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Dominion Diamond Corporation Reports Fiscal 2014 Fourth Quarter and Year-End Results

April 2, 2014

TORONTO, April 2, 2014 /PRNewswire/ – Dominion Diamond Corporation (TSX: DDC,
NYSE: DDC) (the “Company”) today announced its Fiscal 2014 Fourth
Quarter and Year-End results for the period ended January 31, 2014.

Robert Gannicott, Chairman and Chief Executive Officer stated: “Our
early experience at Ekati continues to exceed our expectations while
Diavik also outperforms its planned targets. The diamond market has
improved, both in pricing and volume of demand, as the important
diamond consuming economies, led by the US, maintain momentum.”

Corporate

Fiscal 2014 was a year during which the Company transitioned into one of
the world’s largest pure play diamond mining companies. During this
period, the Company completed the sale of the Harry Winston luxury
brand segment at an enterprise value of $1 billion (including the
assumption of $250 million of pro forma net debt) and the acquisition
of the Ekati Diamond Mine from a global mining company for whom
diamonds were non longer a core asset. The Company paid a total of $553
million, for its interest in the Ekati Diamond Mine, which included $62
million of cash, $154 million of rough diamond inventory and $165
million of supplies (fuel, cement and other mining supplies).

The Diavik Diamond Mine, which is one of the highest grade diamond mines
in the world, continues to deliver excellent results.

The Company’s senior management is completely focused on delivering
value from the Ekati Diamond Mine, and the benefits of having the
senior management team on hand in Yellowknife are already being
demonstrated. Grade recovered is ahead of plan, and cash cost of
production for the period from April 10, 2013, to January 31, 2014,
which were originally forecast at $320 million, came in at $303
million.

At the beginning of calendar year 2016, the capital spending on the
pushback at the Misery Main Pipe will be completed and this pipe will
come into production; at over 4 carats per tonne at an average price of
approximately $105 per carat, Misery Main is one of the richest
kimberlite ore bodies in the world.

During this fiscal year the Company has expensed $10.1 million on the
Jay Project which involves the development of the largest
diamondiferous resource in North America. It has the potential to
extend the operating life of the Ekati Diamond Mine in the order of 10
to 20 years beyond the currently scheduled closure in 2019. The
development and mining of this kimberlite is the cornerstone of the
Company’s strategy for building a long-term, sustainable Canadian
diamond business.

We are pleased to welcome Fiona Perrot-Humphrey to our board of
directors. Dr Perrot-Humphrey has a long history as a mining equity
analyst in both South Africa and then London. She is currently a senior
advisor to N.M. Rothschild in London.

Diamond Market

The first three months of calendar 2014 has seen an upturn in rough
diamond prices of just over 7%. This growth is primarily the result of
restocking in the US, the world’s largest market for diamond jewelry,
following strong demand in the important US holiday season and strong
demand in China, the world’s second largest consumer of diamond
jewelry, in the period running up to Chinese New Year. Evidence
suggests that jewelry sales are also increasing in India, another major
consumer of diamond jewelry where sales had been weak in the past two
years.

Fourth Quarter Summary

        --  For the fourth quarter, Ekati recorded sales of $114.0 million,
            and incurred cash costs of production of $101.3 million. Total
            cost of sales for Ekati for the fourth quarter were $114.3
            million.

        --  For the fourth quarter, Diavik recorded sales of $119.2
            million, and incurred cash costs of production of $43.3
            million. Total cost of sales for Diavik for the fourth quarter
            were $87.7 million.
        --  As at January 31 2014, the Company held cash and cash
            equivalents of $224.8 million and restricted cash of $113.6
            million.

        --  Consolidated rough diamond sales from the Company's ownership
            in the Diavik and Ekati Diamond Mines for the fourth quarter
            were $233.2 million compared to $110.1 million for the
            comparable quarter of the prior year. This resulted in an
            operating profit from continuing operations of $21.0 million,
            consistent with the comparable quarter of the prior year.
            Consolidated EBITDA from continuing operations was $76.2
            million compared to $45.3 million in the comparable quarter of
            the prior year.

      o Sales from the Diavik Diamond Mine were $119.2 million generating
        EBITDA of $59.3 million and EBITDA margins of approximately 50% for
        the fourth quarter.

      o Sales from the Ekati Diamond Mine were $114.0 million generating
        EBITDA of $24.4 million and EBITDA margins of approximately 21% for
        the fourth quarter. However, this excludes the sale of an estimated
        0.2 million carats of production from the processing of satellite
        material from the Misery South and Southwest pipes, which material
        was excavated during the pre-stripping operations of the Misery
        Main pipe, for estimated proceeds of $10.8 million. During
        pre-production, sales of diamonds recovered from the Misery South
        and Southwest material have been applied as a reduction of mining
        assets. The Company estimates that the EBITDA margin would have
        been approximately 26% if the Misery South and Southwest pipes had
        been in commercial production during the quarter, therefore
        allowing the sales of carats from such material to be recognized as
        revenue.
        --  Included in the exploration costs of $3.3 million for the
            quarter was $3.1 million of exploration work on the Jay pipe in
            the Buffer Zone at the Ekati Diamond Mine.

        --  The Company recorded a net foreign exchange loss of $7.9
            million during the fourth quarter related to the weakening in
            the Canadian dollar versus the US dollar. This compared to a
            gain of $0.1 million in the comparable quarter of the previous
            year.

        --  The Company recorded a net income tax expense of $19.0 million
            during the fourth quarter which includes $13.5 million of tax
            expense related to the significant weakening of the Canadian
            dollar versus the US dollar during the fourth quarter,
            substantially all of which was non-cash tax expense.  This is
            compared to a net income tax expense of $7.0 million in the
            comparable quarter of the previous year with a much less
            significant impact of foreign exchange.

        --  The Company recorded a consolidated net loss from continuing
            operations of $7.8 million or $(0.09) per share for the quarter
            compared to a net profit from continuing operations of $12.1
            million or $0.14 per share in the comparable quarter in the
            previous year.

        --  At the end of the quarter, the Company held rough diamond
            inventory with an approximate market value of $205 million, of
            which $40 million of rough diamond inventory had been held as
            strategic stock from sale as at January 31.

        --  Detailed life of mine plans for both the Ekati Diamond Mine and
            the Diavik Diamond Mine based on reserves only were published
            on February 3, 2014.

Annual Results Summary

        --  For the period from April 10, 2013 to January 31, 2014, Ekati
            recorded sales of $399.6 million and incurred cash costs of
            production of $303.9 million. Total cost of sales for Ekati for
            the period were $392.9 million. 

        --  For the fiscal year, Diavik recorded sales of $352.3 million
            and incurred cash costs of production of $162.6 million. Total
            cost of sales for Diavik for the fiscal year were $257.9
            million.
        --  Consolidated sales from continuing operations totaled $751.9
            million for the year ended January 31, 2014, compared to $345.4
            million compared to the prior year resulting in an operating
            profit of $51.6 million compared to an operating profit of
            $47.7 million in the prior year.

      o Sales from the Diavik Diamond Mine were $352.3 million generating
        an EBITDA margin of approximately 49% for the year.

      o Sales from the Ekati Diamond Mine were $399.6 million generating
        EBITDA of $59.6 million and EBITDA margin of approximately 15% for
        the period from April 10, 2013 to January 31, 2014. However, this
        excludes the sale of an estimated 0.2 million carats of production
        from the processing of satellite material from the Misery South and
        Southwest pipes excavated during the pre-stripping operations of
        the Misery Main pipe for estimated proceeds of $14.3million. EBITDA
        was also impacted by the sale of inventory that was recorded at
        market value as a result of the acquisition of the Ekati Diamond
        Mine. The Company estimates that the EBITDA margin would have been
        approximately 27% if the effect of the market value adjustment to
        inventory made as part of the acquisition of the Ekati Diamond Mine
        was excluded and the carats sold from material excavated from the
        Misery South & Southwest pipes were recognized as revenue.

        --  Gross margin increased 30% to $101.1 million from $77.8 million
            in the prior year. Consolidated EBITDA from operations was
            $191.7 million compared to $127.9 million in the prior year.

        --  Exploration expense of $14.6 million was incurred during the
            year which compares to $1.8 million in the prior year. Included
            in the exploration costs for fiscal 2014 are $10.1 million of
            exploration work on the Jay pipe in the Buffer Zone at the
            Ekati Diamond Mine and $4.5 million of exploration work on the
            Company's claims in the Northwest Territories.

        --  The Company recorded a foreign exchange loss of $8.9 million
            during the year related to the weakening in the Canadian dollar
            versus the US dollar. This is compared to a gain of $0.5
            million in the prior year.

        --  The Company recorded a net income tax expense of $35.5 million
            during the year which includes $20.7 million of tax expense
            related to the significant weakening of the Canadian dollar
            versus the US dollar during the period, substantially all of
            which was non-cash tax expense.  This is compared to a net
            income tax expense of $15.3 million in the prior year with a
            much less significant impact of foreign exchange.
        --
        --  Included in the fiscal 2014 financial results are $3.2 million
            (after tax) of restructuring costs at the Antwerp, Belgium,
            office as a result of the integration of Dominion Diamond and
            Ekati's sales teams, $11.4 million (after tax) of Ekati
            acquisition costs and $10.6 million (after tax) of expenses
            related to the cancellation of the credit facilities that had
            been previously arranged in connection with the Ekati Diamond
            Mine acquisition.

        --  The Company recorded a consolidated net loss from continuing
            operations attributable to shareholders of $23.0 million or $
            (0.27) per share.

        --  The Company's estimated consolidated net profit attributable to
            shareholders for the year would have been $15.2 million or
            $0.18 per share excluding the following:

      o the restructuring costs at the Antwerp, Belgium office;
      o the expenses related to the cancellation of the credit facilities
        related to the Ekati Acquisition;
      o Ekati Acquisition transaction costs; and
      o the impact of the sale of opening acquisition inventory that was
        included at market value in Ekati cost of sales.

Diavik Diamond Mine

        --  The fourth calendar quarter at the Diavik Diamond Mine saw
            continued strong performance, producing (on a 100% basis) 2.1
            million carats from 0.54 million tonnes of ore processed
            compared to production of 1.9 million carats from 0.47 million
            tonnes of ore processed in the comparable quarter of the prior
            year. This was a result of the improvements in the mining rates
            as the underground ramp-up progressed throughout the year to
            full production from all three pipes.

        --  During the fourth quarter, the Company sold approximately 1.0
            million carats from the Diavik Diamond Mine for a total of
            $119.2 million for an average price per carat of $114.

        --  Had the Company sold only the last production shipped in the
            fourth quarter, the estimated achieved price would have been
            approximately $119 per carat based on the prices achieved in
            the January 2014 sale.

        --  During the year ended January 31, 2014, the Company sold
            approximately 3.0 million carats from the Diavik Diamond Mine
            for a total of $352 million for an average price of $118 per
            carat, compared to 3.2 million carats for an average price per
            carat of $109 in the comparable period in the prior year.

        --  At January 31, 2014, the Company had 0.4 million carats of
            Diavik Diamond Mine produced inventory with an estimated market
            value of approximately $65 million.

        --  The Diavik management team continues to focus on maximizing
            production and lowering costs.

Ekati Diamond Mine

        --  The Ekati Diamond Mine is performing well. A series of
            initiatives has been undertaken aimed at optimizing operations
            since the Company's senior management team took control.
            Mining at the open pit Fox pipe will be completed ahead of
            schedule.  During the fourth fiscal quarter, approximately
            917,500 tonnes of ore (on a 100% basis) was processed yielding
            approximately 481,000 carats.

        --  During the fourth quarter, the Company sold approximately 0.4
            million carats for a total of $114.0 million for an average
            price per carat of $276. Not included in this figure are sales
            of approximately $10.8 million from carats produced during the
            processing of satellite material from the Misery South and
            Southwest satellite pipes.

        --  Had the Company sold only the last production shipped in the
            fourth quarter, the estimated achieved price would have been
            approximately $287 based on the prices achieved in the January
            2014 sale.

        --  At January 31, 2014, the Company had 0.5 million carats of
            Ekati Diamond Mine produced inventory with an estimated market
            value of approximately $140 million.

        --  During the period from April 10, 2013 to January 31, 2014, the
            Ekati Diamond Mine produced (on a 100% basis) 1.65 million
            carats from the processing of approximately 3.4 million tonnes,
            of which 2.3 million tonnes of ore was sourced from the Fox
            pipe, approximately 0.4 million tonnes was sourced from Koala
            Underground, and 0.28 million tonnes was sourced from Koala
            North. In addition, as at January 31, 2014, the Company had
            processed approximately 0.25 million tonnes of kimberlite
            material excavated from the Misery South and Southwest pipes,
            which achieved an overall grade of 1.4 carats per tonne, as
            well as 78,000 tonnes of Coarse Ore Rejects which achieved an
            average grade of 0.4 carats per tonne. These diamond recoveries
            are not included in the Company's reserves and resources
            statement and are therefore considered incremental to
            production

Jay Pipe Development

The Company’s work on the Jay Project is proceeding on schedule. The
winter 2014 drilling program is well underway at the Jay pipe and along
the proposed dike alignments associated with the project. To date, 20
sonic drill holes and 16 diamond drill holes have been completed along
four potential dike emplacements and geotechnical drilling is underway
at the Jay pipe. The drilling program will extend into late April.

Permitting update

The scoping sessions for the Jay Project were held in January, 2014.
All parties were then asked to comment on a draft Terms of Reference
for the project and the Mackenzie Valley Review Board (Board) published
a final Terms of Reference and interim draft work plan for the
environmental assessment of the Jay pipe on February 21, 2014. The
Company is now working to submit a Developer’s Assessment Report to the
Board in Q3 2014. The analytical and hearing phases of the
Environmental Review are estimated to take 10-12 months. The Board will
then make a recommendation to the Minister with a decision expected in
Q3 2015.

Lynx Project

The permitting for the Lynx pipe expansion is entering its final phase.
The Company anticipates having all permits in hand well before the
planned development of the project in 2015. Ore production is scheduled
for 2016.

Administration of Land, Water and Resources in the Northwest Territories

The Government of Canada will be transferring responsibility for
managing public land, water and resources in the Northwest Territories
to the Government of the Northwest Territories (GNWT) on April 1, 2014.
The Company is preparing for this transfer by working with the GNWT to
strengthen our working relationship and to ensure the schedule for the
Jay review is maintained.

Conference Call and Webcast

Beginning at 8:30AM (ET) on Thursday, April 3rd, 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 web site at www.ddcorp.ca or by dialing 800-706-7741 within North America or 617-614-3471 from
international locations and entering passcode 21447206.

An online archive of the broadcast will be available by accessing the
Company’s 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, April 17th, 2014 by dialing
888-286-8010 within North America or 617-801-6888 from international
locations and entering passcode 35806731.

About Dominion Diamond Corporation

Dominion Diamond Corporation is a Canadian diamond mining company with
ownership interests in two major producing diamond mines. Both mines
are located in the low political risk environment of the Northwest
Territories in Canada.

The Company operates the Ekati Diamond Mine through its 80 per cent
ownership as well as a 58.8% ownership in the surrounding areas
containing additional resources, and also owns 40% of the Diavik
Diamond Mine. It supplies rough diamonds to the global market through
its sorting and selling operations in Canada, Belgium and India and is
the world’s fourth largest producer of rough diamonds by value.

For more information, please visit www.ddcorp.ca

Highlights

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

FOURTH QUARTER RESULTS

Dominion Diamond Corporation (the “Company”) recorded a consolidated net
loss attributable to shareholders of $7.8 million or $(0.09) per share
for the quarter, compared to a net profit attributable to shareholders
of $14.9 million or $0.18 per share in the fourth quarter of the prior
year. Net loss from continuing operations attributable to shareholders
(which represents the Diavik and Ekati mining segments) was
$7.8 million or $(0.09) per share, compared to a net profit from
continuing operations of $12.1 million or $0.14 per share in the
comparable quarter of the prior year. Included in net loss from
continuing operations was $7.9 million related to a foreign exchange
loss compared to a $0.1 million gain related to foreign exchange in the
fourth quarter of the prior year, due to the weakening of the Canadian
dollar. The net loss from continuing operations for the quarter also
included $13.5 million of income tax expense related to the weakening
of the Canadian dollar, substantially all of which is non-cash tax
expense. This compares to a $0.2 million of tax expense related to the
impact of foreign exchange in the comparable quarter of the prior year.

Consolidated sales from continuing operations were $233.2 million for
the quarter, compared to $110.1 million for the comparable quarter of
the prior year, resulting in an operating profit of $21.0 million,
compared to an operating profit of $21.0 million in the comparable
quarter of the prior year. Consolidated EBITDA from continuing
operations was $76.2 million compared to $45.3 million in the
comparable quarter of the prior year.

During the fourth quarter, the Company recorded sales from the Diavik
Diamond Mine of $119.2 million compared to $110.1 million in the
comparable quarter of the prior year. The Company sold approximately
1.0 million carats from the Diavik Diamond Mine for an average price
per carat of $114, compared to 0.8 million carats for an average price
per carat of $133 in the comparable quarter of the prior year. The 27%
increase in volume of Diavik Diamond Mine carats sold versus the
comparable quarter of the prior year resulted primarily from the sale
during the fourth quarter of inventory held back from sale in the prior
quarter due to a weakening of the rough diamond market resulting from
macroeconomic uncertainty in India. The 14% decrease in the Company’s
achieved average rough diamond prices for the Diavik Diamond Mine as
compared to the fourth quarter of the prior year resulted primarily
from a change in the sales mix of product sold, partially offset by an
increase in market prices for rough diamonds in the fourth quarter
compared to the prior year. The Diavik segment generated gross margins
and EBITDA margins as a percentage of sales of 26.4% and 50%,
respectively, compared to 28.2% and 48%, respectively, in the
comparable quarter of the prior year. At January 31, 2014, the Company
had 0.4 million carats of Diavik Diamond Mine produced inventory with
an estimated market value of approximately $65 million.

During the fourth quarter, the Ekati Diamond Mine recorded sales of
$114.0 million and sold approximately 0.4 million carats for an average
price per carat of $276. Excluded from sales recorded in the fourth
quarter were carats produced and sold from the processing of satellite
material from the Misery South and Southwest kimberlite pipes as this
material was excavated during the pre-stripping operations of the
Misery South and Southwest kimberlite pipes. The Ekati Diamond Mine
generated gross margins and EBITDA margins of (0.3)% and 21%,
respectively. The Company estimates that gross margins and EBITDA
margins would have been approximately 7.0% and 26.0%, respectively if
the carats sold from material excavated from the Misery South &
Southwest kimberlite pipes were recognized as revenue. During
pre-production, sales of Misery South and Southwest carats have been
applied as a reduction of mining assets. At January 31, 2014, the
Company had 0.5 million carats of Ekati Diamond Mine produced inventory
with an estimated market value of approximately $140 million.

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 $7.9 million, compared to $8.2
million in the comparable quarter of the prior year.

ANNUAL RESULTS

During the year, the Company completed the acquisition of the Ekati
Diamond Mine and the sale of Harry Winston, Inc. (the “Luxury Brand
Segment”) to Swatch Group. The acquisition of the Ekati Diamond Mine
(the “Ekati Diamond Mine Acquisition”) 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 the Ekati Diamond Mine
(from April 10th, 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 $479.7 million or $5.64 per share for the year,
compared to a consolidated net income attributable to shareholders of
$34.7 million or $0.41 per share in the prior year. Net loss from
continuing operations attributable to shareholders was $23.0 million or
$(0.27) per share compared to net profit from continuing operations
attributable to shareholders of $22.3 million or $0.26 per share in the
prior year. Included in the consolidated net loss attributable to
shareholders for the year was $3.2 million (after-tax) of restructuring
costs at the Antwerp, Belgium office, $10.6 million (after-tax) of
expenses related to the cancellation of the credit facilities that had
been previously arranged in connection with the Ekati Diamond Mine
Acquisition and $11.4 million (after-tax) of Ekati acquisition costs.
Excluding these items and the impact of the sale of opening acquisition
inventory that was included at market value in Ekati cost of sales, the
Company’s estimated consolidated net profit attributable to
shareholders for the year would have been $15.2 million or $0.18 per
share. The net loss from continuing operations for the year also
included $20.7 million of income tax expense related to the weakening
of the Canadian dollar, substantially all of which is non-cash tax
expense. This compares to a $0.7 million of tax expense related to
the impact of foreign exchange in the prior year. Continuing operations
includes all costs related to the Company’s mining operations,
including those previously reported as part of the corporate segment.

Consolidated sales from continuing operations were $751.9 million for
the year compared to $345.4 million for the prior year, resulting in an
operating profit of $51.6 million compared to an operating profit of
$47.7 million in the prior year. Gross margin increased 30% to
$101.1 million from $77.8 million in the prior year. Consolidated
EBITDA from operations was $191.7 million compared to $127.9 million in
the prior year.

During the year, the Company recorded sales from the Diavik Diamond Mine
of $352.3 million compared to $345.4 million in the prior year. The
Company sold approximately 3.0 million carats from the Diavik Diamond
Mine for an average price per carat of $118, compared to 3.2 million
carats for an average price per carat of $109 in the prior year. The
Diavik segment generated gross margins and EBITDA margins as a
percentage of sales of 26.8% and 49%, respectively, compared to 22.5%
and 44% in prior year.

