities

    Cash flows resulting from                  53,159               61,532
    financing activities

    Cash flows used in investing             (10,711)             (15,183)
    activities

((a)) The Joint Venture only earns interest income.
((b)) Expenses net of interest income for the three months ended April 30,
2013 of $nil (three months ended April 30, 2012 of $0.1 million).

DDDLP is contingently liable for DDMI’s portion of the liabilities of
the Diavik Joint Venture, and to the extent DDDLP’s participating
interest has increased because of the failure of DDMI to make a cash
contribution when required, DDDLP would have access to an increased
portion of the assets of the Diavik Joint Venture to settle these
liabilities. Additional information on commitments and contingencies
related to the Diavik Joint Venture is found in Note 12.

Note 9:
Employee Benefit Plans

The employee benefit obligation reflected in the unaudited interim
condensed consolidated balance sheet is as follows:


                                  April 30, 2013         January 31, 2013  

    Post-retirement             $            724      $               699
    benefit plan - Diavik
    Diamond Mine (c)

    Defined benefit plan                  19,493                        -
    obligation - Ekati
    Diamond Mine (a)

    Defined contribution                     200                        -
    plan obligation -
    Ekati Diamond Mine (b)

    Defined contribution
    plan obligation - the                     77                          -
    Company's head office
    (b)

    RSU and DSU plans (d)                  4,178                    5,434  

    Total employee benefit      $         24,672      $             6,133
    plan obligation

                                  April 30, 2013         January 31, 2013  

    Non-current                 $         23,000     $              3,499  

    Current                                1,672                    2,634  

    Total employee benefit      $         24,672     $              6,133
    plan obligation

(a) Defined benefit pension plan

Dominion Diamond Ekati Corporation sponsors a non-contributory defined
benefit registered pension plan covering employees in Canada who were
employed by BHP Billiton Canada Inc. and employed in its diamond
business prior to 2004. As a result of the Ekati Diamond Mine
Acquisition, the plan was assigned to Dominion Diamond Ekati
Corporation and renamed the Dominion Diamond Ekati Corporation Defined
Benefit Pension Plan. Pension benefits are based on the length of
service and highest average covered earnings. Any benefits in excess
of the maximum pension limit for registered pension plans under the
Income Tax Act accrue for the employee, via an unfunded supplementary
retirement plan. New employees could not become members of this
defined benefit pension arrangement after 2004.

(i) NET BENEFIT OBLIGATION:


                                           April 30, 2013

    Accrued benefit obligation           $         89,204

    Plan assets                                    69,711

    Funded status - plan deficit         $       (19,493)

(ii) PLAN ASSETS

Canadian plan assets represented approximately 95% of total plan assets
at April 30, 2013.

The asset allocation of pension assets at April 30 was as follows:


                                    April 30, 2013

    ASSET CATEGORY                                

    Cash equivalents                            5%

    Equity securities                          10%

    Fixed income securities                    85%

    Total                                     100%

(iii) THE SIGNIFICANT ASSUMPTIONS USED FOR THE PLAN ARE AS FOLLOWS:


                                                             April 30, 2013

    ACCRUED BENEFIT OBLIGATION                                             

    Discount rate                                                     4.00%

    Expected long-term rate of return                                 4.00%

    BENEFIT COSTS FOR THE YEAR                                             

    Discount rate                                                     4.10%

    Expected long-term rate of return on plan assets                  3.85%

    Rate of compensation increase                                     4.00%

(b) Defined contribution plan
The Diavik Joint Venture sponsors a defined contribution plan whereby
the employer contributes 6% of the employee’s salary.

Dominion Diamond Corporation sponsors a defined contribution plan for
Canadian employees whereby the employer contributes to a maximum of 6%
of the employee’s salary to the maximum contribution limit under
Canada’s Income Tax Act. The total defined contribution plan liability at April 30, 2013 was $0.1
million ($nil at January 31, 2013).

