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Dominion Diamond Corporation Reports Fiscal 2015 First Quarter Results

June 11, 2014

TORONTO, June 11, 2014 /PRNewswire/ – Dominion Diamond Corporation (TSX: DDC,
NYSE: DDC) (the “Company”) today announced its fiscal 2015 first
quarter results for the period ended April 30, 2014.

Robert Gannicott, Chairman and Chief Executive Officer stated: “A year
on from our purchase of the Ekati operation, we continue to improve ore
production and recoveries as we develop new ore sources. The receipt of
full operating permits for the Lynx open pit development in less than a
year from application speaks better than words about the determination
of a newly empowered Government of the Northwest Territories to
effectively manage through this transition and to support well planned
resource development.”

Diamond Market

Sentiment at the very important JCK Las Vegas show in June reflected the
optimism of the US retail market. Demand continues to be steady from
China and is picking up from India.

First Quarter Highlights

The first quarter of fiscal 2015 marks the anniversary of the
divestiture of the Company’s luxury business and the acquisition of the
Ekati Diamond Mine. The Company is now focused on delivering enhanced
value from its world class diamond mines: an 80% interest in the Ekati
Diamond Mine and a 40% interest in the Diavik Diamond Mine. The Company
is well-funded and has a strong balance sheet.

        --  During the first quarter, both the Ekati Diamond Mine and the
            Diavik Diamond Mine performed well. Production at both mines
            was substantially ahead of expectations.
        --  An improved plan has been developed for mining the Jay
            kimberlite, the largest diamondiferous resource in North
            America.
        --  A total of $163 million of capital expenditure remains to be
            spent on the Misery push-back before bringing the Misery Main
            Pipe, which at 4 carats a tonne is one of the richest ore
            bodies in the world, into full production at the beginning of
            calendar 2016.
        --  The Company has received the amended Ekati Water License to now
            incorporate the Lynx development.
        --  A decision on the development of the A-21 pipe at the Diavik
            Diamond Mine is expected later this year.

    Consolidated Financial Highlights                     Q1 2015 Q1 2014
    (in millions of US dollars except earnings per share)

    Dominion Diamond Corporation Sales                      175.5   108.8

                                 Cost of Sales              137.7    81.5

                                 Gross Margin                37.8    27.3

                                 Gross Margin (%)           21.6%   25.1%

                                 Selling general &            7.1    16.8
                                 administration

                                 Operating profit from       30.7    10.5
                                 continuing operations

                                 EBITDA from continuing      69.6    30.7
                                 operations

                                 EBITDA Margin (%)          39.6%   28.2%

                                 Earnings per share          0.17    0.04

Excluded from the Ekati sales recorded in the first quarter 2015 were
estimated sales of $6.9 million of rough diamonds recovered from the
satellite material at the Misery South and Southwest kimberlite pipes,
as this material was excavated during the pre-stripping operations for
the Misery Main Pipe. The Company estimates that consolidated gross
margin and EBITDA margin would have been approximately 23.0% and 40.4%,
respectively, if the carats sold from material excavated from the
Misery South & Southwest kimberlite pipes were recognized as revenue.

Exploration expense of $9.0 million was incurred during the first
quarter ($1.0 million in Q1 2014). Included in exploration expense for
the first quarter is $8.7 million of exploration work on the Jay pipe
within the Buffer Zone at the Ekati Diamond Mine.

Two rough diamond sales were completed by the Company during the first
quarter. The third rough diamond sale of fiscal 2015, which commenced
in the last week of April and only finished in the first week in May,
will be included as one of the three sales in the second quarter of
fiscal 2015. As of April 30, 2014, the Company held rough diamond
inventory with a market value of approximately $285 million and total
cash and cash equivalents of $328 million ($212.5 million of cash and
$115.6 million of restricted cash).

Jay Project Update

An improved plan for mining the Jay kimberlite pipe, which simplifies
construction and has a reduced impact on the water and fish population
compared to the initial plan, has been introduced to the Northwest
Territories regulatory bodies and the impacted communities.
Improvements to diamond prices and an improved understanding of the
geology of the kimberlite and surrounding rocks supports the mining of
Jay alone without the early support of the Cardinal pipe. The changes,
which have been received with enthusiastic support, reduce both the
expected timeline and the environmental footprint of the project. This
gives enhanced assurance of the release of ore from Jay in late
calendar 2019 to meet the completion of the current ore reserves. The
“Developer’s Assessment Report” for the project will be filed with the
regulator in September this year in anticipation of ministerial
approval from the Government of the Northwest Territories in the fall
of next year.

Operational Summary

The stronger than expected production results at the Ekati Diamond Mine
for the first quarter reflect the Company’s strategy for fully
utilizing the processing plant capacity, higher than expected grades in
the reserve feed and an increase in diamond recovery (primarily of
smaller diamonds) due to operational improvements to the processing
plant implemented by the Company over the last 8 months. The Company
estimates that process plant improvements to date have increased the
recovered grade during the first quarter, albeit in predominantly
smaller diamonds, by approximately 15%.

Ore processing at the Diavik Diamond Mine was 11% ahead of plan as a
result of greater ore availability, higher mining rates and improved
equipment availability, equipment efficiencies and utilization of the
processing plant.


    Rough Diamond Production                               Q1 2015 Q1 20141

    Ekati Diamond Mine (100%)    Tonnes processed ('000's)     962      206

    Three months ended April 30  Carats Recovered ('000's)     561       82

                                 Grade (carats per tonne)     0.58     0.58

    Diavik Diamond Mine (40%)    Tonnes processed ('000's)     235      202

    Three months ended March 312 Carats Recovered ('000's)     746      778

                                 Grade (carats per tonne)    2.913    3.673

(1 )The Q1 2014 amounts for the Ekati Diamond Mine are for the period from
April 10, 2013 (the date of acquisition by the Company of its interest
in the Ekati Diamond Mine) to April 30, 2013.