During the year, the Company recorded sales from the Ekati Diamond Mine
of $399.6 million and sold approximately 1.3 million carats for an
average price per carat of $301. Excluded from sales recorded in the
fourth quarter were carats produced and sold from the processing of
satellite material from the Misery South and Southwest kimberlite
pipes, this material was excavated during the pre-stripping operations
of the Misery South and Southwest kimberlite pipes. The Ekati segment
generated gross margins and EBITDA margins as a percentage of sales of
1.7% and 15%, respectively. The Company estimates that gross margins
and EBITDA margins would have been approximately 8.2% and 27%,
respectively if the effect of the market value adjustment to inventory
made as part of the Ekati Diamond Mine Acquisition was excluded and the
carats sold from material excavated from the Misery South & Southwest
kimberlite pipes were recognized as revenue.

The net earnings during the year from discontinued operations of $502.7
million are presented separately in the consolidated income statements,
and comparative periods have been adjusted accordingly.

Management’s Discussion and Analysis

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

Basis of Presentation

The following is management’s discussion and analysis (“MD&A”) of the
results of operations for Dominion Diamond Corporation for the year
ended January 31, 2014, and its financial position as at January 31,
2014. This MD&A is based on the Company’s unaudited consolidated
financial statements. Unless otherwise specified, all financial
information is presented in United States dollars. Unless otherwise
indicated, all references to “year” refer to the fiscal year ended
January 31, 2014.

Caution Regarding Forward-Looking Information

Certain information included in this MD&A constitutes forward-looking
information within the meaning of Canadian and United States securities
laws. Forward-looking information can generally be identified by the
use of terms such as “may”, “will”, “should”, “could”, “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 relates to
management’s future outlook and anticipated events or results, and can
include statements or information regarding plans for mining,
development, production and exploration activities at the Company’s
mineral properties, projected capital expenditure requirements,
liquidity and working capital requirements, estimated production from
the Ekati Diamond mine and Diavik Diamond Mine, expectations concerning
the diamond industry, and expected cost of sales and cash operating
costs. Forward-looking information included in this MD&A includes the
current production forecast, cost of sales and cash cost of production
estimates and planned capital expenditures for the Diavik Diamond Mine
and other forward-looking information set out under “Diavik Operations
Outlook”, and the current production forecast, cost of sales and cash
cost of production estimates and planned capital expenditures for the
Ekati Diamond Mine and other forward-looking information set out under
“Ekati Operations Outlook”.

Forward-looking information is based on certain factors and assumptions
described below and elsewhere in this MD&A including, among other
things, the current mine plans for each of the Ekati Diamond Mine and
the Diavik Diamond Mine; mining, production, construction and
exploration activities at the Company’s mineral properties; currency
exchange rates; and world and US economic conditions. While the Company
considers these assumptions to be reasonable based on the information
currently available to it, they may prove to be incorrect.
Forward-looking information is subject to certain factors, including
risks and uncertainties, which could cause actual results to differ
materially from what the Company currently expects. 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 and
macroeconomic uncertainty in other financial markets, risks associated
with regulatory requirements, the risk of 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 21 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. Actual results may
vary from the forward-looking information.

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.

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. Both mineral properties are
located at Lac de Gras in Canada’s Northwest Territories.

The Company has a controlling interest in the Ekati Diamond Mine as well
as the associated diamond sorting and sales facilities in Yellowknife,
Canada, and Antwerp, Belgium. The Company acquired its interest in the
Ekati Diamond Mine on April 10, 2013. The Ekati Diamond Mine consists
of the Core Zone (in which the Company has an 80% interest), which
includes the current operating mine and other permitted kimberlite
pipes, as well as the Buffer Zone (in which the Company has a 58.8%
interest), an adjacent area hosting kimberlite pipes having both
development and exploration potential, such as the Jay and Cardinal
kimberlite pipes and the Lynx kimberlite pipe. The Company controls and
consolidates the Ekati Diamond Mine and minority shareholders are
presented as non-controlling interests in the consolidated financial
statements.

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 (2012)
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. Both DDMI and DDDLP
are headquartered in Yellowknife, Canada. DDMI is a wholly owned
subsidiary of Rio Tinto plc of London, England. The Company receives
40% of the diamond production from the Diavik Diamond Mine.

MARKET COMMENTARY

After an exuberant start to fiscal 2014 the rough diamond market slowed
in the second quarter as both tight liquidity and problems with a
fluctuating rupee in India dampened market sentiment amongst diamond
manufacturers. The diamond market was also impacted by a decrease in
retail activity in China, which had propelled the diamond market in
fiscal 2013, as political reforms slowed luxury spending.

The market regained its composure in the fourth quarter of fiscal 2014
as more positive demand was evident in the lead up to the traditionally
busy year-end holiday season in the US and the Lunar New Year in China.
It soon became evident that the world’s largest jewelry market, the
USA, was in a positive mood and also the lead up to the Chinese New
Year was increasingly robust. The mood in the Indian retail market
improved as the rupee steadied but it was still a frustrating season
there as local economic woes, and a substantial increase in the duty on
gold, dampened any enthusiasm for jewelry.

The tightening of liquidity by the banks caused many (mainly India)
manufacturers to take a more pragmatic approach to their business; in
particular with respect to their stock levels and the length of their
supply chain and its impact on cash flow. Whilst this was a painful
exercise, it put the business in a far better shape to capitalize on
the sound market at the year’s end. This assurance has allowed
manufacturers to restock with confidence driving a positive start to
fiscal 2015.

CONSOLIDATED FINANCIAL RESULTS

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 Company’s Luxury Brand
Segment, which it disposed of on March 26, 2013, 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 January 31, 2014. As a result of
retrospective adjustments made reflecting the final purchase price
allocation of the Ekati Diamond Mine and adjustments for Misery South &
Southwest pre-production revenue, the prior quarters have been recast.


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

                            2014      2014       2014      2014      2013      2013      2013      2013       2014      2013       2012

                              Q4        Q3         Q2        Q1        Q4        Q3        Q2        Q1      Total     Total      Total

    Sales             $  233,163 $ 148,138 $  261,803 $ 108,837 $ 110,111 $  84,818 $  61,473 $  89,009 $  751,942 $ 345,411 $  290,114

    Cost of sales        202,030   136,221    231,086    81,535    79,038    71,663    46,784    70,099    650,872   267,584    227,951

    Gross margin          31,133    11,917     30,717    27,302    31,073    13,155    14,689    18,910    101,070    77,827     62,163

    Gross margin
    (%)                    13.4%      8.0%      11.7%     25.1%     28.2%     15.5%     23.9%     21.2%      13.4%     22.5%      21.4%

    Selling,
    general and
    administrative
    expenses              10,117     7,408     15,056    16,843    10,086     7,581     5,750     6,739     49,425    30,156     24,589

    Operating
    profit (loss)
    from continuing
    operations            21,016     4,509     15,661    10,459    20,987     5,574     8,939    12,171     51,645    47,671     37,574

    Finance
    expenses             (3,553)   (3,136)   (17,921)   (2,742)   (2,382)   (2,308)   (2,151)   (2,242)   (27,351)   (9,083)   (10,787)

    Exploration
    costs                (3,290)   (7,074)    (3,145)   (1,039)     (306)     (673)     (568)     (254)   (14,550)   (1,801)    (1,770)

    Finance and
    other income             491       825      1,032       804       601        60        67        52      3,153       780        462

    Foreign
    exchange gain
    (loss)               (7,917)     1,122    (2,814)       732       116     (301)     1,048     (370)    (8,879)       493        834

    Profit (loss)
    before income
    taxes from
    continuing
    operations             6,747   (3,754)    (7,187)     8,214    19,016     2,352     7,335     9,357      4,018    38,060     26,313

    Income tax
    expense
    (recovery)            19,018     2,792      8,655     5,042     6,977     1,583     3,386     3,330     35,505    15,276      9,007

    Net profit
    (loss) from
    continuing
    operations        $ (12,271) $ (6,546) $ (15,842) $   3,172 $  12,039 $     769 $   3,949 $   6,027 $ (31,487) $  22,784 $   17,306

    Net profit
    (loss) from
    discontinued
    operations                 -         -          -   502,656     2,802     3,245       804     5,583    502,656    12,434      8,137

    Net profit
    (loss)            $ (12,271) $ (6,546) $ (15,842) $ 505,828 $  14,841 $   4,014 $   4,753 $  11,610 $  471,169 $  35,218 $   25,443

    Net profit
    (loss) from
    continuing
    operations
    attributable to                                                                                                                    

    Shareholders      $  (7,802) $ (4,794) $ (13,884) $   3,504 $  12,146 $     152 $   3,951 $   6,027 $ (22,974) $  22,276 $   17,317

    Non-controlling
    interest             (4,469)   (1,752)    (1,958)     (332)     (107)       617       (2)         -    (8,513)       508       (11)

    Net profit
    (loss)
    attributable to                                                                                                                    

    Shareholders      $  (7,802) $ (4,794) $ (13,884) $ 506,160 $  14,948 $   3,397 $   4,755 $  11,610 $  479,682 $  34,710 $   25,454

    Non-controlling
    interest             (4,469)   (1,752)    (1,958)     (332)     (107)       617       (2)         -    (8,513)       508       (11)

    Earnings (loss)
    per share -
    continuing
    operations                                                                                                                         

        Basic         $   (0.09) $  (0.06) $   (0.16) $    0.04 $    0.14 $    0.00 $    0.05 $    0.07 $   (0.27) $    0.26 $     0.20

        Diluted       $   (0.09) $  (0.06) $   (0.16) $    0.04 $    0.14 $    0.00 $    0.05 $    0.07 $   (0.27) $    0.26 $     0.20

    Earnings (loss)
    per share                                                                                                                          

        Basic         $   (0.09) $  (0.06) $   (0.16) $    5.96 $    0.18 $    0.04 $    0.06 $    0.14 $     5.64 $    0.41 $     0.30

        Diluted       $   (0.09) $  (0.06) $   (0.16) $    5.89 $    0.18 $    0.04 $    0.06 $    0.14 $     5.59 $    0.41 $     0.30

    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 $     0.00

    Total assets
    (i)               $    2,305 $   2,305 $    2,299 $   2,412 $   1,710 $   1,733 $   1,660 $   1,716 $    2,305 $   1,710 $    1,607

    Total long-term
    liabilities (i)   $      691 $     688 $      694 $     695 $     269 $     682 $     461 $     472 $      691 $     269 $      641

    Operating
    profit (loss)
    from continuing
    operations        $   21,016 $   4,509 $   15,661 $  10,459 $  20,987 $   5,574 $   8,939 $  12,171 $   51,645 $  47,671 $   37,574

    Depreciation
    and
    amortization
    (ii)                  55,228    31,978     32,644    20,211    24,346    20,588    13,160    22,172    140,061    80,266     78,761

    EBITDA from
    continuing
    operations
    (iii)             $   76,244 $  36,487 $   48,305 $  30,670 $  45,333 $  26,162 $  22,099 $  34,343 $  191,706 $ 127,937 $  116,335

    (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 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended
January 31, 2013

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The Company recorded a fourth quarter consolidated net loss attributable
to shareholders of $7.8 million or $(0.09) per share, compared to a net
profit attributable to shareholders of $14.9 million or $0.18 per share
in the fourth quarter of the prior year. Net loss from continuing
operations attributable to shareholders was $7.8 million or $(0.09) per
share, compared to a net profit from continuing operations of
$12.1 million or $0.14 per share in the comparable quarter of the prior
year. Included in net loss from continuing operations was a $7.9
million related to foreign exchange loss compared to a $0.1 million
gain related to foreign exchange in the fourth quarter of the prior
year, due to the weakening of the Canadian dollar. The net loss from
continuing operations for the quarter also included $13.5 million of
income tax expense related to the weakening of the Canadian dollar,
substantially all of which is non-cash tax expense. This compares to a
$0.2 million of tax expense related to the impact of foreign exchange
in the comparable quarter of the prior year.

Discontinued operations represented $nil of net profit compared to $2.8
million or $0.04 share in the fourth quarter of the prior year.

CONSOLIDATED SALES

Consolidated sales for the fourth quarter totalled $233.2 million,
consisting of Diavik rough diamond sales of $119.2 million and
Ekati rough diamond sales of $114.0 million. This compares to sales of
$110.1 million in the comparable quarter of the prior year (Diavik
rough diamond sales of $110.1 million and Ekati rough diamond sales of
$nil).

The Company expects that results for its mining operations will
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 9 for
additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN

The Company’s fourth quarter cost of sales was $202.0 million resulting
in a gross margin of 13.4%, compared to a cost of sales of
$79.0 million and a gross margin of 28.2% 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 9 for additional information.

CONSOLIDATED INCOME TAXES

The Company recorded a net income tax expense of $19.0 million during
the fourth quarter, compared to a net income tax expense of
$7.0 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,
earnings subject to tax different than the statutory rate and
unrecognized tax benefits. 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 fourth quarter, the Canadian dollar significantly weakened against
the US dollar. As a result, the Company recorded an unrealized foreign
exchange gain of $14.6 million on the revaluation of the Company’s
Canadian dollar denominated deferred income tax liability. This
compares to an unrealized foreign exchange loss of $0.3 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 fourth
quarter, the Company also recognized a deferred income tax expense of
$23.5 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 expense of $0.9 million recognized in the
comparable quarter of the prior year. The recorded tax provision during
the quarter also included a net income tax expense of $1.3 million
relating to foreign exchange differences between income in the currency
of the country of origin and US dollars. This compares to net income
tax recovery of $1.1 million recognized in the comparable period 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 $10.1
million for the fourth quarter, consistent with the comparable quarter
of the prior year. See “Segmented Analysis” on page 9 for additional
information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS

Finance expense for the fourth quarter was $3.6 million, compared to
finance expense of $2.4 million for the comparable quarter of the prior
year. The increase was due primarily to accretion expense associated
with the future site restoration liability at the Ekati Diamond Mine,
which was not present in the comparable quarter of the prior year.
Accretion expense was $2.8 million (three months ended January 31, 2013
– $0.6 million) related to future site restoration liabilities at the
Diavik Diamond Mine and the Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS

Exploration expense of $3.3 million was incurred during the fourth
quarter, compared to $0.3 million in the comparable quarter of the
prior year. Included in exploration expense for the fourth quarter is
$3.1 million of exploration work on the Jay pipe within the Buffer Zone
at the Ekati Diamond Mine and $0.2 million of exploration work on the
Company’s claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS

Finance and other income of $0.5 million was recorded during the fourth
quarter, compared to $0.6 million in the comparable quarter of the
prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS

A net foreign exchange loss of $7.9 million was recognized during the
fourth quarter, compared to a net foreign exchange gain of $0.1 million
in the comparable quarter of the prior year, due to the weakening of
the Canadian dollar. The Company does not currently have any
significant foreign exchange derivative instruments outstanding.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The Company recorded a consolidated net profit attributable to
shareholders of $479.7 million or $5.64 per share for the year ended
January 31, 2014, compared to a net profit attributable to shareholders
of $34.7 million or $0.41 per share in the prior year. Included in this
amount is a $502.9 million gain on the sale of the Luxury Brand Segment
on March 26, 2013. Net loss from continuing operations attributable to
shareholders was $23.0 million or $(0.27) per share, compared to a net
profit from continuing operations attributable to shareholders of
$22.3 million or $0.26 per share in the prior year. Included in the
consolidated net loss attributable to shareholders for the year was
$3.2 million (after-tax) of restructuring costs at the Antwerp, Belgium
office, $10.6 million (after-tax) of expenses related to the
cancellation of the credit facilities that had been previously arranged
in connection with the Ekati Diamond Mine Acquisition and $11.4 million
(after-tax) of Ekati acquisition costs. Excluding these items and the
impact of the sale of opening acquisition inventory that was included
at market value in Ekati cost of sales, the Company’s estimated
consolidated net profit attributable to shareholders for the year would
have been $15.2 million or $0.18 per share. Discontinued operations
represented $502.6 million of net profit or $5.91 per share, compared
to $12.4 million or $0.15 per share in prior year.

CONSOLIDATED SALES

Consolidated sales totalled $751.9 million for the year ended January
31, 2014, consisting of Diavik rough diamond sales of $352.3 million
and Ekati rough diamond sales of $399.6 million. This compares to sales
of $345.4 million in the prior year (Diavik rough diamond sales of
$345.4 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 January 31,
2014.

The Company expects that results for its mining operations will
fluctuate depending on the seasonality of production at its mineral
properties, the number of sales events conducted during the period,
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 9 for
additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN

The Company’s cost of sales was $650.9 million for the year ended
January 31, 2014, resulting in a gross margin of 13.4%, compared to a
cost of sales of $267.6 million and a gross margin of 22.5% for the
prior year. The Company’s cost of sales includes costs associated with
mining and rough diamond sorting activities. See “Segmented Analysis”
on page 9 for additional information.

CONSOLIDATED INCOME TAXES

The Company recorded a net income tax expense of $35.5 million during
the year ended January 31, 2014, compared to a net income tax expense
of $15.3 million in the prior year. The Company’s combined federal and
provincial statutory income tax rate for the year ended January 31,
2014 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,
earnings subject to tax different than the statutory rate and
unrecognized tax benefits. 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 year ended January 31, 2014, the Canadian dollar significantly
weakened against the US dollar. The Company recorded an unrealized
foreign exchange gain of $24.1 million on the revaluation of the
Company’s Canadian dollar denominated deferred income tax liability
during the year ended January 31, 2014. This compares to an unrealized
foreign exchange loss of $1.1 million recorded in 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 year ended January 31, 2014, the Company
recognized a deferred income tax expense of $40.4 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 expense of
$4.4 million recognized in the prior year. The recorded tax provision
during the year ended January 31, 2014 included a net income tax
expense of $0.7 million relating to foreign exchange differences
between income in the currency of the country of origin and the US
dollar. This compares to a net income tax recovery of $5.2 million
recognized in 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 Company incurred SG&A expenses of $49.4 million during the year
ended January 31, 2014, compared to $30.2 million in the prior year.
The increase from the prior year was primarily due to $11.2 million of
transaction costs and $4.9 million of restructuring costs at the
Antwerp, Belgium office, related in each case to the Ekati Diamond Mine
Acquisition. See “Segmented Analysis” on page 9 for additional
information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS

Finance expenses were $27.4 million for the year ended January 31, 2014,
compared to $9.1 million for the prior year. The increase was due
primarily to the expensing of approximately $14.0 million relating to
the cancellation of the credit facilities that had been previously
arranged in connection with the Ekati Diamond Mine Acquisition. The
Company ultimately determined to fund the Ekati Diamond Mine
Acquisition by way of cash on hand and did not draw on these credit
facilities, which were subsequently cancelled. Also included in
consolidated finance expense is an accretion expense of $9.3 million
(year ended January 31, 2013 – $2.4 million) related to future site
restoration liabilities at the Diavik Diamond Mine and the Ekati
Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS

Exploration expense of $14.6 million was incurred during the year ended
January 31, 2014, compared to $1.8 million in the prior year. Included
in exploration expense for the current year is $10.1 million of
exploration work on the Jay pipe within the Buffer Zone at the Ekati
Diamond Mine and $4.5 million of exploration work on the Company’s
claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS

Finance and other income of $3.2 million was recorded during the year
ended January 31, 2014, compared to $0.8 million in the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS

A net foreign exchange loss of $8.9 million was recognized during the
year ended January 31, 2014, compared to a net foreign exchange gain of
$0.5 million in 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 the Corporate segment. 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)

                            2014     2014     2014     2014      2013     2013     2013     2013      2014      2013      2012

                              Q4       Q3       Q2       Q1        Q4       Q3       Q2       Q1     Total     Total     Total

    Sales                                                                                                                     

      North            $     511 $      - $      - $  6,179 $   4,604 $  7,697 $  2,269 $  7,432 $   6,690 $  22,002 $  15,018
    America

      Europe             112,001   45,088   80,530   61,642    84,346   57,438   50,514   54,370   299,262   246,668   231,722

      India                6,704    7,818   10,737   21,095    21,161   19,683    8,690   27,207    46,355    76,741    43,374

    Total sales          119,216   52,906   91,267   88,916   110,111   84,818   61,473   89,009   352,307   345,411   290,114

    Cost of sales         87,690   40,018   68,328   61,888    79,038   71,663   46,784   70,099   257,924   267,584   227,951

    Gross margin          31,526   12,888   22,939   27,028    31,073   13,155   14,689   18,910    94,383    77,827    62,163

    Gross margin           26.4%    24.4%    25.1%    30.4%     28.2%    15.5%    23.9%    21.2%     26.8%     22.5%     21.4%
    (%)

    Selling,               1,122    1,123    1,409    1,110     1,860    1,279    1,050      972     4,763     5,161     3,907
    general and
    administrative
    expenses

    Operating          $  30,404 $ 11,765 $ 21,530 $ 25,918 $  29,213 $ 11,876 $ 13,639 $ 17,938 $  89,620 $  72,666 $  58,256
    profit

    Depreciation
    and
    amortization
    (i)                   28,885   12,434   21,768   19,906    24,042   20,283   12,874   21,876    82,993    79,075    77,529

    EBITDA (ii)        $  59,289 $ 24,199 $ 43,298 $ 45,824 $  53,255 $ 32,159 $ 26,513 $ 39,814 $ 172,613 $ 151,741 $ 135,785

    (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 Measures" on page 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended
January 31, 2013

DIAVIK SALES

During the fourth quarter, the Company sold approximately 1.0 million
carats from the Diavik Diamond Mine for a total of $119.2 million for
an average price per carat of $114, compared to 0.8 million carats for
a total of $110.1 million for an average price per carat of $133 in the
comparable quarter of the prior year. The 27% increase in volume of
carats sold versus the comparable quarter of the prior year resulted
primarily from the sale during the fourth quarter of inventory held
back from sale in the prior quarter due to a weakening of the rough
diamond market resulting from macroeconomic uncertainty in India. The
14% decrease in the Company’s achieved average rough diamond prices for
the Diavik Diamond Mine as compared to the fourth quarter of the prior
year resulted primarily from a change in the sales mix of product sold,
partially offset by an increase in market prices for rough diamonds in
the fourth quarter compared to the prior year. At January 31, 2014, the
Company had 0.4 million carats of Diavik Diamond Mine produced
inventory with an estimated market value of approximately $65 million,
compared to 0.5 million carats with an estimated market value of
approximately $65 million in the comparable quarter of the prior year.