Dominion Diamond Ekati Corporation sponsors a defined contribution
arrangement for its employees who are not members of the defined
benefit pension plan referred to in 9(a) above. The employer
contributes 8% of earnings up to 2.5 times the Year’s Maximum
Pensionable Earnings (as defined under the Canada Pension Plan), and
12% of earnings above 2.5 times YMPE. The employer also matches
additional contributions made by an employee up to 3% of earnings.
Employer contributions in excess of the maximum contribution limit for
defined contribution plans under Canada’s Income Tax Act are credited by the employer to a notional (unfunded) supplementary
retirement plan. The defined contribution plan liability at April 30,
2013 was $0.2 million. (Supplemental plan liability has been included
in the accrued benefit obligation disclosed in 9(a) above.)

(c) Post-retirement benefit plan
The Diavik Joint Venture provides non-pension post-retirement benefits
to retired employees. The post-retirement benefit plan liability was
$0.7 million at April 30, 2013 ($0.7 million at January 31, 2013).

(d) RSU and DSU plans
Grants under the RSU Plan are on a discretionary basis to employees of
the Company and its subsidiaries subject to Board of Directors
approval. The RSUs granted vest one-third on March 31 and one-third on
each anniversary thereafter. The vesting of grants of RSUs is subject
to special rules for a change in control, death and disability. The
Company shall pay out cash on the respective vesting dates of RSUs and
redemption dates of DSUs.

Only non-executive directors of the Company are eligible for grants
under the DSU Plan. Each DSU grant vests immediately on the grant date.

The expenses related to the RSUs and DSUs are accrued based on fair
value. This expense is recognized on a straight-line basis over each
vesting period.

Note 10:
Interest-Bearing Loans and Borrowings


                                                                          April    January
                                                                            30,        31,
                                                                           2013       2013

    Credit facilities                                                $   49,836 $   49,560

    First mortgage on real property                                       5,365      5,619

    Bank advances                                                        27,863      1,128

    Total interest-bearing loans and borrowings                          83,064     56,307

    Less current portion                                               (78,526)   (51,508)

                                                                     $    4,538 $    4,799

                         Nominal                             Face
                        interest                            value
                            rate               Carrying        at
                                                 amount     April
                                     Date of   at April       30,
             Currency               maturity   30, 2013      2013                 Borrower

    Secured        US      3.70%    June 24,      $49.8     $50.0         Dominion Diamond
    bank                                2013    million   million          Corporation and
    loan

                                                                          Dominion Diamond
                                                                             Holdings Ltd.

    First         CDN      7.98%   September       $5.4      $5.4      6019838 Canada Inc.
    mortgage                         1, 2018    million   million
    on real
    property

    Secured        US       4.8%      Due on      $27.9     $27.9         Dominion Diamond
    bank                              demand    million   million         International NV
    advance

On May 31, 2013, the Company repaid the $50.0 million outstanding on its
secured bank loan.

Note 11:
Related Party Disclosure

(a) Operational information

The Company had the following investments in significant subsidiaries at
April 30, 2013:


    Name of company             Effective interest        Country of
                                                       incorporation

    Dominion Diamond                          100%            Canada
    Holdings Ltd.

    Dominion Diamond Diavik                   100%            Canada
    Limited Partnership

    Dominion Diamond                          100%             India
    (India) Private Limited

    Dominion Diamond                          100%           Belgium
    International NV

    Dominion Diamond                          100%            Canada
    Technical Services Inc.