(2) The Diavik Diamond Mine reports on a calendar quarter, whereas the Ekati
Diamond Mine reports to the Company’s fiscal quarter. For the three
months ended April 30, 2014, the Diavik Diamond Mine (on a 40% basis)
produced 735,000 carats from the processing of 236,000 tonnes of ore.
The last month of this production is not included in the Company’s
first quarter financial results, as the Company reports Diavik results
on a one-month lag.


(3 )Grade adjusted to exclude Coarse Ore Rejects (COR). COR is not included
in the reserves and is therefore incremental production.


    Ekati and Diavik Summary
    (in millions of US dollars, except carats sold)       Q1 2015 Q1 20141

    Ekati Diamond Mine (100%) Sales2                         92.8       20

                              Carats sold ('000's)            259       12

                              Cash Cost of Production        89.9     17.4

                              Cost of Sales                  81.4     19.6

                              Gross Margin                   11.4      0.3

                              Gross Margin (%)              12.3%     1.4%

                              Operating Profit                9.9    (0.2)

                              Depreciation & amortization    20.2        0

                              EBITDA                         30.1    (0.2)

                              EBITDA Margin (%)             32.4%    -1.2%

                              Capital Expenditures           49.2      8.8

    Diavik Diamond Mine (40%) Sales                          82.7     88.9

                              Carats sold ('000's)            582      783

                              Cash Cost of Production        39.2     42.9

                              Cost of Sales                  56.2     61.9

                              Gross Margin                   26.4     27.0

                              Gross Margin (%)              32.0%    30.4%

                              Operating Profit               25.5     25.9

                              Depreciation & amortization    18.4     19.9

                              EBITDA                         43.9     45.8

                              EBITDA Margin (%)             53.0%    51.5%

                              Capital Expenditures            6.8     10.2

(1)The Q1 2014 amounts for the Ekati Diamond Mine are for the period from
April 10, 2013 (the date of acquisition by the Company of its interest
in the Ekati Diamond Mine) to April 30, 2013.


(2) Excluded from the Ekati sales recorded in the first quarter 2015 were
estimated sales of $6.9 million of rough diamonds recovered from the
satellite material at the Misery South and Southwest kimberlite pipes,
as this material was excavated during the pre-stripping operations for
the Misery Main Pipe. The Company estimates that the Ekati gross margin
and EBITDA margin would have been approximately 15.6% and 34.3%,
respectively, if the carats sold from material excavated from the
Misery South & Southwest kimberlite pipes were recognized as revenue.


    Diamond Inventory
    (in millions of US dollars, except    April 30, 2014 January 31, 2014
    carats)

    Ekati Diamond Mine   Carats (million)            0.8              0.5
    (100%)

                         At Cost                     170              130

                         Estimated Market            200              140
                         Value

    Diavik Diamond Mine  Carats (million)            0.7              0.4
    (40%)

                         At Cost                      60               50

                         Estimated Market             85               65
                         Value

    Consolidated Diamond Estimated Market
    Inventory            Value of Total
                         Inventory1                  285              205

(1 )Includes an estimated $65 million (at market value) of discretionary
stock held back from sale at April 30, 2014.


    Cash                                   April 30, 2014      Jan 31, 2014
    (in millions of US dollars)

    Consolidated Balance Restricted cash            115.6             113.6
    Sheet

                         Unrestricted cash          212.5
                                                                      224.8

                         Total cash                 328.1            338.4 


    Diamond Prices
    April/May 2014 Average Price per Carat (in US dollars) 

    Diavik Ore Type                    Ekati Ore Type1

    A-154 South                   $145 Koala                         $395

    A-154 North                   $190 Koala North                   $440

    A-418                         $105 Fox                           $315

    Coarse Ore Rejects             $50 Misery Satellite Pipes   $80 - 100

                                       Coarse Ore Rejects       $65 - 120

    Rough Diamond Prices  January  +8% Recovered Small Diamonds $70 - 100
    to June, 2014

(1)The Ekati prices do not reflect the increased recovery of small diamonds
from the improvements in processing so as to be consistent with the
Company’s current reserve estimates. The rough diamond price of the
additional recovered small diamonds at Ekati is estimated at between
$70 and $100 per carat.

     _____________________________________________________________________
    |Full Year   |           |            |             |                 |
    |Guidance    |           |Depreciation|             |          Capital|
    |(in millions|Cash Costs2|           &|Cost of Sales|    Expenditures2|
    |of US       |           |Amortization|             |                 |
    |dollars)1   |           |            |             |                 |
    |____________|___________|____________|_____________|_________________|
    |Ekati       |        345|         125|          490|              180|
    |Diamond Mine|           |            |             |                 |
    |(100%)      |           |            |             |                 |
    |____________|___________|____________|_____________|_________________|
    |Diavik      |        150|          95|          275|                 |
    |Diamond Mine|           |            |             |               19|
    |(40%)       |           |            |             |                 |
    |____________|___________|____________|_____________|_________________|

(1 )Assuming an average Canadian/US dollar exchange rate of $1.10.

(2 )The guidance on capital expenditures and cash costs of production for
Diavik are for the calendar year ending December 31, 2014; all others
are for the fiscal year ending January 31, 2015
.

     __________________________________________________________________
    |Had the Company sold only the last production shipped in the first|
    |quarter, the estimated price based on                             |
    |the prices achieved in the May 2014 sale, would have been:        |
    |__________________________________________________________________|
    |Ekati Diamond Mine (100%)|approximately $281 per carat            |
    |_________________________|________________________________________|
    |Diavik Diamond Mine (40%)|approximately $120 per carat            |
    |_________________________|________________________________________|

Non-IFRS Measures

The terms EBITDA, EBITDA margin and cash cost of production do not have
standardized meanings according to International Financial Reporting
Standards. See “Non-IFRS Measures” in the Company’s First Quarter
Management’s Discussion and Analysis for additional information.