Had the Company sold only the last production shipped in the fourth
quarter, the estimated achieved price would have been approximately
$119 per carat based on the prices achieved in the January 2014 sale.

DIAVIK COST OF SALES AND GROSS MARGIN

The Company’s fourth quarter cost of sales for the Diavik Diamond Mine
was $87.7 million resulting in a gross margin of 26.4%, compared to a
cost of sales of $79.0 million and a gross margin of 28.2% in the
comparable quarter of the prior year. Cost of sales for the fourth
quarter included $28.9 million of depreciation and amortization,
compared to $23.6 million in the comparable quarter of the prior year.
The increase in depreciation and amortization is due primarily to the
sale during the fourth quarter of inventory held back from sale in the
third quarter due to a weakening of the rough diamond market resulting
from macroeconomic uncertainty in India. The Diavik segment generated
gross margins and EBITDA margins of 26.4% and 50%, respectively,
compared to 28.2% and 48%, respectively, 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 incurred at the Diavik Diamond Mine. During the fourth quarter,
the Diavik cash cost of production was $43.3 million compared to $44.8
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 January 31, 2014 and 2013.


    (expressed in                 Three months ended     Three months ended
    thousands of United             January 31, 2014       January 31, 2013
    States dollars)

    Diavik cash cost of           $           43,284     $           44,764
    production

    Private royalty                            2,287                  2,040

    Other cash costs                           1,270                  1,272

    Total cash cost of                        46,841                 48,076
    production

    Depreciation and                          24,121                 20,182
    amortization

    Total cost of                             70,962                 68,258
    production

    Adjusted for stock                        16,725                 10,780
    movements

    Total cost of sales           $           87,687     $           79,038

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Diavik Diamond Mine segment during the quarter was
$1.1 million, compared to $1.9 million in the comparable quarter of the
prior year.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

DIAVIK SALES

During the year ended January 31, 2014, the Company sold approximately
3.0 million carats from the Diavik Diamond Mine for a total of $352.3
million for an average price per carat of $118 compared to 3.2 million
carats for a total of $345.4 million for an average price per carat of
$109 in the comparable period of the prior year. The 8% increase in the
Company’s achieved average rough diamond prices and the 6% decrease in
volume of carats sold 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.

DIAVIK COST OF SALES AND GROSS MARGIN

The Company’s cost of sales for the Diavik Diamond Mine for the year
ended January 31, 2014, was $257.9 million resulting in a gross margin
of 26.8% compared to a cost of sales of $267.6 million and a gross
margin of 22.5% in the comparable period of the prior year. Cost of
sales for the year ended January 31, 2014 included $83.0 million of
depreciation and amortization compared to $79.0 million in the prior
year. This segment generated gross margins and EBITDA margins of 26.8%
and 49%, respectively, compared to 22.5% and 44%, respectively, in the
prior year.

A substantial portion of consolidated cost of sales is mining operating
costs, incurred at the Diavik Diamond Mine. During the year ended
January 31, 2014, the Diavik cash cost of production was $162.6 million
compared to $171.4 million in the comparable period of the prior year.
Cost of sales also includes sorting costs, which consist 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 twelve months ended January 31, 2014 and 2013.


    (expressed in thousands of                       2014              2013
    United States dollars)

    Diavik cash cost of                     $     162,648     $     171,442
    production

    Private royalty                                 6,217             7,399

    Other cash costs                                3,988             4,360

    Total cash cost of production                 172,853           183,201

    Depreciation and amortization                  84,888            70,516

    Total cost of production                      257,741           253,717

    Adjusted for stock movements                      181            13,868

    Total cost of sales                     $     257,922     $     267,585

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Diavik Diamond Mine segment for the year ended
January 31, 2014 was $4.8 million, compared to $5.2 million in the
comparable period of the prior year.

OPERATIONAL UPDATE

For the 2013 calendar year, the Diavik Diamond Mine performed ahead of
target, producing (on a 100% basis) 7.2 million carats from 2.1 million
tonnes of ore processed. The fourth quarter of calendar 2013 saw a
continuing strong performance from the Diavik Diamond Mine with
production (on a 100% basis) of 2.1 million carats from 0.54 million
tonnes of ore processed compared to 1.9 million carats from 0.47
million tonnes of ore processed in the comparable quarter of the prior
year. This total production does include coarse ore rejects (“COR”),
which are not included in the Company’s reserves and resource statement
and are therefore incremental to production.

Processing volumes in the fourth quarter of calendar 2013 were 16%
higher than the prior year’s comparable quarter. This was a result of
improvements in the mining rates as the underground ramp up progressed
throughout the year to full production from all three 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 December 31, 2013

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

    A-154 South                          51          220               4.28

    A-154 North                          69          144               2.10

    A-418                                94          418               4.46

    Coarse Ore Rejects                    2           44                  -

    Total                               216          826            3.66(a)

    (a) Grade has been
    adjusted to exclude
    COR.

    For the three months
    ended December 31, 2012

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

    A-154 South                          67          313               4.66

    A-154 North                          42           89               2.11

    A-418                                77          344               4.49

    Coarse Ore Rejects                    1           14                  -

    Total                               187          760            4.01(a)

    (a) Grade has been
    adjusted to exclude
    COR.

    For the year ended
    December 31, 2013

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

    A-154 South                         228          976               4.29

    A-154 North                         288          606               2.11

    A-418                               326        1,160               3.56

    Coarse Ore Rejects                    6          155                  -

    Total                               848        2,897            3.26(a)

    (a) Grade has been
    adjusted to exclude
    COR.

    For the year ended
    December 31, 2012

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

    A-154 South                         166          750               4.52

    A-154 North                         173          354               2.05

    A-418                               482        1,732               3.59

    Coarse Ore Rejects                    2           55                  -

    Total                               823        2,892            3.45(a)

((a)) Grade has been adjusted to exclude COR.

Diavik Operations Outlook

PRODUCTION

The mine plan for calendar 2014 foresees Diavik Diamond Mine production
(on a 100% basis) of approximately 6.1 million carats from the mining
and processing of approximately 1.9 million tonnes of ore. 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 0.8 million
tonnes from A-418 kimberlite pipes. In addition to the 6.1 million
carats produced from underground mining there will be production from
COR and production from the improved recovery of small diamonds. This
additional production is not included in the Company’s ore reserves,
and is therefore incremental. Based on historical recovery rates, the
tonnage of this material which is planned to be processed during
calendar 2014 would have produced 0.6 million carats from COR and 0.2
million carats from the improved recovery process.

PRICING

Based on prices from the Company’s rough diamond sales during the fourth
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:


                                               February 2014
                                                 sales cycle
                                               Average price
                                                   per carat
    Ore type                                 (in US dollars)

    A-154 South                            $             145

    A-154 North                                          190

    A-418                                                105

    Coarse Ore Rejects                                    50

COST OF SALES AND CASH COST OF PRODUCTION

Based on the current mine plan for the Diavik Diamond Mine for calendar
2014, the Company currently expects its 40% share of the cost of sales
for the Diavik Diamond Mine in fiscal 2015 to be approximately $280
million (including depreciation and amortization of approximately $100
million). The Company’s 40% share of the cash cost of production at
the Diavik Diamond Mine for calendar 2014 is expected to be
approximately $150 million at an assumed average Canadian/US dollar
exchange rate of $1.10.

CAPITAL EXPENDITURES

The Company currently expects Dominion Diamond Diavik
Limited Partnership’s 40% share of the planned capital expenditures for
the Diavik Diamond Mine in fiscal 2015 to be approximately $19 million,
assuming an average Canadian/US dollar exchange rate of $1.10. During
the fourth quarter, DDDLP’s share of capital expenditures was $3.2
million ($26.6 million for the year ended January 31, 2014).

The Company and Rio Tinto plc are currently assessing the rejuvenation
of the A-21 project which provides a window of opportunity to extract
value of the Diavik Diamond Mine before the end of its mine life.
Current work is being completed on dike design and mining methodology
with the plan to seek Rio Tinto plc investment committee approval in
the fall of 2014.

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)

                            2014         2014       2014        2014       2013       2013       2013       2013       2014        2013

                              Q4           Q3         Q2          Q1         Q4         Q3         Q2         Q1      Total       Total

    Sales                                                                                                                              

    North America      $     413  $         - $        -  $        - $        - $        - $        - $        - $      413 $         -

    Europe               111,542       95,232    170,536      19,921          -          -          -          -    397,231           -

    India                  1,992           -          -           -           -          -          -          -      1,992           -

    Total sales          113,947       95,232    170,536      19,921          -          -          -          -    399,636           -

    Cost of sales        114,340       96,202    162,758      19,647          -          -          -          -    392,948           -

    Gross margin           (393)        (970)      7,778         274          -          -          -          -      6,688           -

    Gross margin          (0.3%)       (1.0%)       4.6%        1.4%         -%         -%         -%         -%       1.7%          -%
    (%)

    Selling,               1,120          362        676         520          -          -          -          -      2,678           -
    general and
    administrative
    expenses

    Operating          $ (1,513)  $   (1,332)  $   7,102  $    (246) $        - $        - $        - $        - $    4,010 $         -
    profit (loss)

    Depreciation
    and
    amortization
    (i)                   25,892       19,166     10,513           -          -          -          -          -     55,572           -

    EBITDA (ii)        $  24,379  $    17,834  $  17,615  $    (246) $        - $        - $        - $        - $   59,582 $         -

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

    (ii)   Earnings before interest, taxes, depreciation and amortization
           ("EBITDA"). See "Non-IFRS Measures" on page 20.

    (iii)  As a result of retrospective adjustments made reflecting the
           final purchase price allocation of the Ekati Diamond Mine and
           the accounting treatment for
           Misery South & Southwest pre-production revenue, the prior
           quarters have been recast.

Three months ended January 31, 2014

EKATI SALES

During the fourth quarter, the Company sold approximately 0.4 million
carats from the Ekati Diamond Mine for a total of $114.0 million for an
average price per carat of $276. Excluded from sales recorded in the
fourth quarter were carats produced and sold from the processing of
satellite material from the Misery South and Southwest kimberlite pipes
as this material was excavated during the pre-stripping operations of
the Misery South and Southwest kimberlite pipes. The Misery South and
Southwest kimberlite pipes have been designated as exploration targets,
and are not currently classified as resources. The diamonds that have
been recovered to date from this material display similar
characteristics to diamonds from the Misery Main kimberlite pipe.
During the fourth quarter, the Company sold an estimated 0.2 million
carats of production from the Misery South and Southwest kimberlite
pipe material for estimated proceeds of $10.8 million. During
pre-production, sales of diamonds recovered from the Misery South and
Southwest material have been applied as a reduction of mining assets.
At January 31, 2014, the Company had 0.5 million carats of Ekati
Diamond Mine produced inventory with an estimated market value of
approximately $140 million.

EKATI COST OF SALES AND GROSS MARGIN

The Company’s cost of sales for the Ekati Diamond Mine during the fourth
quarter was $114.3 million, resulting in a gross margin of (0.3)% and
an EBITDA margin of 21%. Cost of sales for the fourth quarter was
impacted slightly by the sale of inventory that was recorded at market
value as a result of the Ekati Diamond Mine Acquisition. The Company
estimates the cost of sales would have been approximately
$114.2 million during the fourth quarter if the effect of the market
value adjustment made as part of the Ekati Diamond Mine Acquisition was
excluded. The Company estimates that gross margins and EBITDA margin
would have been (0.2)% and 21%, respectively, if the effect of the
market value adjustment made as part of the Ekati Diamond Mine
Acquisition was excluded. At January 31, 2014, the Company had
approximately $10 million remaining of inventory acquired as part of
the Ekati Diamond Mine Acquisition, the majority of which are made up
of production samples. 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.

Consolidated cost of sales includes mining operating costs incurred at
the Ekati Diamond Mine. During the fourth quarter, the Ekati cash cost
of production was $101.3 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 straight-line
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 three months ended January 31, 2014.


    (expressed in thousands of United States           Three months ended
    dollars)                                             January 31, 2014

    Ekati cash cost of production                      $          101,320

    Other cash costs including inventory                            1,055
    acquisition

    Total cash cost of production                                 102,375

    Depreciation and amortization                                  29,808

    Total cost of production                                      132,183

    Adjusted for stock movements                                 (17,843)

    Total cost of sales                                $          114,340

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Ekati Diamond Mine segment for the quarter were
$1.1 million.

Period from April 10, 2013 to January 31, 2014

EKATI SALES

During the period from April 10 to January 31, 2014, the Company sold
approximately 1.3 million carats from the Ekati Diamond Mine for a
total of $399.6 million for an average price per carat of $301.
Excluded from sales recorded in the fiscal year were carats produced
and sold from the processing of satellite material from the Misery
South & Southwest kimberlite pipes as this material was excavated
during the pre-stripping of the Misery South and Southwest kimberlite
pipe. During the period from April 10 to January 31, 2014, the Company
sold an estimated 0.2 million carats from the Misery South and
Southwest kimberlite pipes for estimated proceeds of $14.3 million.

Had the Company sold only the last production shipped in the fourth
quarter, the estimated achieved price would have been approximately
$287 per carat based on the prices achieved in the January 2014 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 January 31, 2014, was $392.9 million, resulting in a
gross margin of 1.7% and an EBITDA margin of 15%. Cost of sales was
impacted by the sale of inventory that was recorded at market value as
a result of the Ekati Diamond Mine Acquisition. The Company estimates
that the cost of sales would have been approximately $376.7 million
during the period if the effect of the market value adjustment made as
part of the Ekati Diamond Mine Acquisition was excluded. The Company
estimates that gross margins and EBITDA margins of sales would have
been 5.7% and 26%, respectively, if the effect of the market value
adjustment made as part of the Ekati Diamond Mine Acquisition was
excluded. At January 31, 2014, the Company had approximately $10
million remaining of inventory acquired as part of the Ekati Diamond
Mine Acquisition, the majority of which are made up of production
samples. 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 Ekati Diamond Mine. During the period
from April 10 to January 31, 2014, the Ekati cash cost of production
was $303.9 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 straight-line
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 January 31, 2014.


    (expressed in thousands of United States             April 10, 2013 to
    dollars)                                              January 31, 2014

    Ekati cash cost of production                      $           303,902

    Other cash costs                                               167,794

    Total cash cost of production                                  471,696

    Depreciation and amortization                                   87,767

    Total cost of production                                       559,463

    Adjusted for stock movements                                 (166,515)

    Total cost of sales                                $           392,948

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Ekati Diamond Mine segment for the period from
April 10 to January 31, 2014 were $2.7 million.

OPERATIONAL UPDATE

During the fourth quarter of fiscal 2014, the Ekati Diamond Mine
produced (on a 100% basis) 0.5 million carats from the processing of
0.9 million tonnes of ore from the reserves. Activities through the
quarter continued to focus on ore production from the Fox open pit, and
Koala and Koala North underground pits. The Company also recovered 0.1
million carats from the processing of 0.1 million tonnes of coarse ore
rejects, and from satellite material excavated from the Misery South &
Southwest kimberlite pipes, this material was excavated during the
pre-stripping of the Misery South and Southwest kimberlite pipe. These
diamond recoveries were not included in the Company’s reserves and
resource statement and are therefore incremental to production.

On November 18th, 2013, the Wek’èezhii Land and Water Board (“WLWB”)
issued a Preliminary Screening Decision Report on the Lynx kimberlite
pipe at the Ekati Diamond Mine which determined that the Lynx pipe
expansion could proceed with the regulatory process. On November 22,
2013, the WLWB decided to refer the Company’s Detailed Project Report
on the Jay and Cardinal kimberlite pipes at the Ekati Diamond Mine to
the Mackenzie Valley Review Board (“MVRB”) for an environmental
assessment. The Company expects the process to amend the existing Water
License to incorporate the Lynx pipe to be complete by the third
quarter of fiscal 2015. In February 2014, the MVRB issued the final
Terms of Reference and interim draft work plan for the environmental
assessment of the Jay-Cardinal pipes. The Company expects to submit its
Developer’s Assessment Report for the Jay-Cardinal pipes in the second
quarter of fiscal 2015.

During the period from April 10, 2013 to January 31, 2014, the Ekati
Diamond Mine produced (on a 100% basis) 1.2 million carats from the
processing of 3.0 million tonnes of ore from the reserves. The Company
also recovered 0.4 million carats from the processing of 0.4 million
tonnes of coarse ore rejects and satellite materials from the Misery
South and Southwest kimberlite pipes and from the Koala North
underground (inferred resource only).

EKATI DIAMOND MINE PRODUCTION (80% SHARE)


    For the three months
    ended January 31, 2014

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

    Koala Phase 5                        51           21               0.41

    Koala Phase 6                        75           87               1.16

    Koala North                          69           60               0.87

    Fox                                 452          125               0.28

    Misery South &                       58           74               1.28
    Southwest

    Coarse Ore Rejects                   29           18               0.62

    Total                               734          385               0.62

    For the period from
    April 10, 2013 (date of
    acquisition) to January
    31, 2014

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

    Koala Phase 5                       168           68               0.40

    Koala Phase 6                       182          239               1.31

    Koala North                         220          165               0.75

    Fox                               1,853          560               0.30

    Misery South &                      200          269               1.35
    Southwest

    Coarse Ore Rejects                   63           23               0.37

    Total                             2,686        1,324               0.49

Ekati Operations Outlook

PRODUCTION

In fiscal 2015, the Ekati Diamond Mine expects to process (on a 100%
basis) approximately 2.6 million tonnes from the mineral reserve and
produce approximately 0.9 million carats. The Company expects to
process approximately 1.7 million tonnes from the Fox pipe (including
stockpiles) and approximately 0.9 million tonnes from the Koala
underground operations split between Koala phase 5 and phase 6 & 7. As
part of the Koala deposit, a small portion of inferred resources is
extracted along with the reserves. This material is not included in the
current production estimate, but will be processed along with the
reserve ore and will be incremental to production. Mineral resources
that are not reserves do not have demonstrated economic viability.
Additional plant feed to keep the processing plant at capacity for the
period will be sourced from satellite material from the Misery South
and Southwest kimberlite pipes as well as the stockpile of coarse ore
rejects. The Misery South and Southwest satellite bodies as well as the
coarse ore rejects are not included in the Company’s reserves and
resource statement and are therefore considered incremental to
production.

PRICING

Based on prices from the Company’s rough diamond sales during the fourth
quarter 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:


                                                     February 2014
                                                       Sales Cycle
                                                     Average price
                                                         per carat
    Ore type                                       (in US dollars)

    Koala Phase 5                                $             365

    Koala Phase 6                                              420

    Koala North                                                440

    Fox                                                        315

    Misery South & Southwest                                80-100

    Coarse Ore Rejects                                      65-120

COST OF SALES AND CASH COST OF PRODUCTION

Based on the current mine plan for the Ekati Diamond Mine for fiscal
2015, the Company currently expects cost of sales at the Ekati Diamond
Mine (on a 100% basis) in fiscal 2015 to be approximately $520 million
(including depreciation and amortization of approximately
$125 million). The cash cost of production at the Ekati Diamond Mine
for fiscal 2015 is expected to be approximately $340 million (on a 100%
basis) at an assumed average Canadian/US dollar exchange rate of $1.10.

CAPITAL EXPENDITURES

The planned capital expenditures for the Core Zone at the Ekati Diamond
Mine for fiscal 2015 (on a 100% basis) are expected to be approximately
$180 million at an assumed average Canadian/US dollar exchange rate of
$1.10. The planned capital expenditures include approximately $95
million for the continued development of the Misery Pipe, consisting
largely of mining costs to access ore release, and approximately $50
million towards the development of the Pigeon Pipe. During the fourth
quarter, the Ekati Diamond Mine incurred capital expenditures of $30.2
million ($95.6 million for the period from April 10, 2013 to January
31, 2014).

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)

                          2014      2014       2014       2014      2013      2013      2013      2013       2014       2013       2012

                            Q4        Q3         Q2         Q1        Q4        Q3        Q2        Q1      Total      Total      Total

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

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

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

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

    Selling,             7,875     5,924     12,971     15,213     8,227     6,302     4,700     5,767     41,981     24,996     20,679
    general and
    administrative
    expenses

    Operating loss   $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (5,767) $ (41,981) $ (24,996) $ (20,679)

    Depreciation
    and
    amortization
    (i)                    451       378        363        305       304       306       286       296      1,496      1,191      1,231

    EBITDA (ii)      $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (5,471) $ (40,485) $ (23,805) $ (19,448)

    (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 Measures" on page 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended
January 31, 2013

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Corporate segment during the quarter decreased by
$0.4 million from the comparable quarter of the prior year.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Corporate segment during the year ended January
31, 2014 increased by $17.0 million from the prior year. The increase
from the prior year was primarily due to $11.2 million of transaction
costs and $4.9 million of restructuring costs at the Antwerp, Belgium
office, related in each case 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, 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 January 31, 2014, the Company had unrestricted cash and cash
equivalents of $224.8 million and restricted cash of $113.6 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 CDN $127 million in support of the reclamation obligations for the
Ekati Diamond Mine. During the year ended January 31, 2014, the Company
reported cash flow from operations of $166.3 million compared to $105.1
million in the prior year.