    6019838 Canada Inc.                       100%            Canada

    Dominion Diamond Ekati                    100%            Canada
    Corporation

    Dominion Diamond                          100%            Canada
    Resources Corporation

    Dominion Diamond                          100%           Belgium
    Marketing NV

Note 12:
Commitments and Guarantees

(a) Environmental agreements

Through negotiations of environmental and other agreements, both the
Diavik Joint Venture and Ekati Diamond Mine must provide funding for
the Environmental Monitoring Advisory Board, and the Independent
Environmental Monitoring Agency, respectively. Further funding will be
required in future years; however, specific amounts have not yet been
determined. These agreements also state that the mines must provide
security deposits for the performance of their reclamation and
abandonment obligations under all environmental laws and regulations.
DDDLP’s share of the letters of credit outstanding posted by the
operator of the Diavik Joint Venture with respect to the environmental
agreements as at April 30, 2013, was $81.2 million. The agreement
specifically provides that these funding requirements will be reduced
by amounts incurred by the Diavik Joint Venture on reclamation and
abandonment activities. The Company has posted letters of credit of
$126 million with the Government of Canada supported by restricted cash
in support of the reclamation obligations for the Ekati Diamond Mine.

(b) Participation agreements

Both the Diavik Joint Venture and Ekati Diamond Mine have signed
participation agreements with various native groups. These agreements
are expected to contribute to the social, economic and cultural
well-being of the Aboriginal bands. The Diavik participation agreements
are each for an initial term of twelve years and shall be automatically
renewed on terms to be agreed upon for successive periods of six years
thereafter until termination. The Diavik participation agreements
terminate in the event that the Diavik Diamond Mine permanently ceases
to operate. Dominion Diamond Corporation’s share of the Diavik Joint
Venture’s participation agreements as at April 30, 2013 was $1.2
million. The Ekati participation agreements are in place during the
life of the Ekati Diamond Mine and the agreements terminate in the
event of the mine ceases to operate.

(c) Operating lease commitments

The Company has entered into non-cancellable operating leases for the
rental of fuel tanks and office premises for the Ekati Diamond Mine,
which expire at various dates through 2016. The leases have varying
terms, escalation clauses and renewal rights. Any renewal terms are at
the option of the lessee at lease payments based on market prices at
the time of renewal. Minimum rent payments under operating leases are
recognized on a straight-line basis over the term of the lease,
including any periods of free rent. Future minimum lease payments under
non-cancellable operating leases as at April 30, 2013 are as follows:


    Within one year                                     $     4,950

    After one year but not more than five years              10,115

    More than five years                                      4,169

                                                         $   19,234

Note 13:
Capital Management

The Company’s capital includes cash and cash equivalents, current and
non-current interest-bearing loans and borrowings and equity, which
includes issued common shares, contributed surplus and retained
earnings.

The Company’s primary objective with respect to its capital management
is to ensure that it has sufficient cash resources to maintain its
ongoing operations, to provide returns to shareholders and benefits for
other stakeholders, and to pursue growth opportunities. To meet these
needs, the Company may from time to time raise additional funds through
borrowing and/or the issuance of equity or debt or by securing
strategic partners, upon approval by the Board of Directors. The Board
of Directors reviews and approves any material transactions out of the
ordinary course of business, including proposals on acquisitions or
other major investments or divestitures, as well as annual capital and
operating budgets.

The Company assesses liquidity and capital resources on a consolidated
basis. The Company’s requirements are for cash operating expenses,
working capital, contractual debt requirements and capital
expenditures. The Company believes that it will generate sufficient
liquidity to meet its anticipated requirements for the next twelve
months.

Note 14:
Segmented Information

The Company operates in three segments within the diamond industry -
Diavik Diamond Mine, the Ekati Diamond Mine and Corporate – for the
three months ended April 30, 2013.

The Diavik segment consists of the Company’s 40% ownership interest in
the Diavik group of mineral claims and the sale of rough diamonds. The
Ekati segment consists of the Company’s ownership interest in the Ekati
group of mineral claims and the sale of rough diamonds. The Corporate
segment captures all costs not specifically related to the operations
of the Diavik and Ekati mines.