Conference Call and Webcast

Beginning at 8:30AM (ET) on Thursday, June 12th, 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 866-515-2915 within North America or 617-399-5129 from
international locations and entering passcode 36919939.

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, June 26th, 2014 by dialing
888-286-8010 within North America or 617-801-6888 from international
locations and entering passcode 66271254.

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% 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 third 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)

FIRST QUARTER RESULTS

Dominion Diamond Corporation (the “Company”) recorded a consolidated net
profit attributable to shareholders of $14.7 million or $0.17 per share
for the quarter, compared to a net profit attributable to shareholders
of $506.2 million or $5.96 per share in the first quarter of the prior
year. Prior year results include the sale of Harry Winston, Inc. (the
“Luxury Brand Segment”) to Swatch Group.

Consolidated sales from continuing operations were $175.5 million for
the quarter, compared to $108.8 million for the comparable quarter of
the prior year, resulting in an operating profit of $30.7 million,
compared to an operating profit of $10.5 million in the comparable
quarter of the prior year. Consolidated EBITDA from continuing
operations was $69.6 million compared to $30.7 million in the
comparable quarter of the prior year.

During the first quarter, the Company recorded sales from the Diavik
Diamond Mine of $82.7 million, compared to $88.9 million in the
comparable quarter of the prior year. The Company sold approximately
0.6 million carats from the Diavik Diamond Mine for an average price
per carat of $142, compared to 0.8 million carats for an average price
per carat of $114 in the comparable quarter of the prior year. The 25%
increase in the achieved average rough diamond prices and 26% decrease
in volume of carats sold versus the comparable quarter of the prior
year resulted primarily from the carryover of some lower value
inventory at April 30, 2014 for sorting and sale in the second quarter
due to increased production volumes during the first quarter. The
Diavik segment generated gross margins and EBITDA margins as a
percentage of sales of 32.0% and 53%, respectively, compared to 30.4%
and 52%, respectively, in the comparable quarter of the prior year. At
April 30, 2014, the Company had 0.7 million carats of Diavik Diamond
Mine produced inventory with an estimated market value of approximately
$85 million.

During the first quarter, the Ekati Diamond Mine recorded sales of $92.8
million, compared to $19.9 million for the period from April 10 to
April 30, 2013. The Company sold approximately 0.3 million carats for
an average price per carat of $359 compared to 0.01 million carats for
an average price per carat of $1,620 for the period of April 10 to
April 30, 2013. Excluded from sales recorded in the first quarter 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 operations from the Misery Main
pipe. The Ekati Diamond Mine generated gross margins and EBITDA margins
of 12.3% and 32%, respectively, compared to 1.4% and -1% for the period
of April 10 to April 30, 2013. The prior year results include the
purchase of inventory at market values as part of the acquisition of
the Ekati Diamond Mine (the “Ekati Diamond Mine Acquisition”). The
Company estimates that gross margins and EBITDA margins would have been
approximately 15.6% and 34%, 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 & Southwest carats have been applied as a reduction of mining
assets. At April 30, 2014, the Company had 0.8 million carats of Ekati
Diamond Mine produced inventory with an estimated market value of
approximately $200 million. Included in ending inventory is an
estimated 0.1 million carats of Misery South & Southwest with an
estimated market value of approximately $8 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 $4.7 million, compared to $15.2
million in the comparable quarter of the prior year. Prior year results
included $11.3 million of transaction costs related to the Ekati
Diamond Mine Acquisition.

Management’s Discussion and Analysis

PREPARED AS OF JUNE 11, 2014 (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 three
months ended April 30, 2014, and its financial position as at April 30,
2014. This MD&A is based on the Company’s unaudited interim condensed
consolidated financial statements prepared in accordance with
International Accounting Standards 34 (“IAS 34″), as issued by the
International Accounting Standards Board (“IASB”), and should be read
in conjunction with the unaudited interim condensed consolidated
financial statements and notes thereto for the three months ended April
30, 2014, and the audited consolidated financial statements for the
year ended January 31, 2014. Unless otherwise specified, all financial
information is presented in United States dollars. Unless otherwise
indicated, all references to “first quarter” refer to the three months
ended April 30, 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
macro economic 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 19 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, which the Company controls, 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 controls 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 Acquisition”).
The Ekati Diamond Mine consists of the Core Zone (in which the Company
owns 80%), which includes the current operating mine and other
permitted kimberlite pipes, as well as the Buffer Zone (in which the
Company owns 58.8%), an adjacent area hosting kimberlite pipes having
both development and exploration potential, such as the Jay kimberlite
pipe 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

The rough diamond market maintained the momentum experienced at the
beginning of the calendar year. Rough diamond prices then held steady
as the normally slow period during late April and early May had little
effect on market sentiment. The diamond market has also overcome
earlier concerns about liquidity in the Indian diamond manufacturing
industry and it has become increasingly evident that tighter credit
will lead to more sustainable growth in both market demand and diamond
pricing.

Polished sales have remained healthy with shortages still evident in the
lower price ranges. The major retail jewelry markets remain upbeat with
solid growth in the US and in the market for jewelry in China. The
Japanese jewelry market was also positive as the expected decline in
demand following the introduction of a consumption tax in April has
failed to have the anticipated impact. The new business focused
government in India was welcomed by the diamond market and the expected
impacts of stability of the Rupee and promised economic growth bodes
well for a marked improvement in Indian retail demand.

CONSOLIDATED FINANCIAL RESULTS

The following is a summary of the Company’s consolidated quarterly
results for the eight quarters ended April 30, 2014.