As at January 31, 2014, the Company had 1.0 million carats of rough
diamond inventory with an estimated market value of approximately $205
million, of which approximately $45 million represented inventory
available for sale, with the remaining $160 million being sorted.

Working capital increased to $572.1 million at January 31, 2014 from
$361.5 million at January 31, 2013. During the year, the Company
increased accounts receivable from continuing operations by $2.5
million, decreased other current assets from continuing operations by
$2.9 million, decreased inventory and supplies from continuing
operations by $9.8 million, decreased trade and other payables from
continuing operations by $5.2 million and increased employee benefit
plans from continuing operations by $1.4 million.

The Company’s liquidity requirements fluctuate from year over year and
quarter over 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 year, and the volume, size
and quality distribution of rough diamonds delivered from the Company’s
mineral properties and sold by the Company in the year.

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 12 months.

Financing Activities

On May 31, 2013, the Company repaid its senior secured revolving credit
facility with Standard Chartered Bank and cancelled this facility.

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. The new
facilities were subsequently cancelled in fiscal 2014.

As at January 31, 2014, $nil 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 year, the Company purchased property, plant and
equipment of $122.3 million for its continuing operations, of which
$26.6 million was purchased for the Diavik Diamond Mine and $95.7
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 currently
estimated capital expenditures for the calendar years 2014 to 2018 of
approximately $78 million in the aggregate assuming a Canadian/US
average exchange rate of $1.10 for each of the five years, representing
DDDLP’s current projected share of the currently planned capital
expenditures (excluding the A-21 pipe) at the Diavik Diamond Mine. Also
not reflected in the table below are currently estimated capital
expenditures for the fiscal years 2015 to 2019 of approximately
$404 million in the aggregate assuming a Canadian/US average exchange
rate of $1.10 for each of the five years, representing the current
planned capital expenditures (excluding Jay-Cardinal pipes) at the
Ekati Diamond Mine. The most significant contractual obligations for
the ensuing five-year period can be summarized as follows:


    CONTRACTUAL                             Less       Year        Year     After
    OBLIGATIONS                             than

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

    Interest-bearing       $   5,297   $   1,140   $  2,271   $   1,886   $     -
    loans and
    borrowings (a)
    (b)

    Environmental            197,359     190,775      2,325       4,259         -
    and
    participation
    agreements
    incremental
    commitments (c)

    Operating lease           12,975       7,385      5,590           -         -
    obligations (d)

    Total                  $ 215,631   $ 199,300   $ 10,186   $   6,145   $     -
    contractual
    obligations

    (a)  (i) Interest-bearing loans and borrowings presented in the
         foregoing table include current and long-term portions. The
         Company does
         not have any credit 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 14.25%. At January 31, 2014,
         $nil was
         outstanding under this facility relating to Dominion Diamond
         International NV and Dominion Diamond (India) Private Limited. 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 January
         31, 2014, $4.3 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 January 31,
         2014, and have been included under interest-bearing loans and
         borrowings in the table above. Interest payments for the next 12
         months are approximated to be $0.3 million.

    (c)  Both the Diavik Joint Venture and the Ekati Diamond Mine, under
         environmental and other agreements, must provide funding for the
         Environmental Monitoring Advisory Board, and the Independent
         Environmental Monitoring Agency, respectively. 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 January
         31, 2014 was $58 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. In
         June 2013, the WLWB adjusted the total reclamation liability for
         the Ekati
         Diamond Mine (inclusive of Sable property) to reflect the revised
         Interim Closure and Reclamation Plan, and this liability is
         currently set at
         CDN $264 million. The Company has posted letters of credit of CDN
         $127 million with the Government of Canada supported by restricted
         cash in support of the reclamation obligations for the Ekati
         Diamond Mine, and has provided a proposal to the Government of the
         Northwest Territories and the Government of Canada on an
         appropriate form of security. 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 of the Diavik Joint Venture under these
         agreements
         is not anticipated to occur until later in the life of the mine.
         The actual cash outlay in respect of the Ekati Diamond Mine under
         these
         agreements includes annual payments and special project payments
         during the operation of the Ekati Diamond Mine.

    (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 and EBITDA Margin

The term EBITDA (earnings before interest, taxes, depreciation and
amortization) is a non-GAAP financial measure, which is defined as
sales minus cost of sales and selling, general and administrative
expenses, meaning it represents operating profit before depreciation
and amortization. EBITDA margin is calculated using EBITDA over total
sales for the period.

Management believes that EBITDA and EBITDA margin are important
indicators 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 and is a
measurement for cash margins. The intent of EBITDA and EBITDA margin is
to provide additional useful information to investors and analysts and
the measure does not have any standardized meaning under IFRS. These
measures should not be considered in isolation or as substitute for
measures of performance prepared in accordance with IFRS. Other issuers
may calculate EBITDA and EBITDA margins differently.


    CONSOLIDATED                                                                                                              

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

                        2014      2014       2014       2014      2013      2013      2013      2013       2014       2013       2012

                          Q4        Q3         Q2         Q1        Q4        Q3        Q2        Q1      Total      Total      Total

    Operating      $  20,016 $   4,509 $   15,661 $   10,459 $  20,987 $   5,574 $   8,939 $  12,171 $   51,645 $   47,671 $   37,574
    profit
    (loss) from
    continuing
    operations

    Depreciation      55,228    31,978     32,644     20,211    24,346    20,588    13,160    22,172    140,061     80,266     78,761
    and
    amortization

    EBITDA from    $  75,244 $  36,487 $   48,305 $   30,670 $  45,333 $  26,162 $  22,099 $  34,343 $  191,706 $  127,937 $  116,335
    continuing
    operations

    DIAVIK
    DIAMOND MINE
    SEGMENT

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

                        2014      2014       2014       2014      2013      2013      2013      2013       2014       2013       2012

                          Q4        Q3         Q2         Q1        Q4        Q3        Q2        Q1      Total      Total      Total

    Operating      $  30,404 $  11,765 $   21,530 $   25,918 $  29,213 $  11,876 $  13,639 $  17,938 $   89,619 $   72,666 $   58,256
    profit

    Depreciation      28,885    12,434     21,768     19,906    24,042    20,283    12,874    21,876     82,993     79,075     77,529
    and
    amortization

    EBITDA         $  59,289 $  24,199 $   43,298 $   45,824 $  53,255 $  32,159 $  26,513 $  39,814 $  172,612 $  151,741 $  135,785

    EKATI
    DIAMOND MINE
    SEGMENT

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

                        2014      2014       2014       2014      2013      2013      2013      2013       2014       2013       2012

                          Q4        Q3         Q2         Q1        Q4        Q3        Q2        Q1      Total      Total      Total

    Operating      $ (1,513) $ (1,332) $    7,102 $    (246) $       - $       - $       - $       - $    4,010 $        - $        -
    profit
    (loss)

    Depreciation      25,892    19,166     10,513          -         -         -         -         -     55,572          -          -
    and
    amortization

    EBITDA         $  24,379 $  17,834 $   17,615 $    (246) $       - $       - $       - $       - $   59,582 $        - $        -

    CORPORATE
    SEGMENT

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

                        2014      2014       2014       2014      2013      2013      2013      2013       2014       2013       2012

                          Q4        Q3         Q2         Q1        Q4        Q3        Q2        Q1      Total      Total      Total

    Operating      $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (5,767) $ (41,981) $ (24,996) $ (20,679)
    profit
    (loss)

    Depreciation         451       378        363        305       304       306       286       296      1,496      1,191      1,231
    and
    amortization

    EBITDA         $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (5,471) $ (40,485) $ (23,805) $ (19,448)

RISK AND UNCERTAINTIES

The Company 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 mining 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 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.

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
lower 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. 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, and the process for
obtaining and renewing of such licences and permits often takes an
extended period of time and is subject to numerous delays and
uncertainties. Such licences and permits are subject to change in
various circumstances. Failure to comply with applicable laws and
regulations may result in injunctions, fines, criminal liability,
suspensions or revocation of permits and licences and other penalties.
There can be no assurance that DDMI, as the operator of the Diavik
Diamond Mine, or the Company has been or will be at all times in
compliance with all such laws and regulations and with its applicable
licences and permits, or that DDMI or the Company will be able to
obtain on a timely basis or maintain in the future all necessary
licences and permits that may be required to explore and develop their
properties, commence construction or operation of mining facilities and
projects under development or to maintain continued operations.

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.

The environmental agreements relating to the Diavik Diamond Mine and the
Ekati Diamond Mine require that security be provided to cover estimated
reclamation and remediation costs. 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 January 31,
2014 was $58 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. In June 2013, the WLWB adjusted
the total reclamation liability for the Ekati Diamond Mine (inclusive
of the Sable property) to reflect the revised Interim Closure and
Reclamation Plan, and this liability is currently set at CDN $264
million. The Company has as at January 31, 2014 posted letters of
credit of CDN $127 million with the Government of Canada supported by
restricted cash in support of the reclamation obligations for the Ekati
Diamond Mine, and has provided a proposal to the Government of the
Northwest Territories and the Government of Canada on an appropriate
form of security. As reclamation and remediation cost estimates are
updated and revised, the Company expects that it will be required to
post additional security for those obligations, which could result in
additional constraints on liquidity.

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.

Labour Relations

The Company is party to a collective bargaining agreement at its Ekati
Diamond Mine operation which will expire on August 31, 2014. The
Company expects to begin re-negotiations on this labour agreement early
in calendar 2014. If the Company is unable to renew this agreement, or
if the terms of any such renewal are materially adverse to the Company,
then this could result in work stoppages and other labour disruptions,
or otherwise materially impact the Company, all of which could have a
material adverse effect on the Company’s business, results from
operations and financial condition.

DISCLOSURE CONTROLS AND PROCEDURES

The Company has designed a system of disclosure controls and procedures
to provide reasonable assurance that material information relating to
Dominion Diamond Corporation, including its consolidated subsidiaries,
is made known to management of the Company by others within those
entities, particularly during the period in which the Company’s annual
filings are being prepared. In designing and evaluating the disclosure
controls and procedures, the management of the Company recognized that
any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control
objectives. The management of Dominion Diamond Corporation was
required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. The results of the
inherent limitations in all control systems means no evaluation of
controls can provide absolute assurance that all control issues and
instances of fraud, if any, have been detected.

The management of Dominion Diamond Corporation has evaluated the
effectiveness of the design and operation of its disclosure controls
and procedures as of the end of the period covered by the Annual
Report. Based on that evaluation, management has concluded that these
disclosure controls and procedures, as defined in Canada by
Multilateral Instrument 52-109, Certification of Disclosure in Issuers’
Annual and Interim Filings, and in the United States by Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the “Exchange Act”), are effective as of January 31, 2014, to ensure
that information required to be disclosed in reports that the Company
will file or submit under Canada securities legislation and the
Exchange Act is recorded, processed, summarized and reported within the
time periods specified in those rules and forms.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The certifying officers of the Company have designed a system of
internal control over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with IFRS and the
requirements of the US Securities and Exchange Commission, as
applicable. Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company,
including its consolidated subsidiaries.

Management has evaluated the effectiveness of internal control over
financial reporting using the framework and criteria established in
Internal Control – Integrated Framework (1992), issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management has concluded that internal control over
financial reporting was effective as of January 31, 2014.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

During the fourth quarter of fiscal 2014, there were no changes in the
Company’s disclosure controls and procedures or internal controls over
financial reporting that materially affected, or are reasonably likely
to materially affect, the Company’s disclosure controls and procedures
or 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 as permitted under NI 52-109 and
the Exchange Act.

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


    As at January 31, 2014                         

    Current assets                                 447,465

    Long-term assets                               923,209

    Current liabilities                             72,839

    Long-term liabilities                          722,400

    For the year ended January 31, 2014            

    Revenue                                        399,636

    Net loss                                      (40,820)

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 following discussion
outlines the accounting policies and practices that are critical to
determining Dominion Diamond Corporation’s financial results.

Significant Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in conformity
with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets and liabilities and contingent liabilities
at the date of the 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. Revisions to
accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Information
about significant areas of estimation uncertainty and critical
judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the consolidated
financial statements is as follows:

a. Significant Judgments in Applying Accounting Policies

Recovery of deferred tax assets

Judgment is required in determining whether deferred tax assets are
recognized in the consolidated balance sheet. Deferred tax assets,
including those arising from unused tax losses, require management to
assess the likelihood that the Company will generate taxable earnings
in future periods in order to utilize recognized deferred tax assets.
Estimates of future taxable income are based on forecasted income from
operations and the application of existing tax laws in each
jurisdiction. To the extent that future taxable income differs
significantly from estimates, the ability of the Company to realize the
deferred tax assets recorded at the consolidated balance sheet date
could be impacted. Additionally, future changes in tax laws in the
jurisdictions in which the Company operates could limit the ability of
the Company to obtain tax deductions in future periods.

Commitments and contingencies

The Company has conducted its operations in the ordinary course of
business in accordance with its understanding and interpretation of
applicable tax legislation in the countries where the Company has
operations. The relevant tax authorities could have a different
interpretation of those tax laws that could lead to contingencies or
additional liabilities for the Company. The Company believes that its
tax filing positions as at the balance sheet date are appropriate and
supportable. Should the ultimate tax liability materially differ from
the provision, the Company’s effective tax rate and its profit or loss
could be affected positively or negatively in the period in which the
matters are resolved.

b. Significant Estimates and Assumptions in Applying Accounting Policies

Mineral reserves, mineral properties and exploration costs

The estimation of mineral reserves is a subjective process. The Company
estimates its mineral reserves based on information compiled by an
appropriately qualified person. 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. Reserve estimates
can be revised upward or downward based on the results of future
drilling, testing or production levels, and diamond prices. Changes in
reserve estimates may impact the carrying value of exploration and
evaluation assets, mineral properties, property, plant and equipment,
mine rehabilitation and site restoration provisions, recognition of
deferred tax assets, and depreciation charges. Estimates and
assumptions about future events and circumstances are also used to
determine whether economically viable reserves exist that can lead to
commercial development of an ore body.

Estimated mineral reserves are used in determining the depreciation of
mine-specific assets. This results in a depreciation charge
proportional to the depletion of the anticipated remaining life of mine
production. A units-of-production depreciation method is applied, and
depending on the asset, is based on carats of diamonds recovered during
the period relative to the estimated proven and probable reserves of
the ore deposit being mined or to the total ore deposit. Changes in
estimates are accounted for prospectively.

Impairment of long-lived assets

The Company assesses each cash-generating unit at least annually to
determine whether any indication of impairment exists. Where an
indicator of impairment exists, a formal estimate of the recoverable
amount is made, which is considered to be the higher of the fair value
of an asset less costs to sell and its value in use. These assessments
require the use of estimates and assumptions such as long-term
commodity prices, discount rates, future capital requirements,
exploration potential and operating performance. Financial results as
determined by actual events could differ from those estimated.

Mine rehabilitation and site restoration provision

Provision for the cost of site closure and reclamation is recognized at
the time that the environmental disturbance occurs. When the extent of
disturbance increases over the life of the operation, the provision is
increased accordingly. Costs included in the provision encompass all
restoration and rehabilitation activity expected to occur progressively
over the life of the operation and at the time of closure. Routine
operating costs that may impact the ultimate restoration and
rehabilitation activities, such as waste material handling conducted as
an integral part of a mining or production process, are not included in
the provision. Costs arising from unforeseen circumstances, such as
contamination caused by unplanned discharges, are recognized as an
expense and liability when the event gives rise to an obligation which
is probable and capable of reliable estimation.

The site closure and reclamation provision is measured at the expected
value of future cash flows and is discounted to its present value.
Significant judgments and estimates are involved in forming
expectations of future site closure and reclamation activities and the
amount and timing of the associated cash flows. Those expectations are
formed based on existing environmental and regulatory requirements.
The Ekati Diamond Mine rehabilitation and site restoration provision is
prepared by management at the Ekati Diamond Mine.

The Diavik Diamond Mine rehabilitation and site restoration provisions
have been provided by management of the Diavik Diamond Mine and are
based on internal estimates. Assumptions, based on the current economic
environment, have been made which DDMI management believes are a
reasonable basis upon which to estimate the future liability. These
estimates are reviewed regularly by management of the Diavik Diamond
Mine to take into account any material changes to the assumptions.
However, actual rehabilitation costs will ultimately depend upon future
costs for the necessary decommissioning work required, which will
reflect market conditions at the relevant time. Furthermore, the timing
of rehabilitation is likely to depend on when the Diavik Diamond Mine
ceases to produce at economically viable rates. This, in turn, will
depend upon a number of factors including future diamond prices, which
are inherently uncertain.

Pension benefits

The present value of the pension obligations depends on a number of
factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net cost (income)
for pensions include the discount rate. Any changes in these
assumptions will impact the carrying amount of the pension obligation.

The Company determines the appropriate discount rate at the end of each
year. This is the interest rate that should be used to determine the
present value of estimated future cash outflows expected to be required
to settle the pension obligations. In determining the appropriate
discount rate, the Company considers the interest rates of high quality
corporate bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating the
terms of the related pension obligation.

Other key assumptions for pension obligations are based in part on
current market conditions. Additional information is disclosed in note
15.

CHANGES IN ACCOUNTING POLICIES

The Company has adopted the following new standards, along with any
consequential amendments, effective February 1, 2013. These changes
were made in accordance with the applicable transitional provisions.

IFRS 10, “Consolidated Financial Statements” (“IFRS 10″), replaced 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. The Company has conducted a review of all
non-wholly owned entities and determined that the adoption of IFRS 10
did not result in any change in the consolidated status of any of its
subsidiaries and investees.

IFRS 11, “Joint Arrangements” (“IFRS 11″), replaced 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 consolidated financial statements upon its
adoption on February 1, 2013.

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 Company has added additional disclosures
on fair value measurement in note 25 to the consolidated financial
statements.

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. The adoption of IFRIC 20 did not have a material impact on
the Company’s consolidated financial statements.

Amendments to IAS 19, which 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. The adoption of revised IAS 19 did not
materially impact measurement or recognition of the Company’s pension
plans, and additional disclosures required under the new standard can
be found in note 15 to the consolidated 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 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 March 31, 2014                               

    Authorized                                          Unlimited

    Issued and outstanding shares                     85,124,480 

    Options outstanding                                2,438,000 

    Fully diluted                                     87,562,480 

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.


                                     Consolidated Balance Sheets

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

                                    January 31, 2014       January 31, 2013

    ASSETS                                                                 

    Current assets                                                         

     Cash and cash          $          224,778     $          104,313
    equivalents (note 5)

     Accounts                           20,879                  3,705
    receivable (note 6)

     Inventory and                     440,853                115,627
    supplies (note 7)

     Other current                      27,156                 29,486
    assets (note 8)

     Assets held for                         -                718,804
    sale (note 10)

                                             713,666                971,935

    Property, plant and                    1,469,557                727,489
    equipment (note 11)

    Restricted cash (note                    113,612                      -
    9)

    Other non-current                          4,737                  6,937
    assets (note 13)

    Deferred income tax                        3,078                  4,095
    assets (note 16)

    Total assets                  $        2,304,650     $        1,710,456

    LIABILITIES AND EQUITY                                                 

    Current liabilities                                                    

     Trade and other        $          103,653     $           39,053
    payables (note 14)

     Employee benefit                    3,643                  2,634
    plans (note 15)

     Income taxes                       33,442                 32,977
    payable (note 16)

     Current portion                       794                 51,508
    of interest-bearing
    loans and borrowings
    (note 21)

     Liabilities held                        -                484,252
    for sale (note 10)

                                             141,532                610,424

    Interest-bearing loans                     3,504                  4,799
    and borrowings (note
    21)

    Deferred income tax                      242,563                181,427
    liabilities (note 16)

    Employee benefit plans                    14,120                  3,499
    (note 15)

    Provisions (note 17)                     430,968                 79,055

    Total liabilities                        832,687                879,204

    Equity                                                                 

     Share capital                     508,523                508,007
    (note 18)

     Contributed                        23,033                 20,387
    surplus

     Retained                          775,419                295,738
    earnings

     Accumulated                       (2,447)                  6,357
    other comprehensive
    income

     Total                           1,304,528                830,489
    shareholders' equity

     Non-controlling                   167,435                    763
    interest

    Total equity                           1,471,963                831,252

    Total liabilities and         $        2,304,650     $        1,710,456
    equity

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

                                Consolidated Statements of Income

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

                                                      2014             2013

    Sales                                     $    751,942     $    345,411

    Cost of sales                                  650,872          267,584

    Gross margin                                   101,070           77,827

    Selling, general and                            49,425           30,156
    administrative expenses

    Operating profit (note 19)                      51,645           47,671

    Finance expenses                              (27,352)          (9,083)

    Exploration costs                             (14,550)          (1,801)

    Finance and other income                         3,153              780

    Foreign exchange (loss) gain                   (8,879)              493

    Profit before income taxes from                  4,017           38,060
    continuing operations

    Income tax expense  (note 16)                   35,505           15,276

    Net profit (loss) from                        (31,488)           22,784
    continuing operations

    Net profit from discontinued                   502,656           12,434
    operations (note 10)

    Net profit                                $    471,168     $     35,218

    Net profit (loss) from
    continuing operations
    attributable to

       Shareholders                           $   (22,975)     $     22,276

       Non-controlling interest                    (8,513)              508

    Net profit (loss) attributable
    to

       Shareholders                           $    479,681     $     34,710

       Non-controlling interest                    (8,513)              508

    Earnings (loss) per share -
    continuing operations

     Basic                              $     (0.27)     $       0.26

       Diluted                                      (0.27)             0.26

    Earnings per share                                                     

     Basic                                      5.64             0.41

       Diluted                                        5.59             0.41

    Weighted average number of                  85,019,802       84,875,789
    shares outstanding (note 20)