    For the three
    months ended
    April 30, 2013             Diavik           Ekati       Corporate           Total

    Sales                                                                            

      North America       $     6,179     $         -     $         -     $     6,179

      Europe                   61,642          19,921               -          81,563

      India                    21,095               -               -          21,095

      Total sales              88,916          19,921               -         108,837

    Cost of sales                                                                    

      Depreciation
      and
      amortization             19,542               -               -          19,542

      All other costs          42,346          19,647               -          61,993

      Total cost of
      sales                    61,888          19,647               -          81,535

    Gross margin               27,028             274               -          27,302

    Gross margin (%)            30.4%            1.4%              -%           25.1%

    Selling, general
    and
    administrative
    expenses                                                                         

      Selling and
      related
      expenses                  1,110             520               -           1,630

      Administrative
      expenses                      -               -          15,213          15,213

      Total selling,
      general and
      administrative
      expenses                  1,110             520          15,213          16,843

    Operating profit
    (loss)                     25,918           (246)        (15,213)          10,459

    Finance expenses          (2,019)         (1,975)               -         (3,994)

    Exploration costs         (1,039)               -               -         (1,039)

    Finance and other
    income                        540             264               -             804

    Foreign exchange
    gain (loss)                 1,560           (828)               -             732

    Segmented profit      $               $               $               $
    (loss) before
    income taxes               24,960         (2,785)        (15,213)           6,962

    Segmented assets
    as at April 30,
    2013                                                                             

      Canada              $ 1,177,853     $ 1,203,112     $         -     $ 2,380,965

      Other foreign
      countries                27,663           3,003               -          30,666

                          $ 1,205,516     $ 1,206,115     $         -     $ 2,411,631

    Capital               $               $               $               $
    expenditures             (10,154)         (8,780)           (784)        (19,717)

    Inventory                 154,561         285,225               -         439,786

    Other significant
    non-cash items:                                                                  

      Deferred income     $               $               $               $
      tax
      recovery            (4,474)         (4,266)               -         (8,740)

Sales to one customers totaled $12.6 million for the three months ended
April 30, 2013.


    For the three
    months ended April
    30, 2012                  Diavik         Ekati       Corporate           Total

    Sales                                                                         

        North America    $     7,432       $     -     $         -     $     7,432

        Europe                54,370             -               -          54,370

        India                 27,207             -               -          27,207

        Total sales           89,009             -               -          89,009

    Cost of sales                                                                 

        Depreciation
        and
        amortization          21,876             -               -          21,876

        All other
        costs                 48,223             -               -          48,223

        Total cost of
        sales                 70,099             -               -          70,099

    Gross margin              18,910             -               -          18,910

    Gross margin (%)           21.2%           -%               -%           21.2%

    Selling, general
    and administrative
    expenses                                                                      

        Selling and
        related
        expenses                 972             -               -             972

        Administrative
        expenses                   -             -           5,767           5,767

        Total selling,
        general and
        administrative
        expenses                 972             -           5,767           6,739

    Operating profit
    (loss)                    17,938             -         (5,767)          12,171

    Finance expenses         (2,242)             -               -         (2,242)

    Exploration costs          (254)             -               -           (254)

    Finance and other
    income                        52             -               -              52

    Foreign exchange
    gain                       (370)             -               -           (370)

    Segmented profit     $                 $           $               $
    (loss) before
    income taxes              15,124             -         (5,767)           9,357

    Segmented assets
    as at April 30,
    2012                                                                          

        Canada           $ 1,002,717       $     -     $         -     $ 1,002,717

        Other foreign
        countries             10,786             -               -          10,786

                         $ 1,013,503       $     -     $         -     $ 1,013,503

    Capital              $                 $           $               $
    expenditures            (18,149)             -               -        (18,149)

    Inventory                146,991             -                         146,991

    Other significant
    non-cash items:                                                               

        Deferred         $                 $           $               $
        income tax
        recovery             (2,567)             -               -         (2,567)

SOURCE Dominion Diamond Corporation


Source: PR Newswire