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


                                                                                                          Three     Three
                                                                                                         months    months
                                                                                                          ended     ended
                                                                                                          April     April
                                                                                                            30,       30,
                                                                                                           2014      2013
                         2015       2014      2014       2014      2014      2013      2013      2013
                           Q1         Q4        Q3         Q2        Q1        Q4        Q3        Q2            

    Sales           $ 175,522 $  233,163 $ 148,138 $  261,803 $ 108,837 $ 110,111 $  84,818 $  61,473 $ 175,522 $ 108,837

    Cost of sales     137,680    202,030   136,221    231,086    81,535    79,038    71,663    46,784   137,680    81,535

    Gross margin       37,842     31,133    11,917     30,717    27,302    31,073    13,155    14,689    37,842    27,302

    Gross margin        21.6%      13.4%      8.0%      11.7%     25.1%     28.2%     15.5%     23.9%     21.6%     25.1%
    (%)

    Selling,            7,148     10,117     7,408     15,056    16,843    10,086     7,581     5,750     7,148    16,843
    general and
    administrative
    expenses

    Operating          30,694     21,016     4,509     15,661    10,459    20,987     5,574     8,939    30,694    10,459
    profit (loss)
    from continuing
    operations

    Finance           (3,310)    (3,553)   (3,136)   (17,921)   (2,742)   (2,382)   (2,308)   (2,151)   (3,310)   (2,742)
    expenses

    Exploration       (9,044)    (3,290)   (7,074)    (3,145)   (1,039)     (306)     (673)     (568)   (9,044)   (1,039)
    costs

    Finance and         2,827        491       825      1,032       804       601        60        67     2,827       804
    other income

    Foreign             (947)    (7,917)     1,122    (2,814)       732       116     (301)     1,048     (947)       732
    exchange gain
    (loss)

    Profit (loss)      20,220      6,747   (3,754)    (7,187)     8,214    19,016     2,352     7,335    20,220     8,214
    before income
    taxes from
    continuing
    operations

    Income tax          9,533     19,018     2,792      8,655     5,042     6,977     1,583     3,386     9,533     5,042
    expense
    (recovery)

    Net profit      $  10,687   (12,271) $ (6,546) $ (15,842) $   3,172 $  12,039 $     769 $   3,949 $  10,687 $   3,172
    (loss) from
    continuing
    operations

    Net profit              -          -         -          -   502,656     2,802     3,245       804         -   502,656
    (loss) from
    discontinued
    operations

    Net profit      $  10,687 $ (12,271) $ (6,546) $ (15,842) $ 505,828 $  14,841 $   4,014 $   4,753 $  10,687 $ 505,828
    (loss)

    Net profit
    (loss) from
    continuing
    operations
    attributable to

    Shareholders    $  14,671 $  (7,802) $ (4,794) $ (13,884) $   3,504 $  12,146 $     152 $   3,951 $  14,671 $   3,504

    Non-controlling   (3,984)    (4,469)   (1,752)    (1,958)     (332)     (107)       617       (2)   (3,984)     (332)
    interest

    Net profit
    (loss)
    attributable to

    Shareholders    $  14,671 $  (7,802) $ (4,794) $ (13,884) $ 506,160 $  14,948 $   3,397 $   4,755 $  14,671 $ 506,160

    Non-controlling   (3,984)    (4,469)   (1,752)    (1,958)     (332)     (107)       617       (2)   (3,984)     (332)
    interest

    Earnings (loss)
    per share -
    continuing
    operations
    attributable to
    shareholders

        Basic       $    0.17 $   (0.09) $  (0.06) $   (0.16) $    0.04 $    0.14 $    0.00 $    0.05 $    0.17 $    0.04

        Diluted     $    0.17 $   (0.09) $  (0.06) $   (0.16) $    0.04 $    0.14 $    0.00 $    0.05 $    0.17 $    0.04

    Earnings (loss)
    per share
    attributable to
    shareholders

        Basic       $    0.17 $   (0.09) $  (0.06) $   (0.16) $    5.96 $    0.18 $    0.04 $    0.06 $    0.17 $    5.96

        Diluted     $    0.17 $   (0.09) $  (0.06) $   (0.16) $    5.89 $    0.18 $    0.04 $    0.06 $    0.17 $    5.89

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

    Total assets(i) $   2,361 $    2,305 $   2,305 $    2,299 $   2,412 $   1,710 $   1,733 $   1,660 $   2,361 $   2,412

    Total long-term $     676 $      691 $     688 $      694 $     695 $     269 $     682 $     461 $     676 $     695
    liabilities(i)

    Operating       $  30,694 $   21,016 $   4,509 $   15,661 $  10,459 $  20,987 $   5,574 $   8,939 $  30,694 $  10,459
    profit (loss)
    from continuing
    operations

    Depreciation       38,885     55,228    31,978     32,644    20,211    24,346    20,588    13,160    38,885    20,211
    and
    amortization
    (ii)

    EBITDA from     $  69,579 $   76,244 $  36,487 $   48,305 $  30,670 $  45,333 $  26,162 $  22,099 $  69,579 $  30,670
    continuing
    operations(iii)

(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 17.

Three Months Ended April 30, 2014, Compared to Three Months Ended April
30, 2013


CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The Company recorded a first quarter consolidated net income
attributable to shareholders of $14.7 million or $0.17 per share,
compared to $506.2 million or $5.96 per share in the first quarter of
the prior year. Included in the three month period ended April 30, 2013
amount is the net profit from discontinued operations of $502.7 million
recognized on the sale of the Luxury Brand Segment.

CONSOLIDATED SALES

Consolidated sales for the first quarter totalled $175.5 million,
consisting of Diavik rough diamond sales of $82.7 million and
Ekati rough diamond sales of $92.8 million. This compares to sales of
$108.8 million in the comparable quarter of the prior year (Diavik
rough diamond sales of $88.9 million and Ekati rough diamond sales of
$19.9 million; Ekati sales are for the period of April 10 to April 30,
2013).