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

                      Consolidated Statements of Comprehensive Income

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

                                                     2014              2013

    Net profit                               $    471,168     $      35,218

    Other comprehensive income                                             

      Items that may be
      reclassified to profit                                               

        Net loss on translation of
        net foreign operations
        (net of tax of nil)                      (12,228)           (2,883)

      Items that will not be
      reclassified to profit                                               

        Actuarial gain (loss) on
        employee benefit plans
        (net of tax of $1.5
        million for the year ended
        January 31, 2014; 2013 -
        $0.1 million)                               3,424             (846)

    Other comprehensive loss, net
    of tax                                        (8,804)           (3,729)

    Total comprehensive income               $    462,364     $      31,489

      Comprehensive income (loss)            $                $
      from continuing operations                 (29,686)            22,778

      Comprehensive income from
      discontinued operations                     492,050             8,711

    Comprehensive income (loss)
    attributable to                                                        

      Shareholders                           $    470,877     $      30,981

      Non-controlling interest                    (8,513)               508

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

                        Consolidated Statements of Changes in Equity

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

                                                     2014              2013

    Common shares:                                                         

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

    Issued during the period                          516                32

    Balance at end of period                      508,523           508,007

    Contributed surplus:                                                   

    Balance at beginning of period                 20,387            17,764

    Stock-based compensation expense                2,646             2,623

    Balance at end of period                       23,033            20,387

    Retained earnings:                                                     

    Balance at beginning of period                295,738           261,028

    Net profit attributable to common
    shareholders                                  479,681            34,710

    Balance at end of period                      775,419           295,738

    Accumulated other comprehensive
    income:                                                                

    Balance at beginning of period                  6,357            10,086

    Other comprehensive income                                             

      Items that may be reclassified to
      profit                                                               

        Net loss on translation of net
        foreign operations (net of tax of
        nil)                                     (12,228)           (2,883)

      Items that will not be reclassified
      to profit                                                            

        Actuarial gain (loss) on employee
        benefit plans (net of tax of $1.5
        million for the year ended
        January 31, 2014; 2013 - $0.1
        million)                                    3,424             (846)

    Balance at end of period                      (2,447)             6,357

    Non-controlling interest:                                              

    Balance at beginning of period                    763               255

    Non-controlling interest                      (8,513)               508

    Acquisition of Ekati Diamond Mine
    (note 4)                                      163,776                 -

    Contributions made by minority
    partners                                       11,409                 -

    Balance at end of period                      167,435               763

    Total equity                              $ 1,471,963     $     831,252

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

                            Consolidated Statements of Cash Flows

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

                                                   2014               2013

    Cash provided by (used in)                                            

    OPERATING                                                             

    Net profit (loss)                       $   471,168     $       22,784

     Depreciation and                     140,061             80,266
    amortization

     Deferred income tax                  (4,894)            (9,752)
    recovery

     Current income tax expense            40,399             25,028

     Finance expenses                      27,351              9,083

     Stock-based compensation               2,646              2,623

       Other non-cash items                      11,092            (1,761)

     Foreign exchange (gain)               10,166               (45)
    loss

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

    Change in non-cash operating                  6,320              8,871
    working capital, excluding taxes
    and finance expenses

    Cash provided by (used in)                  704,671            136,767
    operating activities

       Interest paid                            (6,383)            (5,318)

     Income and mining taxes             (29,354)           (15,987)
    paid

    Cash provided by (used in)                  668,934            115,462
    operating activities - continuing
    operations

    Cash provided by (used in)                (502,656)           (10,339)
    operating activities -
    discontinued operations

    Net cash from (used in) operating           166,278            105,123
    activities

    FINANCING                                                             

    Increase (decrease) in                        (789)            (5,359)
    interest-bearing loans and
    borrowings

    Increase in revolving credit                      -             38,765

    Decrease in revolving credit                (1,128)           (41,898)

    Repayment of senior secured                (50,000)                  -
    credit facility

    Issue of common shares, net of                  516                 32
    issue costs

    Contribution from non-controlling             2,414            (8,000)
    interest

    Cash provided from financing               (48,987)           (16,460)
    activities - continuing
    operations

    Cash provided from financing                      -             39,880
    activities - discontinued
    operations

    Cash provided from financing               (48,987)             23,420
    activities

    INVESTING                                                             

    Acquisition of Ekati                      (490,925)                -  

    Property, plant and equipment             (122,278)           (56,478)

    Net proceeds from sale of                     1,911              2,619
    property, plant and equipment

    Other non-current assets                    (2,981)                 50

    Cash provided in investing                (614,273)           (53,809)
    activities - continuing
    operations

    Cash provided in investing                 746,738            (25,023)
    activities - discontinued
    operations

    Cash used in investing activities           132,465           (78,832)

    Foreign exchange effect on cash            (15,679)              (378)
    balances

    Increase in cash and cash                   234,077             49,333
    equivalents

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

    Cash and equivalents, end of                338,390            127,449
    period

    Less cash and equivalents of                      -             23,136
    discontinued operations, end of
    period

    Cash and cash equivalents of            $   338,390     $      104,313
    continuing operations, end of
    period

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

    Accounts receivable                         (2,532)            (1,747)

    Inventory and supplies                        9,758              8,994

    Other current assets                          2,850                148

    Trade and other payables                    (5,164)                 72

    Employee benefit plans                        1,408              1,404

                                            $     6,320     $        8,871

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

Notes to Consolidated Financial Statements

JANUARY 31, 2014 (UNAUDITED) WITH COMPARATIVE FIGURES

(TABULAR AMOUNTS IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT AS
OTHERWISE NOTED)

Note 1:

Nature of Operations

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 under the symbol “DDC”. 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
(2012) 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 is a wholly owned subsidiary of Rio Tinto plc of London, England,
and DDDLP is a wholly owned subsidiary of Dominion Diamond Corporation.
The Company records its interest in the assets, liabilities and
expenses of the Diavik Joint Venture in its 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 the
Company acquired an 80% interest in the Core Zone and a 58.8% interest
in the Buffer Zone. The Company controls and consolidates the Ekati
Diamond Mine and minority shareholders are presented as non-controlling
interests within the consolidated financial statements.

On March 26, 2013, the Company completed the sale of the Luxury Brand
Segment to Swatch Group. The operations of the Luxury Brand Segment
have been presented as discontinued operations for reporting purposes.
See note 10. 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”.

Note 2:

Basis of Preparation

(a) Statement of compliance

These consolidated financial statements (“financial statements”) have
been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).

These financial statements were prepared on a going concern basis under
the historical cost method except for certain financial assets and
liabilities which are measured at fair value. The significant
accounting policies are presented in Note 3 and have been consistently
applied in each of the periods presented.

(b) Currency of presentation

These 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 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 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

The accounting policies set out below have been applied consistently to
all periods presented in these consolidated financial statements, and
have been applied consistently by Company entities.

(a) Basis of consolidation

The consolidated financial statements comprise the financial statements
of the Company and its subsidiaries as at January 31, 2014.
Subsidiaries are fully consolidated from the date of acquisition or
creation, being the date on which the Company obtains control, and
continue to be consolidated until the date that such control ceases.
The financial statements of the Company’s subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies. All intercompany balances, income and expenses,
and unrealized gains and losses resulting from intercompany
transactions are eliminated in full. For partly owned subsidiaries, the
net assets and net earnings attributable to minority shareholders are
presented as non-controlling interests within the consolidated
financial statements.

Interest in Diavik Joint Venture

DDDLP has an undivided 40% ownership interest in the assets, liabilities
and expenses of the Diavik Joint Venture. The Company records its
interest in the assets, liabilities and expenses of the Diavik Joint
Venture in its consolidated financial statements with a one-month lag.
The accounting policies described below include those of the Diavik
Joint Venture.

Interest in Ekati Diamond Mine

Dominion Diamond Delware Company LLC (“DDDLC”) has an undivided 80%
ownership interest in the Core Zone and a 58.8% interest in the Buffer
Zone. The Company controls and consolidates the Ekati Diamond Mine and
minority shareholders are presented as non-controlling interest (20% in
the Core Zone and 41.2% in the Buffer Zone) within the consolidated
financial statements.

(b) Revenue

Sales of rough diamonds are recognized when significant risks and
rewards of ownership are transferred to the customer, the amount of
sales can be measured reliably and the receipts of future economic
benefits are probable. Sales are measured at the fair value of the
consideration received or receivable and after eliminating sales within
the Company.

(c) Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, balances with banks
and short-term money market instruments (with a maturity on acquisition
of less than 90 days), and are carried at fair value.

(d) Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and
generally do not bear interest. Account balances are written off
against the allowance after all means of collection have been exhausted
and the potential for recovery is considered remote.

(e) Inventory and supplies

Rough diamond inventory is recorded at the lower of cost or net
realizable value. Cost is determined on an average cost basis including
production costs and value-added processing activity.

Supplies inventory is recorded at the lower of cost or net realizable
value. Supplies inventory includes consumables and spare parts
maintained at the Diavik Diamond Mine, Ekati Diamond Mine and at the
Company’s sorting and distribution facility locations.

Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and costs of
selling the final product. In order to determine net realizable value,
the carrying amount of obsolete and slow moving items is written down
on a basis of an estimate of their future use or realization. A
provision for obsolescence is made when the carrying amount is higher
than net realizable value.

(f) Assets held for sale and discontinued operations

A discontinued operation represents a separate major line of business
that either has been disposed of or is classified as held for sale.
Classification as held for sale applies when an asset’s carrying value
will be recovered principally through a sale transaction rather than
through continuing use, it is available for immediate sale in its
present condition and its sale is highly probable. Results for assets
held for sale are disclosed separately as net profit from discontinued
operations in the consolidated statements of income and comparative
periods are reclassified accordingly.

(g) Business combination and goodwill

Acquisitions of businesses are accounted for using the purchase method
of accounting whereby all identifiable assets and liabilities are
recorded at their fair value as at the date of acquisition. Any excess
purchase price over the aggregate fair value of identifiable net assets
is recorded as goodwill. Goodwill is identified and allocated to
cash-generating units (“CGU”), or groups of CGU’s, that are expected to
benefit from the synergies of the acquisition. A CGU to which goodwill
has been allocated is tested for impairment annually, and whenever
there is an indication that the CGU may be impaired. For goodwill
arising on acquisition in a financial year, the CGU to which goodwill
has been allocated is tested for impairment before the end of that
financial year.

When the recoverable amount of the CGU is less than the carrying amount
of that CGU, the impairment loss is first allocated to reduce the
carrying amount of any goodwill allocated to that CGU, and then to the
other assets of that CGU pro rata on the basis of the carrying amount
of each asset in the CGU. Any impairment loss for goodwill is
recognized directly in the consolidated statement of income. An
impairment loss recorded on goodwill is not reversed in subsequent
periods.

(h) Exploration, evaluation and development expenditures

Exploration and evaluation activities include: acquisition of rights to
explore; topographical, geological, geochemical and geophysical
studies; exploratory drilling; trenching and sampling; and activities
involved in evaluating the technical feasibility and commercial
viability of extracting mineral resources. Mineral exploration is
expensed as incurred. Exploration costs are only capitalized when the
exploration activity relates to proven and probable reserves.
Capitalized exploration and evaluation expenditures are recorded as a
component of property, plant and equipment. Exploration and evaluation
assets are no longer classified as such when the technical feasibility
and commercial viability of extracting a mineral resource are
demonstrable. Before reclassification, exploration and evaluation
assets are assessed for impairment. Recognized exploration and
evaluation assets will be assessed for impairment when the facts and
circumstances suggest that the carrying amount may exceed its
recoverable amount.

Drilling and related costs are capitalized for an ore body where proven
and probable reserves exist and the activities are directed at either
(a) obtaining additional information on the ore body that is classified
within proven and probable reserves, or (b) converting non-reserve
mineralization to proven and probable reserves and the benefit is
expected to be realized over an extended period of time. All other
drilling and related costs are expensed as incurred.

(i) Property, plant and equipment

Items of property, plant and equipment are measured at cost, less
accumulated depreciation and accumulated impairment losses. The initial
cost of an asset comprises its purchase price and construction cost,
any costs directly attributable to bringing the asset into operation,
including stripping costs incurred in open pit development before
production commences, the initial estimate of the rehabilitation
obligation, and for qualifying assets, borrowing costs. The purchase
price or construction cost is the aggregate amount paid and the fair
value of any other consideration given to acquire the asset.

When parts of an item of property, plant and equipment have different
useful lives, the parts are accounted for as separate items (major
components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment
are determined by comparing the proceeds from the disposal with the
carrying amount of property, plant and equipment and are recognized
within cost of sales or selling, general and administrative expenses.

(i) DEPRECIATION

Depreciation commences when the asset is available for use. Depreciation
is charged so as to write off the depreciable amount of the asset to
its residual value over its estimated useful life, using a method that
reflects the pattern in which the asset’s future economic benefits are
expected to be consumed by the Company.

The unit-of-production method is applied to a substantial portion of the
Diavik Diamond Mine and Ekati Diamond Mine property, plant and
equipment, and, depending on the asset, is based on carats of diamonds
recovered during the period relative to the estimated proven and
probable ore reserves of the ore deposit being mined, or to the total
ore deposit. The Company currently does not include estimates of
measured, indicated or inferred resources in its calculation of ore
reserves. Other property, plant and equipment are depreciated using the
straight-line method over the estimated useful lives of the related
assets, for the current and comparative periods, which are as follows:


    Asset                                       Estimated useful life
                                                               (years)

    Buildings                                                    10-40

    Machinery and mobile                                          3-10
    equipment

    Computer equipment and                                           3
    software

    Furniture, fixtures and                                       2-10
    equipment

    Leasehold and building                                    Up to 20
    improvements

Amortization for mine related assets was charged to mineral properties
during the pre-commercial production stage.

Upon the disposition of an asset, the accumulated depreciation and
accumulated impairment losses are deducted from the original cost, and
any gain or loss is reflected in current net profit or loss.

Depreciation methods, useful lives and residual values are reviewed at
each financial year end and adjusted if appropriate. The impact of
changes to the estimated useful lives or residual values is accounted
for prospectively.

(ii) 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 deferred mineral property costs
within mining assets.

IFRIC 20 specifies the accounting for costs associated with waste
removal (stripping) during the production phase of a surface mine. When
the benefit from the stripping activity is realised in the current
period, the stripping costs are accounted for as the cost of inventory.
When the benefit is the improved access to ore in future periods, the
costs are recognised as a non-current asset, if certain criteria are
met. After initial recognition, the stripping activity asset is
depreciated on a systematic basis (unit of production method) over the
expected useful life of the identified component of the ore body that
becomes more accessible as a result of the stripping activity.

(iii) MAJOR MAINTENANCE AND REPAIRS

Expenditure on major maintenance refits or repairs comprises the cost of
replacement assets or parts of assets and overhaul costs. When an
asset, or part of an asset that was separately depreciated, is replaced
and it is probable that future economic benefits associated with the
new asset will flow to the Company through an extended life, the
expenditure is capitalized. The unamortized value of the existing asset
or part of the existing asset that is being replaced is expensed. Where
part of the existing asset was not separately considered as a
component, the replacement value is used to estimate the carrying
amount of the replaced assets, which is immediately written off. All
other day-to-day maintenance costs are expensed as incurred.

(j) Financial instruments

From time to time, the Company may use a limited number of derivative
financial instruments to manage its foreign currency and interest rate
exposure. For a derivative to qualify as a hedge at inception and
throughout the hedged period, the Company formally documents the nature
and relationships between the hedging instruments and hedged items, as
well as its risk-management objectives, strategies for undertaking the
various hedge transactions and method of assessing hedge effectiveness.
Financial instruments qualifying for hedge accounting must maintain a
specified level of effectiveness between the hedge instrument and the
item being hedged, both at inception and throughout the hedged period.
Gains and losses resulting from any ineffectiveness in a hedging
relationship are recognized immediately in net profit or loss.

(k) Provisions

Provisions represent obligations to the Company for which the amount or
timing is uncertain. Provisions are recognized when (a) the Company has
a present obligation (legal or constructive) as a result of a past
event, (b) it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, and (c) a
reliable estimate can be made of the amount of the obligation. The
expense relating to any provision is included in net profit or loss. If
the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the obligation. Where discounting is
used, the increase in the provision due to the passage of time is
recognized as a finance cost in net profit or loss.

Mine rehabilitation and site restoration provision:

The Company records the present value of estimated costs of legal and
constructive obligations required to restore operating locations in the
period in which the obligation is incurred. The nature of these
restoration activities includes dismantling and removing structures,
rehabilitating mines and tailings dams, dismantling operating
facilities, closure of plant and waste sites, and restoration,
reclamation and re-vegetation of affected areas.

The obligations generally arise when the asset is installed or the
ground/environment is disturbed at the production location. When the
liability is initially recognized, the present value of the estimated
cost is capitalized by increasing the carrying amount of the related
assets. Over time, the discounted liability is increased/decreased for
the change in present value based on the discount rates that reflect
current market assessments and the risks specific to the liability.
Additional disturbances or changes in rehabilitation costs, including
re-measurement from changes in the discount rate, are recognized as
additions or charges to the corresponding assets and rehabilitation
liability when they occur. The periodic unwinding of the discount is
recognized in net profit or loss as a finance cost.

(l) Foreign currency

Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are
translated to US dollars at exchange rates in effect at the balance
sheet date, and non-monetary assets and liabilities are translated at
rates of exchange in effect when the assets were acquired or
obligations incurred. Revenues and expenses are translated at rates in
effect at the time of the transactions. Foreign exchange gains and
losses are included in net profit or loss.

For certain subsidiaries of the Company where the functional currency is
not the US dollar, the assets and liabilities of these subsidiaries are
translated at the rate of exchange in effect at the reporting date.
Sales and expenses are translated at the rate of exchange in effect at
the time of the transactions. Foreign exchange gains and losses are
accumulated in other comprehensive income within shareholders’ equity.
When a foreign operation is disposed of, in part or in full, the
relevant amount in the foreign exchange reserve account is reclassified
to net profit or loss as part of profit or loss on disposal.

(m) Income taxes

Current and deferred taxes

Income tax expense comprises current and deferred tax and is recognized
in net profit or loss except to the extent that it relates to items
recognized directly in equity, in which case it is recognized in equity
or in other comprehensive income.

Current tax expense is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous years. Deferred tax expense is recognized in respect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax expense is measured at the tax rates
that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively
enacted by the reporting date.

A deferred tax asset is recognized to the extent that it is probable
that future taxable profits will be available against which the
temporary difference can be utilized. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is
probable that the related tax benefit will not be realized.

Deferred income and mining tax assets and deferred income and mining tax
liabilities are offset, if a legally enforceable right exists to offset
current tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the same
taxation authority.

The Company classifies foreign exchange differences on deferred tax
assets or liabilities in jurisdictions where the functional currency is
different from the currency used for tax purposes as income tax
expense.

(n) Stock-based payment transactions

Stock-based compensation

The Company applies the fair value method to all grants of stock
options. The fair value of options granted is estimated at the date of
grant using a Black-Scholes option pricing model incorporating
assumptions regarding risk-free interest rates, dividend yield,
volatility factor of the expected market price of the Company’s stock,
and a weighted average expected life of the options. When option awards
vest in installments over the vesting period, each installment is
accounted for as a separate arrangement. The estimated fair value of
the options is recorded as an expense with an offsetting credit to
shareholders’ equity. Any consideration received on amounts
attributable to stock options is credited to share capital.

Restricted and Deferred Share Unit Plans

The Restricted and Deferred Share Unit (“RSU” and “DSU”) Plans are full
value phantom shares that mirror the value of Dominion Diamond
Corporation’s publicly traded common shares. Grants under the RSU Plan
are on a discretionary basis to employees of the Company subject to
Board of Directors approval. Under the prior RSU Plan, each RSU grant
vests on the third anniversary of the grant date. Under the 2010 RSU
Plan, each RSU grant vests equally over a three-year period. Vesting
under both RSU Plans is subject to special rules for death, disability
and change in control. Grants under the DSU Plan are awarded to
non-executive directors of the Company. Each DSU grant vests
immediately on the grant date. The expenses related to the RSUs and
DSUs are accrued based on fair value. When a share-based payment award
vests in installments over the vesting period, each installment is
accounted for as a separate arrangement. These awards are accounted for
as liabilities with the value of these liabilities being re-measured at
each reporting date based on changes in the fair value of the awards,
and at settlement date. Any changes in the fair value of the liability
are recognized as employee benefit plan expense in net profit or loss.

(o) Employee pension plans

The Company operates various pension plans. The plans are generally
funded through payments to insurance companies or trustee-administered
funds determined by periodic actuarial calculations. The Company has
both defined benefit and defined contribution plans.

A defined contribution plan is a pension plan under which the employer
pays fixed contributions into a separate entity or fund in respect of
each member of the plan. These contributions are expensed as incurred.
Unless otherwise provided in the plan documentation, the employer has
no legal or constructive obligation to pay any further contributions.
The benefits each member of the plan will receive are based solely on
the amount contributed to the member’s account and any income,
expenses, gains and losses attributed to the member’s account.

A defined benefit plan is a pension plan that guarantees a defined
amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service
and compensation. The liability recognized in the balance sheet in
respect of defined benefit pension plans is the present value of the
defined benefit obligation at the end of the reporting period less the
fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using
interest rates on high quality corporate bonds that are denominated in
the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension obligation.

Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise. Past
service costs are recognized immediately in income.

(p) Operating leases

Minimum rent payments under operating leases, including any rent-free
periods and/or construction allowances, are recognized on a
straight-line basis over the term of the lease and included in net
profit or loss.

(q) Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets other than
inventory and deferred taxes are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset is the greater of its fair value less
costs of disposal and its value in use. In the absence of a binding
sales agreement, fair value is estimated on the basis of values
obtained from an active market or from recent transactions or on the
basis of the best information available that reflects the amount that
the Company could obtain from the disposal of the asset. Value in use
is defined as the present value of future pre-tax cash flows expected
to be derived from the use of an asset, using a pre-tax discount rate
that reflects current market assessments of the time value of money and
the risks specific to the asset. For the purpose of impairment testing,
assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or groups of assets (the
“cash-generating unit”).

An impairment loss is recognized if the carrying amount of an asset or
its cash-generating unit exceeds its estimated recoverable amount.
Impairment losses are recognized in the consolidated statement of
income in those expense categories consistent with the function of the
impaired asset. Impairment losses recognized in respect of
cash-generating units would be allocated first to reduce goodwill and
then to reduce the carrying amounts of the assets in the unit (group of
units) on a pro rata basis.

For property, plant and equipment, an assessment is made at each
reporting date as to whether there is any indication that previously
recognized impairment losses may no longer exist or may have decreased.
If such indication exists, the Company makes an estimate of the
recoverable amount. A previously recognized impairment loss is reversed
only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was
recognized. If this is the case, the carrying amount of the asset is
increased to its recoverable amount. The increased amount cannot exceed
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in
prior years. Such reversal is recognized in the consolidated statement
of income.

(r) Basic and diluted earnings per share

Basic earnings per share are calculated by dividing net profit or loss
by the weighted average number of shares outstanding during the period.
Diluted earnings per share are determined using the treasury stock
method to calculate the dilutive effect of options and warrants. The
treasury stock method assumes that the exercise of any “in-the-money”
options with the option proceeds would be used to purchase common
shares at the average market value for the period. Options with an
exercise price higher than the average market value for the period are
not included in the calculation of diluted earnings per share as such
options are not dilutive.

(s) Use of estimates, judgments and assumptions

The preparation of the consolidated financial statements in conformity
with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets and liabilities and contingent liabilities
at the date of the 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. Revisions to
accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Information
about significant areas of estimation uncertainty and critical
judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the consolidated
financial statements is as follows:

a. Significant Judgments in Applying Accounting Policies

Recovery of deferred tax assets

Judgment is required in determining whether deferred tax assets are
recognized in the consolidated balance sheet. Deferred tax assets,
including those arising from unused tax losses, require management to
assess the likelihood that the Company will generate taxable earnings
in future periods in order to utilize recognized deferred tax assets.
Estimates of future taxable income are based on forecasted income from
operations and the application of existing tax laws in each
jurisdiction. To the extent that future taxable income differs
significantly from estimates, the ability of the Company to realize the
deferred tax assets recorded at the consolidated balance sheet date
could be impacted. Additionally, future changes in tax laws in the
jurisdictions in which the Company operates could limit the ability of
the Company to obtain tax deductions in future periods.

Commitments and contingencies

The Company has conducted its operations in the ordinary course of
business in accordance with its understanding and interpretation of
applicable tax legislation in the countries where the Company has
operations. The relevant tax authorities could have a different
interpretation of those tax laws that could lead to contingencies or
additional liabilities for the Company. The Company believes that its
tax filing positions as at the balance sheet date are appropriate and
supportable. Should the ultimate tax liability materially differ from
the provision, the Company’s effective tax rate and its profit or loss
could be affected positively or negatively in the period in which the
matters are resolved.

b. Significant Estimates and Assumptions in Applying Accounting Policies

Mineral reserves, mineral properties and exploration costs

The estimation of mineral reserves is a subjective process. The Company
estimates its mineral reserves based on information compiled by an
appropriately qualified person. 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. Reserve estimates
can be revised upward or downward based on the results of additional
future drilling, testing or production levels, and diamond prices.
Changes in reserve estimates may impact the carrying value of
exploration and evaluation assets, mineral properties, property, plant
and equipment, mine rehabilitation and site restoration provisions,
recognition of deferred tax assets, and depreciation charges. Estimates
and assumptions about future events and circumstances are also used to
determine whether economically viable reserves exist that can lead to
commercial development of an ore body.

Estimated mineral reserves are used in determining the depreciation of
mine-specific assets. This results in a depreciation charge
proportional to the depletion of the anticipated remaining life of mine
production. A units-of-production depreciation method is applied, and
depending on the asset, is based on carats of diamonds recovered during
the period relative to the estimated proven and probable reserves of
the ore deposit being mined or to the total ore deposit. Changes in
estimates are accounted for prospectively.

Impairment of long-lived assets

The Company assesses each cash-generating unit at least annually to
determine whether any indication of impairment exists. Where an
indicator of impairment exists, a formal estimate of the recoverable
amount is made, which is considered to be the higher of the fair value
of an asset less costs to sell and its value in use. These assessments
require the use of estimates and assumptions such as long-term
commodity prices, discount rates, future capital requirements,
exploration potential and operating performance. Financial results as
determined by actual events could differ from those estimated.

Mine rehabilitation and site restoration provision

Provision for the cost of site closure and reclamation is recognized at
the time that the environmental disturbance occurs. When the extent of
disturbance increases over the life of the operation, the provision is
increased accordingly. Costs included in the provision encompass all
restoration and rehabilitation activities expected to occur
progressively over the life of the operation and at the time of
closure. Routine operating costs that may impact the ultimate
restoration and rehabilitation activities, such as waste material
handling conducted as an integral part of a mining or production
process, are not included in the provision. Costs arising from
unforeseen circumstances, such as contamination caused by unplanned
discharges, are recognized as an expense and liability when the event
gives rise to an obligation which is probable and capable of reliable
estimation.

The site closure and reclamation provision is measured at the expected
value of future cash flows and is discounted to its present value.
Significant judgments and estimates are involved in forming
expectations of future site closure and reclamation activities and the
amount and timing of the associated cash flows. Those expectations are
formed based on existing environmental and regulatory requirements.
The Ekati Diamond Mine rehabilitation and site restoration provision is
prepared by management at the Ekati Diamond Mine.

The Diavik Diamond Mine rehabilitation and site restoration provisions
have been provided by management of the Diavik Diamond Mine and are
based on internal estimates. Assumptions, based on the current economic
environment, have been made which DDMI management believes are a
reasonable basis upon which to estimate the future liability. These
estimates are reviewed regularly by management of the Diavik Diamond
Mine to take into account any material changes to the assumptions.
However, actual rehabilitation costs will ultimately depend upon future
costs for the necessary decommissioning work required, which will
reflect market conditions at the relevant time. Furthermore, the timing
of rehabilitation is likely to depend on when the Diavik Diamond Mine
ceases to produce at economically viable rates. This, in turn, will
depend upon a number of factors including future diamond prices, which
are inherently uncertain.

Pension benefits

The present value of the pension obligations depends on a number of
factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net cost (income)
for pensions include the discount rate. Any changes in these
assumptions will impact the carrying amount of the pension obligation.

The Company determines the appropriate discount rate at the end of each
year. This is the interest rate that should be used to determine the
present value of estimated future cash outflows expected to be required
to settle the pension obligations. In determining the appropriate
discount rate, the Company considers the interest rates of high quality
corporate bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating the
terms of the related pension obligation.

Other key assumptions for pension obligations are based in part on
current market conditions. Additional information is disclosed in note
15.

(t) New Accounting Standards adopted during the year

The Company has adopted the following new standards, along with any
consequential amendments, effective February 1, 2013. These changes
were made in accordance with the applicable transitional provisions.

IFRS 10, “Consolidated Financial Statements” (“IFRS 10″), replaced 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. The Company has conducted a review of all
non-wholly owned entities and determined that the adoption of IFRS 10
did not result in any change in the consolidated status of any of its
subsidiaries and investees.

IFRS 11, “Joint Arrangements” (“IFRS 11″), replaced 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 consolidated financial statements upon its
adoption on February 1, 2013.

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 Company has added additional disclosures
on fair value measurement in note 25.

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. The adoption of IFRIC 20 did not have a material impact on
the Company’s consolidated financial statements.

Amendments to IAS 19, “Employee Benefits” (“IAS 19″), which 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. The adoption of revised IAS
19 did not materially impact measurement or recognition of the
Company’s pension plans, and additional disclosures required under the
new standard which can be found in note 15.

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 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.

(u) Standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the
consolidated financial statements are listed below. The listing is of
standards and interpretations issued, which the Company reasonably
expects to be applicable at a future date. The Company intends to
adopt those standards when they become effective.

IFRS 9 – Financial Instruments

In November 2009, the IASB issued IFRS 9 Financial Instruments as the
first step in its project to replace IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 retains but simplifies the mixed
measurement model and establishes two primary measurement categories
for financial assets: amortized cost and fair value. The basis of
classification depends on an entity’s business model and the
contractual cash flows of the financial asset. Classification is made
at the time the financial asset is initially recognized, namely when
the entity becomes a party to the contractual provisions of the
instrument. Requirements for classification and measurement of
financial liabilities were added in October 2010 and they largely
carried forward existing requirements in IAS 39, except that fair value
changes due to an entity’s own credit risk for liabilities designated
at fair value through profit or loss would generally be recorded in
other comprehensive income (OCI) rather than the statement of income.
In November 2013, IFRS 9 was amended to include guidance on hedge
accounting.

The IASB has tentatively decided to require an entity to apply IFRS 9
for annual periods beginning on or after January 1, 2018, however,
early adoption of the new standard is still permitted. The Company is
currently assessing the impact of the standard on its consolidated
financial statements.

IAS 32 – Offsetting Financial Assets and Liabilities

The amendments to IAS 32 clarify that an entity currently has a legally
enforceable right to set-off if that right is:

        --  not contingent on a future event; and
        --  enforceable both in the normal course of business and in the
            event of default, insolvency or bankruptcy of the entity and
            all counterparties.

The amendments to IAS 32 also clarify when a settlement mechanism
provides for net settlement or gross settlement that is equivalent to
net settlement. The effective date for the amendments to IAS 32 is
annual periods beginning on or after January 1, 2014. These amendments
are to be applied retrospectively.

The Company intends to adopt the amendments to IAS 32 in its financial
statements for the annual period beginning February 1, 2014. The
Company does not expect that the amendments will have a material impact
on the consolidated financial statements.

IFRIC 21 – Levies

In May 2013, the IASB issued International Financial Reporting
Interpretations Committee (IFRIC) 21, Levies. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014 and is to be
applied retrospectively. IFRIC 21 provides guidance on accounting for
levies in accordance with IAS 37, Provisions, Contingent Liabilities
and Contingent Assets. The interpretation defines a levy as an outflow
from an entity imposed by a government in accordance with legislation
and confirms that an entity recognizes a liability for a levy only when
the triggering event specified in the legislation occurs. The Company
intends to adopt IFRIC 21 in its financial statements for the annual
period beginning February 1, 2014. The impact to the Company’s
consolidated financial statements upon adoption of this standard has
not yet been determined.

Note 4:

Acquisition

On April 10, 2013, the Company completed the 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.

The allocation of the purchase price to the fair values of assets
acquired and liabilities assumed is set forth below. In accordance with
IFRS 3, “Business Combinations” (“IFRS 3″), the provisional purchase
price allocation at acquisition has been revised to reflect final
adjustments to fair values made during the fourth quarter.


                            Preliminary                                 Final
                                   fair                                  fair
                              values at                             values at
                              April 10,               Further       April 10,
                                   2013           adjustments            2013

    Cash                  $     553,142     $                     $
    consideration
    paid                                                    -         553,142

    Cash and cash         $      62,217     $                     $
    equivalents                                             -          62,217

    Accounts                      7,465
    receivable and
    other current
    assets                                            (1,376)           6,089

    Inventory and               300,248
    supplies                                           30,967         331,215

    Other long-term                   -
    assets                                              1,776           1,776

    Property, plant             800,741
    and equipment                                       6,666         807,407

    Trade and other            (70,618)
    payables                                            (548)        (71,166)

    Income taxes                (6,085)
    payable                                            12,328           6,243

    Provisions,               (348,230)
    future site
    restoration
    costs                                               4,729       (343,501)

    Deferred income            (62,985)
    tax liabilities                                   (2,528)        (65,513)

    Other long-term            (19,017)
    liabilities                                          (20)        (19,037)

    Non-controlling           (152,798)
    interest                                         (10,978)       (163,776)

    Total net                   510,938
    identifiable
    assets acquired                                    41,016         551,954

    Goodwill (note               42,204
    13)                                              (41,016)           1,188

                          $     553,142     $               -     $   553,142

The main adjustments to the provisional fair value relate to the fair
value attributed to property, plant and equipment, stockpile ore and
provision for future site restoration costs acquired as part of the
Ekati Diamond Mine Acquisition and the associated tax impacts.

Non-controlling interest was measured by taking the proportionate share
of the fair value of the net assets of the Ekati Diamond Mine.
Goodwill comprises the value of expected synergies arising from the
Ekati Diamond Mine Acquisition and the expertise and reputation of the
assembled workforce acquired. None of the goodwill recognized is
expected to be deductible for tax purposes.

From the closing date of the Ekati Diamond Mine Acquisition, revenues of
$399.6 million and a net loss of $40.8 million were generated by the
operations of the Ekati Diamond Mine. If the acquisition had taken
place at the beginning of the 2014 fiscal year, the Company’s
consolidated pro forma revenue including the Ekati mining segment would
have been $860.6 million and pro forma net loss would have been $43.7
million for the year ended January 31, 2014. The Company incurred total
transaction costs of $14.4 million related to the Ekati Diamond Mine
Acquisition, of which $11.2 million has been expensed and included in
selling, general and administrative costs during the current year, with
the balance of $3.2 million expensed in fiscal 2013.

Note 5:

Cash and Cash Equivalents


                                                     2014            2013

    Cash on hand and balances                 $   224,778     $   104,313
    with banks

    Restricted cash                               113,612               -

    Total cash and cash                       $   338,390     $   104,313
    equivalents

Note 6:

Accounts Receivable


                                                    2014            2013

    Trade receivables                         $      451     $       239

    Accounts receivable -                          9,158               -
    minority partners

    Sales tax credits                              7,622             546

    Other                                          3,648           2,920

    Total accounts receivable                 $   20,879     $     3,705

The Company’s exposure to credit risk is disclosed in note 25.

Note 7:

Inventory and Supplies


                                                      2014            2013

    Stockpile ore                              $    38,475     $         -

    Rough diamonds - Work in                       139,520          29,343
    progress

    Rough diamonds - Available                      35,573          16,124
    for sale

    Supplies inventory                             227,285          70,160

    Total inventory and                        $   440,853     $   115,627
    supplies

Total inventory and supplies is net of a provision for obsolescence of
$0.6 million ($0.4 million at January 31, 2013). Cost of sales from
continuing operations includes inventory of $645.8 million sold during
the year (2013 – $262.7 million), with another $5.1 million of
non-inventoried costs (2013 – $4.9 million).

Note 8:

Other Current Assets


                                                  2014           2013

    Prepaid assets                          $   27,156     $   29,486

    Total other current                     $   27,156     $   29,486
    assets

Note 9:

Restricted Cash

The Company has provided CDN $127 million in letters of credit to the
Government of Canada, supported by restricted cash for the reclamation
obligations for the Ekati Diamond Mine.

Note 10:

Assets Held for Sale (Discontinued Operations)

On March 26, 2013, the Company completed the sale of the Luxury Brand
Segment to Swatch Group.

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                           61,080
    assets

    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                                   (13,743)

    Net assets                                            $        243,825

    Consideration received, satisfied in                  $        746,738
    cash

    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 consolidated statements of
income, and comparative periods have been adjusted accordingly.


                                                     2014            2013

    Sales                                    $     63,799     $   435,835

    Cost of sales                                (31,355)       (208,574)

    Other expenses                               (30,964)       (212,562)

    Other income and foreign                      (1,551)           1,888
    exchange gain (loss)

    Net income tax (expense)                        (186)         (4,153)
    recovery

    Net profit (loss) from                   $      (257)     $    12,434
    discontinued operations before
    gain

    Gain on sale                             $    502,913     $         -

    Net profit from discontinued             $    502,656     $    12,434
    operations

    Earnings per share -
    discontinued operations

     Basic                             $       5.91     $      0.15

       Diluted                                       5.85            0.15

Note 11:

Property, Plant and Equipment


    MINING OPERATIONS                                                                                                                                               

                                                                                                          Real                                    Mine
                                                             Equipment          Furniture,          property -              Assets      rehabilitation
                                           Mineral                 and           equipment            land and               under            and site
                                     properties(a)       leaseholds(b)        and other(c)         building(d)        construction      restoration(e)         Total

    Cost:                                                                                                                                                           

    Balance at February 1,       $                   $                   $                   $          40,194   $                   $          64,839   $
    2013                                   249,720             899,595              11,664                                  15,302                         1,281,314

    Acquisition (Note 4)                                                                               186,802
                                            70,000             405,796               1,007                                 143,802                   -       807,407

    Additions                                                                                            1,258                                   (926)
                                                 -               2,632               1,077                                 119,750                           123,791

    Disposals
                                                 -             (4,460)               (326)                   -                   -                   -       (4,786)

    Foreign exchange                                                                                   (3,108)
    differences                                  -                   -                   -                                       -                   -       (3,108)

    Pre-production revenue
                                          (11,114)                   -                   -                   -                   -                   -      (11,114)

    Transfers and other                                                                                    511
    movements                               40,868              67,768               (277)                               (108,870)                   -             -

    Balance at January 31,       $                   $                   $                   $         225,657   $                   $          63,913   $
    2014                                   349,474           1,371,331              13,145                                 169,984                         2,139,504

    Accumulated
    depreciation/amortization:                                                                                                                                      

    Balance at February 1,       $                   $                   $                   $          10,880   $                   $          23,328   $
    2013                                   173,493             339,343               6,781                                       -                           553,825

    Depreciation and                                                                                    25,811                                   5,060
    amortization for the year                9,284             131,552               1,689                                       -                           173,396

    Disposals                                                                                                -
                                                 -             (2,300)               (210)                                       -                   -       (2,510)

    Foreign exchange                                                                                     (764)
    differences                                  -                   -                   -                                       -                   -         (764)

    Balance at January 31,       $                   $                   $                   $          35,927   $                   $          28,388   $
    2014                                   182,777             468,595               8,260                                       -                           723,947

    Net book value at January    $                   $                   $                   $         189,730   $                   $          35,525   $
    31, 2014                               166,697             902,736               4,885                                 169,984                         1,469,557

                                                                                                          Real                                    Mine
                                                             Equipment          Furniture,          property -              Assets      rehabilitation
                                           Mineral                 and           equipment            land and               under            and site
                                     properties(a)       leaseholds(b)        and other(c)         building(d)        construction      restoration(e)         Total

    Cost:                                                                                                                                                           

    Balance at February 1,       $                   $                   $                   $          37,577   $                   $          53,471   $
    2012                                   249,527             855,213               9,306                                  23,174                         1,228,268

    Additions                                                                                            2,460                                  11,368
                                               327                   -               2,509                                  51,181                            67,845

    Disposals
                                                 -            (14,805)               (151)                   -                   -                   -      (14,956)

    Foreign exchange                                                                                       157
    differences                                  -                   -                   -                                       -                   -           157

    Transfers and other                                                                                      -
    movements                                (134)              59,187                   -                                (59,053)                   -             -

    Balance at January 31,       $                   $                   $                   $          40,194   $                   $          64,839   $
    2013                                   249,720             899,595              11,664                                  15,302                         1,281,314

    Accumulated
    depreciation/amortization:                                                                                                                                      

    Balance at February 1,       $                   $                   $                   $           9,335   $                   $          19,446   $
    2012                                   162,068             297,245               6,028                                       -                           494,122

    Depreciation and                                                                                     1,578                                   3,882
    amortization for the year               11,425              54,502                 904                                       -                            72,291

    Disposals
                                                 -            (12,403)               (151)                   -                   -                   -      (12,554)

    Foreign exchange                                                                                      (34)
    differences                                  -                   -                   -                                       -                   -          (34)

    Balance at January 31,       $                   $                   $                   $          10,879   $                   $          23,328   $
    2013                                   173,493             339,344               6,781                                       -                           553,825

    Net book value at January    $                   $                   $                   $          29,315   $                   $          41,511   $
    31, 2013                                76,227             560,251               4,883                                  15,302                           727,489

    The Company has expensed $14.6 million in exploration expenditures in
    the current year (2013: $1.8 million).

    (a)  Represents the Company's ownership share of mineral claims, which
         contains commercially mineable diamond reserves.

    (b)  Equipment and leaseholds are project related assets at the Diavik
         Joint Venture and Ekati Diamond Mine level.

    (c)  Furniture, equipment and other includes equipment located at the
         Company's diamond sorting facility.

    (d)  Real property is comprised of land and a building that houses the
         corporate activities of the Company, and various betterments to
         the corporate offices.

    (e)  Both the Diavik Joint Venture and the Ekati Diamond Mine have an
         obligations under various agreements (note 17) to reclaim and
         restore the lands disturbed
         by its mining operations.

Note 12:

Diavik Joint Venture

The following represents DDDLP’s 40% interest in the net assets and
operations of the Diavik Joint Venture as at December 31, 2013 and
December 31, 2012, which represents the financial year end of the
Diavik Joint Venture:


                                                     2013            2012

    Current assets                            $    97,078     $   102,299

    Non-current assets                            618,141         677,808

    Current liabilities                            31,296          30,517

    Non-current liabilities and                   683,923
    participant's account                                         749,590

                                                     2013            2012

    Expenses net of interest income of
    $nil (2012 - $0.1 million)(a)             $   253,592     $   243,796

    Cash flows used in operating                (162,535)
    activities                                                  (164,645)

    Cash flows resulting from financing           182,841
    activities                                                    214,061

    Cash flows used in investing                 (22,300)
    activities                                                   (50,925)

    (a) The Joint Venture only earns
    interest income.