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 8 for
additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN

The Company’s first quarter cost of sales was $137.7 million resulting
in a gross margin of 21.6%, compared to a cost of sales of
$81.5 million and a gross margin of 25.1% for the comparable quarter of
the prior year. The Company’s cost of sales includes costs associated
with mining and rough diamond sorting activities. See “Segmented
Analysis” on page 8 for additional information.

CONSOLIDATED INCOME TAXES

The Company recorded a net income tax expense of $9.5 million during the
first quarter, compared to a net income tax expense of $5.0 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, and earnings
subject to tax different than the statutory rate. As a result, the
Company’s recorded tax provision can be significantly different than
the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency
exchange rate fluctuations. The Company’s functional and reporting
currency is US dollars; however, the calculation of income tax expense
is based on income in the currency of the country of origin. As such,
the Company is continually subject to foreign exchange fluctuations,
particularly as the Canadian dollar moves against the US dollar. During
the first quarter, the Canadian dollar strengthened against the US
dollar. As a result, the Company recorded an unrealized foreign
exchange loss of $3.9 million on the revaluation of the Company’s
Canadian dollar denominated deferred income tax liability. This
compares to an unrealized foreign exchange gain of $1.8 million in the
comparable quarter of the prior year. The unrealized foreign exchange
loss is recorded as part of the Company’s deferred income tax expense,
and is not deductible for Canadian income tax purposes. During the
first quarter, the Company also recognized a deferred income tax
recovery of $5.4 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 $3.1 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 $2.9
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 $1.2 million recognized in the comparable
quarter of the prior year.

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

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The principal components of selling, general and administrative (“SG&A”)
expenses include expenses for salaries and benefits, professional fees,
consulting and travel. The Company incurred SG&A expenses of $7.1
million for the first quarter, compared to $16.8 million in the
comparable quarter of the prior year. The prior year SG&A expenses
included transaction costs related to the Ekati Diamond Mine
acquisition. See “Segmented Analysis” on page 8 for additional
information.

CONSOLIDATED FINANCE EXPENSES

Finance expense for the first quarter was $3.3 million, compared to
finance expense of $2.7 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 only recorded for the period from April 10 to April 30 in the
comparable quarter of the prior year. Accretion expense was $2.9
million (three months ended April 30, 2013 – $2.2 million) related to
future site restoration liabilities at the Diavik Diamond Mine and the
Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE

Exploration expense of $9.0 million was incurred during the first
quarter, compared to $1.0 million in the comparable quarter of the
prior year. Included in exploration expense for the first quarter is
$8.7 million of exploration work on the Jay pipe within the Buffer Zone
at the Ekati Diamond Mine and $0.3 million of exploration work on the
Company’s claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME

Finance and other income of $2.8 million was recorded during the first
quarter, compared to $0.8 million in the comparable quarter of the
prior year.

CONSOLIDATED FOREIGN EXCHANGE

A net foreign exchange loss of $0.9 million was recognized during the
first quarter, compared to a net foreign exchange gain of $0.7 million
in the comparable quarter of the prior year. The Company does not
currently have any significant foreign exchange derivative instruments
outstanding.

Segmented Analysis

The operating segments of the Company include the Diavik Diamond Mine,
the Ekati Diamond Mine and 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)


                                                                                                    Three    Three
                                                                                                   months   months
                                                                                                    ended    ended
                                                                                                    April    April
                           2015      2014     2014     2014     2014      2013     2013     2013      30,      30,

                             Q1        Q4       Q3       Q2       Q1        Q4       Q3       Q2     2014     2013

    Sales                                                                                                         

      North            $      - $     511 $      - $      - $  6,179 $   4,604 $  7,697 $  2,269 $      - $  6,179
    America

      Europe             73,918   112,001   45,088   80,530   61,642    84,346   57,438   50,514   73,918   61,642

      India               8,757     6,704    7,818   10,737   21,095    21,161   19,683    8,690    8,757   21,095

    Total sales          82,675   119,216   52,906   91,267   88,916   110,111   84,818   61,473   82,675   88,916

    Cost of sales        56,232    87,690   40,018   68,328   61,888    79,038   71,663   46,784   56,232   61,888

    Gross margin         26,443    31,526   12,888   22,939   27,028    31,073   13,155   14,689   26,443   27,028

    Gross margin          32.0%     26.4%    24.4%    25.1%    30.4%     28.2%    15.5%    23.9%    32.0%    30.4%
    (%)

    Selling,                975     1,122    1,123    1,409    1,110     1,860    1,279    1,050      975    1,110
    general and
    administrative
    expenses

    Operating          $ 25,468 $  30,404 $ 11,765 $ 21,530 $ 25,918 $  29,213 $ 11,876 $ 13,639 $ 25,468 $ 25,918
    profit

    Depreciation         18,389    28,885   12,434   21,768   19,906    24,042   20,283   12,874   18,389   19,906
    and
    amortization
    (i)

    EBITDA (ii)        $ 43,857 $  59,289 $ 24,199 $ 43,298 $ 45,824 $  53,255 $ 32,159 $ 26,513 $ 43,857 $ 45,824

((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 17.

Three Months Ended April 30, 2014, Compared to Three Months Ended April
30, 2013


DIAVIK SALES

During the first quarter, the Company sold approximately 0.6 million
carats from the Diavik Diamond Mine for a total of $82.7 million for an
average price per carat of $142, compared to 0.8 million carats for a
total of $88.9 million for an average price per carat of $114 in the
comparable quarter of the prior year. The 25% increase in the achieved
average rough diamond prices and 26% decrease in volume of carats sold
versus the comparable quarter of the prior year resulted primarily from
the carryover of some lower value inventory at April 30, 2014 for
sorting and sale in the second quarter due to increased production
volumes during the first quarter. At April 30, 2014, the Company had
0.7 million carats of Diavik Diamond Mine produced inventory with an
estimated market value of approximately $85 million, compared to
0.6 million carats with an estimated market value of approximately $85
million in the comparable quarter of the prior year.

Had the Company sold only the last production shipped in the first
quarter, the estimated achieved price would have been approximately
$120 per carat based on the prices achieved in the May 2014 sale.

DIAVIK COST OF SALES AND GROSS MARGIN

The Company’s first quarter cost of sales for the Diavik Diamond Mine
was $56.2 million resulting in a gross margin of 32.0%, compared to a
cost of sales of $61.9 million and a gross margin of 30.4% in the
comparable quarter of the prior year. Cost of sales for the first
quarter included $18.3 million of depreciation and amortization,
compared to $19.5 million in the comparable quarter of the prior year.
The Diavik segment generated gross margins and EBITDA margins of 32.0%
and 53%, respectively, compared to 30.4% and 52%, 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 first quarter,
the Diavik cash cost of production was $39.2 million compared to $42.9
million in the comparable quarter of the prior year. Cost of sales also
includes sorting costs, which consists of the Company’s cost of
handling and sorting product in preparation for sales to third parties,
and depreciation and amortization, the majority of which is recorded
using the unit-of-production method over estimated proven and probable
reserves.

The MD&A refers to cash cost of production, a non-IFRS performance
measure, in order to provide investors with information about the
measure used by management to monitor performance. This information is
used to assess how well the Diavik Diamond Mine is performing compared
to the mine plan and prior periods. Cash cost of production includes
mine site operating costs such as mining, processing and
administration, but is exclusive of amortization, capital, and
exploration and development costs. Cash cost of production does not
have any standardized meaning prescribed by IFRS and differs from
measures determined in accordance with IFRS. This performance measure
is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. This measure is not necessarily
indicative of net profit or cash flow from operations as determined
under IFRS. The following table provides a reconciliation of cash cost
of production to the Diavik Diamond Mine’s cost of sales disclosed for
the three months ended April 30, 2014 and 2013.


    (expressed in thousands of   Three months ended Three months ended
    United States dollars)           April 30, 2014   April 30, 2013  

    Diavik cash cost of          $           39,195 $           42,919
    production

    Private royalty                           1,426              1,194

    Other cash costs                            712              1,070

    Total cash cost of                       41,333             45,183
    production

    Depreciation and                         20,732             22,909
    amortization

    Total cost of production                 62,065             68,092

    Adjusted for stock movements            (5,833)            (6,204)

    Total cost of sales          $           56,232 $           61,888

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Diavik Diamond Mine segment during the first
quarter was $1.0 million, compared to $1.1 million in the comparable
quarter of the prior year.

OPERATIONAL UPDATE

During the first quarter of the calendar year 2014, the Diavik Diamond
Mine produced (on a 100% basis) 1.9 million carats from 0.6 million
tonnes of ore processed compared to 1.9 million carats from 0.5 million
tonnes of ore processed in the comparable quarter of the prior year.
Total production includes 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 first quarter of calendar 2014 were 17% higher
than the prior year’s comparable quarter as a result of continuing
improvements in mining rates as the underground ramp up progressed to
full production from all three kimberlite pipes. Carat production from
first quarter of calendar 2014 was 4% lower compared to the comparable
quarter of the prior year, primarily as a result of mining and
processing a greater proportion of the lower grade A-154 North ore.

DOMINION DIAMOND DIAVIK LIMITED PARTNERSHIP’S 40% SHARE OF DIAVIK
DIAMOND MINE PRODUCTION

(reported on a one-month lag)

For the three months ended March 31, 2014


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

    A-154 South                           38    135           3.56

    A-154 North                           98    227           2.33

    A-418                                 97    315           3.25

    Coarse Ore Rejects ("COR")             2     69              -

    Total                                235    746        2.91(a)

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

For the three months ended March 31, 2013


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

    A-154 South                   60    282           4.71

    A-154 North                   70    162           2.32

    A-418                         71    291           4.11

    Coarse Ore Rejects             1     43              -

    Total                        202    778        3.67(a)

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

For the period from February 1 to April 30, 2014((a))


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

    A-154 South                   48    168           3.50

    A-154 North                   97    218           2.26

    A-418                         90    311           3.46

    Coarse Ore Rejects             2     37          23.25

    Total                        237    734        2.97(b)

((a)) The last month of this production is not included in the Company’s
first quarter financial results, as the Company reports Diavik Diamond
Mine results on a one-month lag.

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

For the period from February 1 to April 30, 2013((a))


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

    A-154 South                   58    246           4.24

    A-154 North                   68    134           1.98

    A-418                         83    296           3.56

    Coarse Ore Rejects             3     41           13.6

    Total                        212    717        3.23(b)

((a)) The last month of this production is not included in the Company’s
first quarter financial results, as the Company reports Diavik Diamond
Mine results on a one-month lag.

((b)) 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 to production. 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.

Production guidance for the Diavik Diamond Mine will be reviewed at the
end of the second quarter.

PRICING

Based on the average prices per carat achieved by the Company in the
latest sale which was held in May 2014, the Company has modeled the
approximate rough diamond price per carat for each of the Diavik
kimberlite process plant feed types in the table that follows:


                          April/May 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 $275
million (including depreciation and amortization of approximately $95
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 DDDLP’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 first quarter, DDDLP’s share of
capital expenditures was $6.8 million ($10.2 million for the period
ended April 30, 2013).