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 23.

Note 13:

Other Non-Current Assets


                                                      2014            2013

    Prepaid pricing discount(a), net
    of accumulated amortization of
    $nil  (2013 - $11.7 million)               $         -     $       240

    Prepaid assets                                     418               -

    Other assets                                     1,524           6,279

    Security deposits                                1,607             418

                                               $     3,549     $     6,937

    (a)  Prepaid pricing discount represents funds paid to Tiffany & Co. by
         the Company to amend its rough diamond supply
         agreement. The amendment eliminated all pricing discounts on
         future sales. The payment was deferred and was
         being amortized on a straight-line basis over the remaining life
         of the contract.  The contract expired on
         March 31, 2013.

Note 14:

Trade and Other Payables


                                                      2014           2013

    Trade and other payables                     $  69,373     $   31,622

    Accrued expenses                                33,693          6,647

    Customer deposits                                  587            784

                                                 $ 103,653     $   39,053

Note 15:

Employee Benefit Plans

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


                                                       2014            2013

    Defined benefit plan                         $   10,990     $         -
    obligation - Ekati Diamond
    Mine (a)

    Defined contribution plan                           300               -
    obligation - Ekati Diamond
    Mine (b)

    Post-retirement benefit plan                        746             699
    - Diavik Diamond Mine (c)

    RSU and DSU plans (d)                             5,727           5,434

    Total employee benefit plan                  $   17,763     $     6,133
    obligation

                                                       2014            2013

    Non-current                                  $   14,120     $     3,499

    Current                                           3,643           2,634

    Total employee benefit plan                  $   17,763     $     6,133
    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 June 30, 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 June 30, 2004.

(i) NET BENEFIT OBLIGATION:


                                                       January 31,
                                                              2014

    Accrued benefit obligation                       $      76,670

    Plan assets                                             65,680

    Funded status - plan deficit                     $      10,990

As at the last valuation date, the present value of the defined benefit
obligation was comprised of approximately $64.2 million relating to
active employees, $6.8 million relating to deferred members and $5.7
million relating to retired members.


                                                                       2014

    Defined benefit obligation at April 10, 2013                $    87,483

    Service cost                                                      4,094

    Interest expense                                                  2,719

    Benefit payments                                                (6,627)

    Administrative expense                                             (95)

    Remeasurements                                                  (8,438)

    Effect on changes in foreign exchange rates                     (2,466)

    Defined benefit obligation as at January 31, 2014           $    76,670

(ii) PLAN ASSETS


                                                                      2014

    Plan Assets at April 10, 2013                              $    68,721

    Interest Income                                                  2,205

    Total employer contributions                                     6,859

    Benefit payments                                               (6,627)

    Taxes paid from plan assets                                       (95)

    Return on plan assets, excluded imputed interest               (3,238)
    income

    Effect on changes in foreign exchange rates                    (2,145)

    Plan assets as at January 31, 2014                         $    65,680

The amounts recognized in the statement of income are as follows:


                                                             2014

    Current service costs                             $     4,094

    Interest costs                                            514

    Total, included in costs of sales                 $     4,608

The actuarial losses/(gains) recognized in other comprehensive
income/(loss) net of taxes for defined benefit plans were as follows:


                                                                      2014

    Return on plan assets, excluding imputed interest           $    3,238
    income

    Actuarial losses from change in demographic                      2,791
    assumptions

    Actuarial gains from change in financial assumptions          (11,229)

    Total net actuarial loss recognized in other                $  (5,200)
    comprehensive loss before income taxes

    Income tax expenses on actuarial (gains)/losses                  1,457

    Actuarial (gains)/losses net of income tax recoveries       $    3,743

Canadian plan assets represented approximately 95% of total plan assets
at January 31, 2014.

The asset allocation of pension assets at January 31 was as follows:


                                                January 31,
                                                       2014

    ASSET CATEGORY                                         

    Cash equivalents                                     2%

    Equity securities                                   22%

    Fixed income securities                             70%

    Other                                                6%

    Total                                              100%

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


                                                          January 31, 2014

    ACCRUED BENEFIT
    OBLIGATION

    Discount rate                                                     4.4%

    Rate of salary increase                                           3.0%

    Rate of price inflation                                          2.25%

    Mortality table                             CPM-RPP2014Priv with CPM-A

    BENEFIT COSTS FOR THE
    YEAR

    Discount rate                                                     4.0%

    Expected rate of salary                                           4.0%
    increase

    Rate of compensation                                             2.25%
    increase

The weighted average duration of the defined benefit obligation is 17
years. The sensitivity of the defined benefit obligation to changes in
the weighted principal assumption is:


    IMPACT ON               Changes in       Decrease in       Increase in
    DEFINED                 Assumption        Assumption        Assumption
    BENEFIT
    OBLIGATION

    Discount                     0.50%     $       7,522     $     (5,801)
    Rate

    Salary                       0.50%           (1,523)             2,080
    growth rate

    Mortality                     Life           (2,054)             1,937
    table                 expectancy 1

The above sensitivity analysis is based on a change in an assumption
while holding all other assumptions constant. In practice, this is
unlikely to occur, and changes in some of the assumptions may be
correlated.

(iv) RISK ANALYSIS

Through its defined benefit pension plan, the Company is exposed to a
number of risks, the most significant of which are detailed below:

Asset volatility

The plan liabilities are calculated using a discount rate set with
references to corporate bond yields; if the plan underperforms the
yield, this will create a deficit.

Changes in bond yields

A decrease in corporate bond yields will increase plan liabilities,
although this would likely be partially offset by an increase in the
value of the plan’s bond holdings.

Inflation risk

Most of the plan’s obligations are linked to inflation and higher
inflation will lead to higher liabilities (although, in most cases,
caps on the level of inflationary increases are in place to protect the
plan against extreme inflation). The majority of the plan’s assets are
either unaffected by (fixed interest bonds) or loosely correlated with
(equities) inflation, meaning that an increase in inflation will also
increase the deficit.

Life expectancy

The majority of the plan’s obligations are to provide benefit for the
life of the member and the member’s spouse, so increases in life
expectancy will result in an increase in the plan’s liabilities.

(v) FUNDING POLICY

The Company funds the plan in accordance with the requirements of the
Pension Benefits Standards Act, 1985 and the Pension Benefits Standards
Regulations and the actuarial professional standards with respect to
funding such plans. Funding deficits are amortized as permitted under
the Regulations. In the Company’s view, this level of funding is
adequate to meet current and future funding needs in light of projected
economic and demographic conditions. The Company may in its absolute
discretion fund in excess of the legislated minimum from time to time,
but no more than the maximum contribution permitted under the Income
Tax Act.

The expected contributions to the plan for fiscal year 2015 are $6.0
million.

(b) Defined contribution plan

Dominion Diamond Corporation sponsors a defined contribution plan for
Canadian employees who are not employed by Dominion Diamond Ekati
Corporation 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 January 31, 2014 was
$nil ($nil at January 31, 2013).

Dominion Diamond Ekati Corporation sponsors a defined contribution plan
for its employees who are not members of the defined benefit pension
plan referred to in 15(a) above. The employer contributes 8% of
earnings up to 2.5 times the Year’s Maximum Pensionable Earnings (
“YMPE”: 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 January 31,
2014 was $0.3 million. (Supplemental plan liability has been included
in the accrued benefit obligation disclosed in 15(a) above.)

(c) Post-retirement benefit plan

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

The Diavik Joint Venture provides non-pension post-retirement benefits
to retired employees. The post-retirement benefit plan liability was
$0.8 million at January 31, 2014 ($0.7 million at January 31, 2013).

(d) Restricted Stock Units (“RSU”) and Deferred Stock Units (“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 following the
date of the grant and one-third on each anniversary thereafter. The
vesting of grants of RSUs are 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 16:

Income Taxes

The deferred income tax asset of the Company is $3.1 million. Included
in the deferred tax asset is $2.0 million that has been recorded to
recognize the benefit of $7.7 million of net operating losses that the
Company has available for carry forward to shelter income taxes for
future years.

The deferred income tax liability of the Company is $242.6 million. The
Company’s deferred income tax asset and liability accounts are revalued
to take into consideration the change in the Canadian dollar compared
to the US dollar and the unrealized foreign exchange gain or loss is
recorded as part of deferred tax expenses for each year.

(a) The income tax provision consists of the following:


                                                       2014            2013

    CURRENT TAX EXPENSE FROM
    CONTINUING OPERATIONS

    Current period                              $    36,530     $    25,172

    Adjustment for prior periods                      3,869           (144)

    Total current tax expense                        40,399          25,028

    DEFERRED TAX EXPENSE FROM
    CONTINUING OPERATIONS

    Origination and reversal of                     (4,889)         (9,718)
    temporary differences

    Change in unrecognized deductible                  (39)            (36)
    temporary differences

    Current year losses for which no                     34               2
    deferred tax asset was recognized

    Total deferred tax expense                      (4,894)         (9,752)

    Total income tax expense from               $    35,505     $    15,276
    continuing operations

Tax expense from continuing operations excludes tax expense from
discontinued operations of $0.2 million (2013 – $4.2 million).

(b) The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at
January 31, 2014 and 2013 are as follows:


                                                      2014            2013

    DEFERRED INCOME TAX ASSETS:                                           

    Net operating loss carryforwards           $     2,043     $       331

    Property, plant and equipment                      799             116

    Future site restoration costs                  120,739          13,329

    Deferred mineral property costs                  5,215             240

    Other deferred income tax assets                27,293          12,861

                                                   156,089          26,877

    Reclassification to deferred                 (153,011)        (22,782)
    income tax liabilities

    Deferred income tax assets                       3,078           4,095

    DEFERRED INCOME TAX LIABILITIES:                                      

    Deferred mineral property costs               (49,706)        (27,459)

    Property, plant and equipment                (320,485)       (157,683)

    Other deferred income tax                     (25,383)        (19,067)
    liabilities

                                                 (395,574)       (204,209)

    Reclassification from deferred                 153,011          22,782
    income tax assets

    Deferred income tax liabilities              (242,563)       (181,427)

    Deferred income tax liabilities,           $ (239,485)     $ (177,332)
    net

Movement in net deferred tax liabilities:


                                                      2014            2013

    Balance at the beginning of the            $ (177,332)     $ (242,080)
    year

    Reclassification to assets held                      -          50,181
    for sale

    Recognized in profit (loss)                      4,894           9,752

    Reclassification to current                         -            4,815
    income taxes payable

    Recognized in OCI                              (1,457)               -

    Acquired on business combination              (65,513)               -

    Other                                             (77)               -

    Balance at the end of the year             $ (239,485)     $ (177,332)

(c) Unrecognized deferred tax assets and liabilities:

Deferred tax assets have not been recognized in respect of the following
items:


                                               2014           2013

    Tax losses                           $      568     $      548

    Deductible temporary                        177            265
    differences

    Total                                $      745     $      813

The tax losses not recognized expire as per the amount and years noted
below. The deductible temporary differences do not expire under current
tax legislation. Deferred tax assets have not been recognized in
respect of these items because it is not probable that future taxable
profit will be available against which the Company can utilize the
benefits therefrom.

The following table summarizes the Company’s non-capital losses as at
January 31, 2014 that may be applied against future taxable profit:


    Jurisdiction           Type                    Amount           Expiry
                                                                      Date

    Luxembourg             Net                 $    1,947               No
                           operating                                expiry
                           losses

The taxable temporary differences associated with investments in
subsidiaries and joint ventures, for which a deferred tax liability has
not been provided, aggregate to $295.4 million (2013 – deductible
temporary differences of $60.0 million).

(d) The difference between the amount of the reported consolidated
income tax provision and the amount computed by multiplying the
earnings (loss) before income taxes by the statutory tax rate of 26.5%
(2013 – 26.5%) is a result of the following:


                                                       2014            2013

    Expected income tax expense from             $    1,065     $    10,080
    continuing operations

    Non-deductible (non-taxable) items                3,184           1,208

    Impact of foreign exchange                       20,655             659

    Northwest Territories mining                      8,519           4,637
    royalty (net of income tax relief)

    Earnings subject to tax different                   576              70
    than statutory rate

    Assessments and adjustments                         664         (1,386)

    Current year losses for which no                     34               2
    deferred tax asset was recognized

    Tax effect on income allocated to                 1,389              -
    non-controlling interest

    Change in unrecognized temporary                   (39)            (36)
    differences

    Other                                             (542)              42

    Recorded income tax expense from             $   35,505     $    15,276
    continuing operations

(e) The Company has net operating loss carryforwards for Canadian income
tax purposes of approximately $7.7 million and $1.9 million for other
foreign jurisdictions’ tax purposes.

Note 17:

Provisions


    Future site restoration costs                       2014           2013

    Diavik Diamond Mine (a)                                                

    Balance at February 1, 2013 and 2012           $  79,055     $   65,245

    Revisions of previous estimates                    (924)         11,369

    Accretion of provision                             2,057          2,441

    Total Diavik Diamond Mine site                    80,188         79,055
    restoration costs

    Ekati Diamond Mine (b)                                                 

    Balance at April 10, 2013                        348,230              -

    Revisions of previous estimates                  (4,729)              -

    Accretion of provision                             7,279              -

    Total  Ekati Diamond Mine site                   350,780              -
    restoration costs

    Total site restoration costs                   $ 430,968     $   79,055

The Company has an obligation under various agreements to reclaim and
restore the lands disturbed by its mining operations.

(a) Diavik Diamond Mine

The Company’s share of the total undiscounted amount of the future cash
flows that will be required to settle the obligation incurred at
January 31, 2014 is estimated to be CDN $115 million. The expenditures
are discounted using a discount rate of 2.63%. The revision of previous
estimates in fiscal 2013 and 2014 is based on revised expectations of
reclamation activity costs and changes in estimated reclamation
timelines. The Diavik Joint Venture is required to provide security for
future site closure and reclamation costs for the Diavik Diamond Mine’s
operations and for various permits and licenses. 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
January 31, 2014 was $58 million based on its 40% ownership interest in
the Diavik Diamond Mine.

(b) Ekati Diamond Mine – Future site restoration

The undiscounted estimated expenditures required to settle the
obligation totals approximately CDN $420 million through 2048. The
expenditures are discounted using a discount rate of 2.63%. The Company
is required to provide security for future site closure and reclamation
costs for the Ekati Diamond Mine’s operations and for various permits
and licenses. As at January 31, 2014, the Company provided CDN $127
million in letters of credit as security with various regulatory
authorities in support of the reclamation obligations for the Ekati
Diamond Mine.

Note 18:

Share Capital

(a) Authorized

Unlimited common shares without par value.

(b) Issued


                                         Number of shares            Amount

    Balance, January 31,                       84,874,781     $     507,975
    2012

    SHARES ISSUED FOR:                                                     

    Exercise of options                             8,250                32

    Balance, January 31,                       84,883,031           508,007
    2013

    SHARES ISSUED FOR:                                                     

    Exercise of options                           140,000               516

    Balance, January 31,                       85,023,031     $     508,523
    2014

(c) Stock options

Under the Employee Stock Option Plan, amended and approved by the
shareholders on June 4, 2008, the Company may grant options for up to
6,000,000 shares of common stock. Options may be granted to any
director, officer, employee or consultant of the Company or any of its
affiliates. Options granted to directors vest immediately and options
granted to officers, employees or consultants vest over three to four
years. The maximum term of an option is ten years. The number of shares
reserved for issuance to any one optionee pursuant to options cannot
exceed 2% of the issued and outstanding common shares of the Company at
the date of grant of such options.

The exercise price of each option cannot be less than the fair market
value of the shares on the last trading day preceding the date of
grant.

The Company’s shares are primarily traded on a Canadian dollar based
exchange, and accordingly stock option information is presented in
Canadian dollars, with conversion to US dollars at the average exchange
rate for the year.

Compensation expense for stock options was $2.6 million for fiscal 2014
(2013 – $2.6 million) and is presented as a component of both cost of
sales and selling, general and administrative expenses. The amount
credited to share capital for the exercise of the options is the sum of
(a) the cash proceeds received and (b) the amount debited to
contributed surplus upon exercise of stock options by optionees (2014 -
$nil; 2013 – $nil).

Changes in share options outstanding are as follows:


                                                     2014                                 2013

                                                 Weighted                             Weighted
                                                  average                              average

                           Options               exercise       Options               exercise
                                                    price                                price

                              000s       CDN $       US $          000s       CDN $       US $

    Outstanding,             2,362       12.56      12.68         2,401       14.21      14.34
    beginning of
    year

    Granted                    435       13.19      12.75           350       14.00      14.14

    Forfeited                    -           -          -          (26)       26.64      26.54

    Exercised                (140)        3.78       3.55           (8)        3.78       3.82

    Expired                  (219)       26.45      24.38         (355)       24.39      24.48

    Outstanding,             2,438       11.93      11.49         2,362       12.56      12.68
    end of year

The following summarizes information about stock options outstanding at
January 31, 2014:


                                                              Options                         Options
                                                          outstanding                     exercisable

                                               Weighted                                              

                                                average                                              

                                              remaining      Weighted                       Weighted 

                               Number       contractual       average            Number       average

    Range of              outstanding           life in      exercise       exercisable      exercise
    exercise                                      years         price                           price
    prices

    CDN $                        000s                           CDN $              000s         CDN $

    3.78                          868               5.2   $      3.78               868   $      3.78

    12.35-16.70                 1,435               4.5         14.07               650         14.21

    41.45                         135               0.2         41.45               135         41.45

                                2,438                     $     11.93             1,653   $     10.97

(d) Stock-based compensation

The Company applies the fair value method to all grants of stock
options.

The fair value of options granted during the years ended January 31,
2014 and 2013 was estimated using a Black-Scholes option pricing model
with the following weighted average assumptions:


                                                   2014            2013

    Risk-free interest rate                       1.68%           1.17%

    Dividend yield                                0.00%           0.00%

    Volatility factor                            50.00%          50.00%

    Expected life of the                      3.5 years       3.5 years
    options

    Average fair value per                  $      5.18     $      5.17
    option, CDN

    Average fair value per                  $      4.65     $      5.18
    option, US

Expected volatility is estimated by considering historic average share
price volatility based on the average expected life of the options.

(e) RSU and DSU Plans


    RSU                                                 Number of units

    Balance, January 31, 2012                                   175,974

    Awards and payouts during the year
    (net)

     RSU awards                                           175,200

     RSU payouts                                         (74,148)

    Balance, January 31, 2013                                   277,026

    Awards and payouts during the year
    (net)

     RSU awards                                           293,096

     RSU payouts                                        (128,633)

    Balance, January 31, 2014                                   441,489

    DSU                                                 Number of units

    Balance, January 31, 2012                                   214,868

    Awards and payouts during the year
    (net)

     DSU awards                                            27,078

     DSU payouts                                         (52,261)

    Balance, January 31, 2013                                   189,685

    Awards and payouts during the year
    (net)

     DSU awards                                            39,366

     DSU payouts                                         (65,556)

    Balance, January 31, 2014                                   163,495

During the fiscal year, the Company granted 293,096 RSUs (net of
forfeitures) and 39,366 DSUs under an employee and director incentive
compensation program, respectively. The RSU and DSU Plans are full
value phantom shares that mirror the value of Dominion Diamond
Corporation’s publicly traded common shares.

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. The Company recognized an expense of $3.4 million for
the year ended January 31, 2014 (2013 – $3.4 million). The total
carrying amount of liabilities for cash settled share-based payment
arrangements is $5.7 million (2013 – $5.4 million). The amounts for
obligations and expense (recovery) for cash settled share-based payment
arrangements have been grouped with Employee Benefit Plans in Note 15
for presentation purposes.

Note 19:

Expenses by Nature

Operating profit (loss) from continuing operations includes the
following items of expense:


                                                    2014           2013

    Research and development                   $   2,316     $    3,651

    Operating lease                                1,651            382

    Employee compensation                        118,393         60,265
    expense

    Depreciation and                             140,061         80,266
    amortization

Note 20:

Earnings per Share

The following table presents the calculation of diluted earnings per
share:


                                                     2014           2013

    NUMERATOR                                                           

    Net earnings for the year                   $ 479,681     $   34,710
    attributable to shareholders

    DENOMINATOR (000S SHARES)                                           

    Weighted average number of shares              85,020         84,876
    outstanding

    Dilutive effect of employee stock                 860            620
    options (a)

                                                   85,880         85,496

(a) A total of 0.6 million options were excluded from the dilution
calculation (2013 – 1.2 million) as they are anti-dilutive.

Note 21:

Interest-Bearing Loans and Borrowings


                                                      2014           2013

    Credit facilities                          $         -     $   49,560

    First mortgage on real                           4,298          5,619
    property

    Bank advances                                        -          1,128

    Total interest-bearing                           4,298         56,307
    loans and borrowings

    Less current portion                             (794)       (51,508)

                                               $     3,504     $    4,799

                                                                         Carrying          Face
                                                                           amount         value
                                                                               at            at
                                           Nominal                        January       January
                                          interest         Date of            31,           31,
                       Currency               rate        maturity           2014          2014       Borrower

    First                   CDN              7.98%       September           $4.3          $4.3        6019838
    mortgage                                               1, 2018        million       million         Canada
    on real                                                                                               Inc.
    property

On May 31, 2013, the Company repaid the $50.0 million outstanding on its
secured revolving credit facility. 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.