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 calendar 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)

                                                                                               Three    Three
                                                                                              months   months
                                                                                               ended    ended
                                                                                               April    April
                           2015      2014      2014      2014     2014   2013   2013   2013      30,      30,

                             Q1        Q4        Q3        Q2       Q1     Q4     Q3     Q2     2014     2013

    Sales                                                                                                    

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

    Europe               88,469   111,542    95,232   170,536   19,921      -      -      -   88,469   19,921

    India                 4,378     1,992         -         -        -      -      -      -    4,378        -

    Total sales          92,847   113,947    95,232   170,536   19,921      -      -      -   92,847   19,921

    Cost of sales        81,448   114,340    96,202   162,758   19,647      -      -      -   81,448   19,647

    Gross margin         11,399     (393)     (970)     7,778      274      -      -      -   11,399      274

    Gross margin          12.3%    (0.3%)    (1.0%)      4.6%     1.4%     -%     -%     -%    12.3%     1.4%
    (%)

    Selling,              1,475     1,120       362       676      520      -      -      -    1,475      520
    general and
    administrative
    expenses

    Operating          $  9,924 $ (1,513) $ (1,332) $   7,102 $  (246) $    - $    - $    - $  9,924 $  (246)
    profit (loss)

    Depreciation
    and
    amortization
    (i)                  20,154    25,892    19,166    10,513        -      -      -      -   20,154        -

    EBITDA(ii)         $ 30,078 $  24,379 $  17,834 $  17,615 $  (246) $    - $    - $    - $ 30,078 $  (246)

    (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 17.

Three Months Ended April 30, 2014, Compared to Three Months Ended April
30, 2013


EKATI SALES

During the first quarter, the Company sold approximately 0.3 million
carats from the Ekati Diamond Mine for a total of $92.8 million for an
average price per carat of $359. Excluded from sales recorded in the
first quarter 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 operations of
the Misery Main pipe. The Misery South & 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 first quarter, the Company sold
an estimated 0.1 million carats of production from the Misery South &
Southwest kimberlite pipe material for estimated proceeds of $6.9
million for an average price per carat of $75, which includes the
recovery of small diamonds. During pre-production, sales of diamonds
recovered from the Misery South & Southwest material have been applied
as a reduction of mining assets. At April 30, 2014, the Company had 0.8
million carats of Ekati Diamond Mine produced inventory with an
estimated market value of approximately $200 million, compared to 0.5
million carats with an estimated market value of approximately $165
million in the comparable quarter of the prior year. Included in ending
inventory is an estimated 0.1 million carats of Misery South &
Southwest with an estimated market value of approximately $8 million.

Had the Company sold only the last production shipped in the first
quarter, the estimated achieved price would have been approximately
$281 per carat based on the prices achieved in the May 2014 sale.

EKATI COST OF SALES AND GROSS MARGIN

The Company’s cost of sales for the Ekati Diamond Mine during the first
quarter was $81.4 million, resulting in a gross margin of 12.3% and an
EBITDA margin of 32%, compared to a cost of sales of $19.6 million and
a gross margin of 1.4% and an EBITDA margin of -1% for the period of
April 10 to April 30, 2013. Cost of sales for the first quarter of the
prior year reflected the purchase of inventory at market values as part
of the Ekati Diamond Mine Acquisition. Cost of sales for the comparable
quarter of the prior year would have been approximately $13 million
excluding the market value adjustment made as part of the Ekati Diamond
Mine Acquisition. There was no impact during the first quarter of the
current fiscal year. At April 30, 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 first quarter, the Ekati cash cost
of production was $89.9 million compared to $17.4 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 straight-line method over the remaining mine life.

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 April 30, 2014.


    (expressed in thousands of   Three months ended Period April 10 to
    United States dollars)           April 30, 2014     April 30, 2013

    Ekati cash cost of           $           89,859 $           17,381
    production

    Other cash costs                            998            134,647

    Total cash cost of                       90,857            152,028
    production

    Depreciation and                         31,601              6,544
    amortization

    Total cost of production                122,458            158,572

    Adjusted for stock movements           (41,010)          (138,925)

    Total cost of sales          $           81,448 $           19,647

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Ekati Diamond Mine segment for the first quarter
were $1.5 million, compared to $0.5 million for the period of April 10
to April 30, 2013.

OPERATIONAL UPDATE

During the first quarter of fiscal 2015, the Ekati Diamond Mine produced
(on a 100% basis) 0.4 million carats from the processing of 0.9 million
tonnes of ore from the reserves. Mining activities during the quarter
were focused on ore production from the Fox open pit and Koala
underground and pre-stripping operations at the Misery pushback open
pit. The Company recovered 0.1 million carats from the processing of
0.1 million tonnes of inferred resource from the Koala North and Koala
underground mines and an additional 0.1 million carats from the
processing of 0.1 million tonnes of satellite material excavated from
the Misery South Pipe & Southwest Extension during the pre-stripping of
the Misery Main pipe. These diamond recoveries are not included in the
Company’s reserves statement and are therefore incremental to
production.

The Company estimates that process plant improvements to date have
increased the recovered grade during the first quarter by approximately
15% compared to the mine plan. Most of this incremental recovery is in
smaller diamonds not currently included in reserves. Historically, the
Ekati Diamond Mine has bypassed the recrush circuit in order to
maximize process plant throughput and has not recovered the entrained
diamonds within the coarse fraction of the tail rejects. The recrush
circuit will likely be re-established by year end to further improve
diamond recovery. Once the process improvements have been substantially
completed the Company intends to incorporate the higher recovery rate
into an updated reserves statement.

On April 30th, 2014, the Wek’èezhìi Land and Water Board (WLWB) issued
the Land use Permit for the Lynx Project and made recommendations to
the Minster of Environment and Natural Resources for the Government of
the Northwest Territories on an amendment on the Ekati Water Licence to
incorporate the Lynx Project. On May 30, 2014, the Minister signed the
amended Ekati Water Licence.