Note 22:

Related Party Disclosure

There were no material related party transaction in fiscal year 2014 and
2013 other than compensation of key management personnel.

(a) Operational information

The Company had the following investments in significant subsidiaries at
January 31, 2014:


    Name of company                  Effective interest          Country of
                                                              incorporation

    Dominion Diamond                               100%              Canada
    Holdings Ltd.

    Dominion Diamond                               100%              Canada
    Diavik Limited
    Partnership

    Dominion Diamond                               100%               India
    (India) Private
    Limited

    Dominion Diamond                               100%             Belgium
    International NV

    Dominion Diamond                               100%              Canada
    Marketing Corporation

    Dominion Diamond (UK)                          100%             England
    Limited

    6019838 Canada Inc.                            100%              Canada

    Dominion Diamond                               100%              Canada
    Building Services Inc.

    Dominion Diamond Ekati                         100%              Canada
    Corporation

    Dominion Diamond                               100%              Canada
    Resources Corporation

    Dominion Diamond                               100%             Belgium
    Marketing NV

Note 23:

Commitments and Guarantees


    CONTRACTUAL                               Less         Year          Year       After
    OBLIGATIONS                               than

                               Total        1 year          2-3           4-5           5
                                                                                    years

    Interest-bearing       $   5,297     $   1,140     $  2,271     $   1,886     $     -
    loans and
    borrowings

    Environmental            197,359       190,775        2,325         4,259           -
    and
    participation
    agreements
    incremental
    commitments (a)
    (b)

    Operating lease           12,975         7,385        5,590             -           -
    obligations (c)

    Total                  $ 215,631     $ 199,300     $ 10,186     $   6,145     $     -
    contractual
    obligations

(a) Environmental agreements

Through negotiations of environmental and other agreements, both the
Diavik Joint Venture and the 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 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
January 31, 2014, was $58 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 CDN $127 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 the 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. The Ekati Diamond Mine participation agreements are in
place during the life of the Ekati Diamond Mine and the agreements
terminate in the event 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.

Note 24:

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 is not subjected to any externally imposed capital
requirements. 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 25:

Financial Risk Management Objectives and Policies

The Company is exposed, in varying degrees, to a variety of
financial-instrument-related risks by virtue of its activities.
The Company’s overall financial risk-management program focuses on the
preservation of capital and protecting current and future Company
assets and cash flows by minimizing exposure to risks posed by the
uncertainties and volatilities of financial markets.

The Company’s Audit Committee has responsibility to review and discuss
significant financial risks or exposures and to assess the steps
management has taken to monitor, control, report and mitigate such
risks to the Company.

Financial risk management is carried out by the Finance department,
which identifies and evaluates financial risks and establishes controls
and procedures to ensure financial risks are mitigated.

The types of risk exposure and the way in which such exposures are
managed are as follows:

(i) Currency risk

The Company’s sales are predominantly denominated in US dollars. As the
Company operates in an international environment, some of the Company’s
financial instruments and transactions are denominated in currencies
other than the US dollar. The results of the Company’s operations are
subject to currency transaction risk and currency translation risk. The
operating results and financial position of the Company are reported in
US dollars in the Company’s consolidated financial statements.

The Company’s primary foreign exchange exposure impacting pre-tax profit
arises from the following sources:

Net Canadian dollar denominated monetary assets and liabilities

The Company’s functional and reporting currency is US dollars; however,
many of the mining operation’s monetary assets and liabilities are
denominated in Canadian dollars. As such, the Company is continually
subject to foreign exchange fluctuations, particularly as the Canadian
dollar moves against the US dollar. The weakening/strengthening of the
Canadian dollar versus the US dollar results in an unrealized foreign
exchange gain/loss on the revaluation of the Canadian dollar
denominated monetary assets and liabilities.

Committed or anticipated foreign currency denominated transactions

Primarily Canadian dollar costs at both the Diavik Diamond Mine and
Ekati Diamond Mine.

Based on the Company’s net exposure to Canadian dollar monetary assets
and liabilities at January 31, 2014, a one-cent change in the exchange
rate would have impacted pre-tax profit for the year by $1.1 million
(2013 – $0.5 million).

(ii) Interest rate risk

Interest rate risk is the risk borne by an interest-bearing asset or
liability as a result of fluctuations in interest rates. Financial
assets and financial liabilities with variable interest rates expose
the Company to cash flow interest rate risk. The Company’s most
significant interest rate risk arises from its various credit
facilities, which bear variable interest based on LIBOR. As at January
31, 2014, the Company had no outstanding balances under our credit
facilities and consequently, a 100 basis point change in LIBOR would
have no impact on our pre-tax net profit (2013 – $0.5 million).

(iii) Concentration of credit risk

Credit risk is the risk of a financial loss to the Company if a customer
or counterparty to a financial instrument fails to meet its contractual
obligation.

The Company’s exposure to credit risk in the mining operations is
minimized by its sales policy, which requires receipt of cash prior to
the delivery of rough diamonds to its customers.

The Company manages credit risk, in respect of short-term investments,
by maintaining bank accounts with creditworthy major banks and
investing only in term deposits or bankers’ acceptances with highly
rated financial institutions that are capable of prompt liquidation.
The Company monitors and manages its concentration of counterparty
credit risk on an ongoing basis.

At January 31, 2014, the Company’s maximum counterparty credit exposure
consists of the carrying amount of cash and cash equivalents and
accounts receivable, which approximates fair value.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due.

The Company manages its liquidity by ensuring that there is sufficient
capital to meet short-term and long-term business requirements, after
taking into account cash flows from operations and the Company’s
holdings of cash and cash equivalents. The Company also strives to
maintain sufficient financial liquidity at all times in order to
participate in investment opportunities as they arise, as well as to
withstand sudden adverse changes in economic circumstances. The Company
assesses liquidity and capital resources on a consolidated basis.
Management forecasts cash flows for its current and subsequent fiscal
years to predict future financing requirements. Future financing
requirements are met through a combination of committed credit
facilities and access to capital markets.

At January 31, 2014, the Company had $224.8 million of cash and cash
equivalents.

The following table summarizes the aggregate amount of contractual
undiscounted future cash outflows for the Company’s financial
liabilities:


                                              Less          Year          Year       After
                                              than

                               Total        1 year           2-3           4-5           5
                                                                                     years

    Trade and other        $ 103,653     $ 103,653     $             $             $
    payables

    Interest-bearing
    loans and
    borrowings(a)              4,298         4,298                                        

    Environmental
    and
    participation

     agreement         197,359       190,775         2,325         4,259
    incremental
    commitments

    (a) Includes projected interest payments on the current debt
        outstanding based on interest rates in effect at January 31, 2014.

Note 26:

Financial Instruments

The Company has various financial instruments comprising cash and cash
equivalents, accounts receivable, trade and other payables, and
interest-bearing loans and borrowings.

Cash and cash equivalents consist of cash on hand and balances with
banks and short-term investments held in overnight deposits with a
maturity on acquisition of less than 90 days. Cash and cash
equivalents, which are designated as held-for-trading, are carried at
fair value based on quoted market prices and are classified within
Level 1 of the fair value hierarchy established by the International
Accounting Standards Board.

The fair value of accounts receivable is determined by the amount of
cash anticipated to be received in the normal course of business from
the financial asset.

The Company’s interest-bearing loans and borrowings are for the most
part fully secured, hence the fair values of these instruments at
January 31, 2014 are considered to approximate their carrying value.

The carrying values and estimated fair values of these financial
instruments are as follows:


                                            January 31, 2014               January 31, 2013

                                    Estimated       Carrying       Estimated       Carrying
                                         fair          value            fair          value
                                        value                          value

    Financial assets                                                                       

     Cash and cash          $   338,390     $  338,390     $   104,313     $  104,313
    equivalents, including
    restricted cash

     Accounts                    20,879         20,879           3,705          3,705
    receivable

                                  $   359,269     $  359,269     $   108,018     $  108,018

    Financial liabilities                                                                  

     Trade and other        $   103,653     $  103,653     $    39,053     $   39,053
    payables

     Interest-bearing             4,298          4,298          56,307         56,307
    loans and borrowings

                                  $   107,951     $  107,951     $    95,360     $   95,360

Note 27:

Segmented Information

The reportable segments are those operations whose operating results are
reviewed by the Chief Executive Officer to make decisions about
resources to be allocated to the segment and assess its performance
provided those operations pass certain quantitative thresholds.
Operations whose revenues, earnings or losses or assets exceed 10% of
the total consolidated revenue, earnings or losses or assets are
reportable segments.

In order to determine reportable segments, management reviewed various
factors, including geographical locations and managerial structure. It
was determined by management that the Company operates in three
segments within the diamond industry – Diavik Diamond Mine, Ekati
Diamond Mine and Corporate – for the year ended January 31, 2014. The
results of the Company’s luxury brand segment, which it disposed of on
March 26, 2013, no longer qualify as a reportable operating segment and
current and prior period results have been recast accordingly.

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 diamond mines.


    For the year ended                    Diavik           Ekati       Corporate           Total
    January 31, 2014

    Sales                                                                                       

      North America                 $      6,690     $       413     $         -     $     7,103

     Europe                        299,262         397,230               -         696,492

     India                          46,355           1,992               -          48,347

     Total sales                   352,307         399,635               -         751,942

    Cost of sales                                                                               

     Depreciation                   82,993          55,572               -         138,565
    and amortization

     All other                     174,931         337,376               -         512,307
    costs

     Total cost of                 257,924         392,948               -         650,872
    sales

    Gross margin                          94,383           6,687               -         101,070

    Gross margin (%)                       26.8%            1.7%              -%           13.4%

    Selling, general and
    administrative
    expenses

     Selling and                     4,763           2,679               -           7,442
    related expenses

     Administrative                                                 41,983          41,983
    expenses

     Total selling,                  4,763           2,679          41,983          49,425
    general and
    administrative
    expenses

    Operating profit                      89,620           4,008        (41,983)          51,645
    (loss)

    Finance expenses                    (19,690)         (7,662)               -        (27,352)

    Exploration costs                    (4,469)        (10,081)               -        (14,550)

    Finance and other                      2,741             412               -           3,153
    income

    Foreign exchange gain                  3,373        (12,252)               -         (8,879)
    (loss)

    Segmented profit                $     71,575     $  (25,575)     $  (41,983)     $     4,017
    (loss) before income
    taxes

    Segmented assets as
    at January 31, 2014

     Canada                   $    907,096     $ 1,365,389     $         -     $ 2,272,485

     Other foreign                  26,880           5,285               -          32,164
    countries

                                    $    933,976     $ 1,370,674     $         -     $ 2,304,650

    Capital expenditures            $   (26,581)     $  (95,697)     $         -     $ (122,278)

    Inventory                            115,438         325,415               -         440,853

    Total liabilities                     37,448         795,239               -         832,687

    Other significant
    non-cash items:

     Deferred                 $        650     $   (5,544)     $         -     $   (4,894)
    income tax expense
    (recovery) 

Sales to one customer totalled $104 million for the year ended January
31, 2014.


    For the year ended                   Diavik             Ekati       Corporate           Total
    January 31, 2013

    Sales                                                                                        

     North America            $    22,002     $           -     $         -     $    22,002

     Europe                       246,668                 -               -         246,668

      India                              76,741                 -               -          76,741

     Total sales                  345,411                 -               -         345,411

    Cost of sales                                                                                

     Depreciation                  79,075                 -               -          79,075
    and amortization

     All other                    188,509                 -               -         188,509
    costs

     Total cost of                267,584                 -               -         267,584
    sales

    Gross margin                         77,827                 -               -          77,827

    Gross margin (%)                      22.5%                 %               %           22.5%

    Selling, general and
    administrative
    expenses

     Selling and                    5,161                 -               -           5,161
    related expenses

     Administrative                     -                 -          24,995          24,995
    expenses

     Total selling,                 5,161                 -          24,995          30,156
    general and
    administrative
    expenses

    Operating profit                     72,666                 -        (24,995)          47,671
    (loss)

    Finance expenses                    (9,083)                 -               -         (9,083)

    Exploration costs                   (1,801)                 -               -         (1,801)

    Finance and other                       780                 -               -             780
    income

    Foreign exchange gain                   493                 -               -             493

    Segmented profit                $    63,055     $           -     $  (24,995)     $    38,060
    (loss) before income
    taxes

    Segmented assets as
    at January 31, 2013

     Canada                   $ 1,339,482     $           -     $         -     $ 1,339,482

     Other foreign                370,974                 -               -         370,974
    countries

                                    $ 1,710,456     $           -     $         -     $ 1,710,456

    Capital expenditures            $  (56,478)     $           -     $         -     $  (56,478)

    Inventory                           115,627                 -               -         115,627

    Total liabilities                   879,204                 -               -         879,204

    Other significant
    non-cash items:

     Deferred                 $   (9,752)     $           -     $         -     $   (9,752)
    income tax recovery

Diavik Diamond Mine Mineral Reserve and

Mineral Resource Statement

AS OF DECEMBER 31, 2013 (UNAUDITED) (100% BASIS)



    Mineral
    Reserves

                                                       Proven                       Probable            Proven and Probable

    Kimberlite                   Millions   Carats   Millions   Millions   Carats   Millions   Millions   Carats   Millions
    pipes                              of      per         of         of      per         of         of      per         of
                      Type         tonnes    tonne     carats     tonnes    tonne     carats     tonnes    tonne     carats

    A-154 South         UG            0.8      4.1        3.1        1.4      3.4        4.8        2.2      3.6        7.8

    A-154 North         UG            5.7      2.1       12.2        1.8      2.2        3.9        7.5      2.1       16.1

    A-418               UG            4.4      3.7       16.2        2.1      2.9        6.2        6.5      3.4       22.4

    Stockpile          N/A            0.2      2.7        0.5          -        -          -        0.2      2.7        0.5

    Sub-Total -                      10.9      2.9       31.4        5.3      2.8       14.9       16.2      2.9       46.3
    Underground

    Sub-Total -                       0.2      2.7        0.5          -        -          -        0.2      2.7        0.5
    Stockpile

    Total                            11.1      2.9       32.0        5.3      2.8       14.9       16.4      2.9       46.8
    Reserves

    Note:
    Totals may
    not add up
    due to
    rounding.

    Mineral
    Resources

                                                     Measured            Indicated Resources             Inferred Resources
                                                    Resources

    Kimberlite                   Millions   Carats   Millions   Millions   Carats   Millions   Millions   Carats   Millions
    pipes                              of      per         of         of      per         of         of      per         of
                      Type         tonnes    tonne     carats     tonnes    tonne     carats     tonnes    tonne     carats

    A-154 South         UG              -        -          -          -        -          -       0.04      4.0        0.1

    A-154 North         UG              -        -          -          -        -          -        2.2      2.6        5.7

    A-418               UG              -        -          -          -        -          -        0.3      2.4        0.7

    A-21                OP            3.6      2.8       10.0        0.4      2.6        1.0        0.8      3.0        2.3

    Total                             3.6      2.8       10.0        0.4      2.6        1.0        3.3      2.7        8.8
    Resources

    Note:
    Totals may
    not add up
    due to
    rounding.

Cautionary Note to United States Investors Concerning Disclosure of
Mineral Reserves and Resources:
The Company is organized under the laws of Canada. The mineral reserves
and resources described herein are estimates, and have been prepared in
compliance with National Instrument 43-101 (“NI 43-101″). The
definitions of proven and probable reserves used in NI 43-101 differ
from the definitions in the United States Securities and Exchange
Commission (“SEC”) Industry Guide 7. In addition, the terms “mineral
resource”, “measured mineral resource”, “indicated mineral resource”
and “inferred mineral resource” are defined in and required to be
disclosed by NI 43-101; however, these terms are not defined terms
under SEC Industry Guide 7, and normally are not permitted to be used
in reports and registration statements filed with the SEC. Accordingly,
information contained in this financial report containing descriptions
of the Diavik Diamond Mine’s mineral deposits may not be comparable to
similar information made public by US companies subject to the
reporting and disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder. United States investors are cautioned not to assume that all or any
part of Measured or Indicated Mineral Resources will ever be converted
into Mineral Reserves. United States investors are also cautioned not
to assume that all or any part of an Inferred Mineral Resource exists,
or is economically or legally mineable.

The reserve and resource information for the Diavik Diamond Mine was
prepared by or under the supervision of Calvin G. Yip, P. Eng., an
employee of Diavik Diamond Mines (2012) Inc. and a Qualified Person
within the meaning of NI 43-101 of the Canadian Securities
Administrators. The Qualified Person has verified the data disclosed,
and the data underlying the information contained herein. For further
details and information concerning Dominion Diamond Corporation’s
Mineral Reserves and Mineral Resources, readers should reference
Dominion Diamond Corporation’s Annual Information Form available
through www.sedar.com and www.ddcorp.ca.

Ekati Diamond Mine Mineral Reserve and

Mineral Resource Statement

AS OF JANUARY 31, 2014 (UNAUDITED) (100% BASIS)


    Mineral
    Reserves

                                                                   Proven                       Probable            Proven and Probable

    Kimberlite           Zone                Millions   Carats   Millions   Millions   Carats   Millions   Millions   Carats   Millions
    pipes            location                      of      per         of         of      per         of         of      per         of
                                    Type       tonnes    tonne     carats     tonnes    tonne     carats     tonnes    tonne     carats

    Koala                Core         UG            -        -          -        5.1      0.6        3.0        5.1      0.6        3.0

    Fox                  Core         OP            -        -          -        0.5      0.3        0.2        0.5      0.3        0.2

    Misery               Core         OP            -        -          -        3.0      4.0       12.3        3.0      4.0       12.3
    Main

    Pigeon               Core         OP            -        -          -        7.3      0.4        3.1        7.3      0.4        3.1

    Stock-pile           Core        N/A            -        -          -        1.1      0.2        0.2        1.1      0.2        0.2

    Total                                           -        -          -       17.0      1.1       18.8       17.0      1.1       18.8
    Reserves

    Note:
    Totals may
    not add up
    due to
    rounding.

    Mineral
    Resources

                                                       Measured Resources            Indicated Resources             Inferred Resources

    Kimberlite           Zone                Millions   Carats   Millions   Millions   Carats   Millions   Millions   Carats   Millions
    pipes            location                      of      per         of         of      per         of         of      per         of
                                    Type       tonnes    tonne     carats     tonnes    tonne     carats     tonnes    tonne     carats

    Koala                Core         UG            -        -          -        7.1      0.6        4.3        0.2      1.0        0.2

    Koala                Core         UG            -        -          -          -        -          -        0.1      0.6        0.1
    North

    Fox                  Core         OP            -        -          -        6.0      0.2        1.4        0.8      0.3        0.2

    Fox                  Core         UG            -        -          -       20.2      0.3        6.1        5.7      0.3        1.7

    Misery               Core         OP            -        -          -        3.7      4.5       16.8        0.8      2.9        2.3
    Main

    Pigeon               Core         OP            -        -          -       12.0      0.5        5.9        1.7      0.4        0.8

    Sable                Core         OP            -        -          -       15.4      0.9       13.3          -        -          -

    Jay                Buffer         OP            -        -          -       36.2      2.2       78.1        9.5      1.4       12.9

    Lynx               Buffer         OP            -        -          -        1.3      0.8        1.0        0.1      0.8        0.1

    Stock-pile           Core        N/A            -        -          -        1.1      0.2        0.3        6.6      0.2        1.0

    Sub-Total                                       -        -          -       65.5      0.7       48.0       15.9      0.4        6.3
    Core Zone

    Sub-Total
    Buffer                                          -        -          -       37.5      2.1       79.1        9.6      1.3       13.0
    Zone

    Total                                           -        -          -      103.0      1.2      127.1       25.5      0.8       19.3
    Resources

Mineral resources are inclusive of mineral reserves.

Mineral resources are reported at +1.0 mm (diamonds retained on a 1.0 mm
slot screen).

Note: Totals may not add up due to rounding.

Cautionary Note to United States Investors Concerning Disclosure of
Mineral Reserves and Resources:
The Company is organized under the laws of Canada. The mineral reserves
and resources described herein are estimates, and have been prepared in
compliance with National Instrument 43-101 (“NI 43-101″). The
definitions of proven and probable reserves used in NI 43-101 differ
from the definitions in the United States Securities and Exchange
Commission (“SEC”) Industry Guide 7. In addition, the terms “mineral
resource”, “measured mineral resource”, “indicated mineral resource”
and “inferred mineral resource” are defined in and required to be
disclosed by NI 43-101; however, these terms are not defined terms
under SEC Industry Guide 7, and normally are not permitted to be used
in reports and registration statements filed with the SEC. Accordingly,
information contained in this financial report containing descriptions
of the Ekati Diamond Mine’s mineral deposits may not be comparable to
similar information made public by US companies subject to the
reporting and disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder. United States investors are cautioned not to assume that all or any
part of Measured or Indicated Mineral Resources will ever be converted
into Mineral Reserves. United States investors are also cautioned not
to assume that all or any part of an Inferred Mineral Resource exists,
or is economically or legally mineable.

The reserve and resource information for the Ekati Diamond Mine was
prepared by or under the supervision of Mats Heimersson, P. Eng., an
employee of the Company and a Qualified Person within the meaning of NI
43-101 of the Canadian Securities Administrators. The Qualified Person
has verified the data disclosed, and the data underlying the
information contained herein. For further details and information
concerning Dominion Diamond Corporation’s Mineral Reserves and Mineral
Resources, readers should reference Dominion Diamond Corporation’s
Annual Information Form available through www.sedar.com and www.ddcorp.ca.

SOURCE Dominion Diamond Corporation


Source: PR Newswire



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