EKATI DIAMOND MINE PRODUCTION (100% SHARE)


    For the three months ended April 30, 2014

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

    Koala                              152    172           1.13

    Koala North                         82     71           0.87

    Fox                                671    231           0.34

    Misery South & Southwest            56     86           1.52

    Coarse Ore Rejects                   -      -              -

    Total                              962    561           0.58


    For the period from April 10 to April 30, 2013

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

    Koala                               22     16           1.21

    Koala North                         22     21           0.97

    Fox                                162     45           0.28

    Misery South & Southwest             -      -              -

    Coarse Ore Rejects                   -      -              -

    Total                              206     82           0.58

Ekati Operations Outlook

PRODUCTION

In fiscal 2015, the Ekati Diamond Mine expects to process (on a 100%
basis) approximately 2.6 million tonnes from mineral reserves 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 &
Southwest kimberlite pipes as well as the stockpile of coarse ore
rejects. The Misery South & 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.

Production guidance for the Ekati Diamond Mine will be reviewed at the
end of the second quarter of fiscal 2015.

PRICING

Based on the average prices per carat achieved by the Company in the
latest sale which was held in May 2014, the Company has modeled the
approximate rough diamond price per carat for the Ekati kimberlite
process plant feed types below. The Ekati prices do not reflect the
increased recovery of small diamonds from the improvements in
processing so as to be consistent with the Company’s current reserve
estimates. The rough diamond price of the additional recovered small
diamonds at Ekati is estimated at between $70 and $100 per carat.


                                April/May 2014
                                   sales cycle

                                 Average price
                                     per carat
    Ore type                   (in US dollars)

    Koala                    $             395

    Koala North                            440

    Fox                                    315

    Misery South & Southwest            80-100

    Coarse Ore Rejects                  65-120

    Recovered Small Diamonds            70-100

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 $490 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 $345 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 achieve ore release, and approximately $50
million towards the development of the Pigeon Pipe. During the first
quarter, the Ekati Diamond Mine incurred capital expenditures of $49.2
million ($8.8 million for the period from April 10 to April 30, 2013).

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)

(quarterly results are unaudited)


                                                                                                         Three      Three
                                                                                                        months     months
                                                                                                         ended      ended
                                                                                                         April      April
                        2015      2014      2014       2014       2014      2013      2013      2013       30,        30,

                          Q1        Q4        Q3         Q2         Q1        Q4        Q3        Q2      2014       2013

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

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

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

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

    Selling,
    general and

    administrative
    expenses           4,698     7,875     5,924     12,971     15,213     8,227     6,302     4,700     4,698     15,213

    Operating loss $ (4,698) $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (4,698) $ (15,213)

    Depreciation
    and
    amortization
    (i)                  342       451       378        363        305       304       306       286       342        305

    EBITDA(ii)     $ (4,356) $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (4,356) $ (14,908)

    (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 17.

Three Months Ended April 30, 2014, Compared to Three Months Ended April
30, 2013


CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Corporate segment during the quarter decreased by
$10.5 million from the comparable quarter of the prior year, primarily
due to $11.3 million of transaction costs related to the Ekati Diamond
Mine acquisition in the prior year.

Liquidity and Capital Resources

Working Capital

As at April 30, 2014, the Company had unrestricted cash and cash
equivalents of $212.5 million and restricted cash of $115.6 million
compared to $224.8 million and $113.6 million at January 31, 2014. The
restricted cash is used to support letters of credit to the Government
of the Northwest Territories of CDN $127 million in support of the
reclamation obligations for the Ekati Diamond Mine. During the quarter
ended April 30, 2014, the Company reported cash flow from operations of
$27.7 million compared to a use of cash in operations of $9.5 million
in the prior year.

As at April 30, 2014, the Company had 1.5 million carats of rough
diamond inventory with an estimated market value of approximately
$285 million, of which approximately $145 million represented inventory
available for sale, with the remaining $140 million being sorted.

Working capital increased to $573.7 million at April 30, 2014 from
$572.1 million at January 31, 2014. During the quarter, the Company
increased accounts receivable from continuing operations by $7.4
million, decreased other current assets from continuing operations by
$11.7 million, increased inventory and supplies from continuing
operations by $58.7 million, increased trade and other payables from
continuing operations by $41.1 million and decreased employee benefit
plans from continuing operations by $2.3 million.

The Company’s liquidity requirements fluctuate 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

As at April 30, 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 $27.9
million and $nil at April 30, 2013.

There were no significant transactions to note during the first quarter.

Investing Activities

During the first quarter, the Company purchased property, plant and
equipment of $56.0 million for its continuing operations, of which
$6.8 million was purchased for the Diavik Diamond Mine and $49.2
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
$400 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 the Jay pipe) 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 years
    thousands of
    United States
    dollars)

    Interest-bearing   $   4,950   $  1,121   $  2,241   $ 1,588   $       -
    loans and
    borrowings (a)
    (b)

    Environmental        182,057     60,096      2,121     4,328     115,512
    and
    participation
    agreements
    incremental
    commitments (c)

    Operating lease       13,149      7,469      5,680         -           -
    obligations (d)

    Total              $ 200,156   $ 68,686   $ 10,042   $ 5,916   $ 115,512
    contractual
    obligations

    (a)     (i) Interest-bearing loans and borrowings presented in the
            foregoing table include current and long-term portions.

            (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 14.5%. At April 30, 2014,
            $nil was outstanding under this facility relating to Dominion
            Diamond International NV and Dominion Diamond (India) Private
            Limited, respectively. The facility is guaranteed by Dominion
            Diamond Corporation.

            (iii) The Company's first mortgage on real property has
            scheduled principal payments of approximately $0.2 million
            quarterly, may be prepaid at any time, and matures on September
            1, 2018. On April 30, 2014, $4.2 million was outstanding on the
            mortgage payable.

    (b)     Interest on loans and borrowings is calculated at various fixed
            and floating rates. Projected interest payments on the current
            debt outstanding were based on interest rates in effect at
            April 30, 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 April 30, 2014
            was $58.9 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 Wek'eezhii Land and Water Board
            ("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 April 30, 2014 posted letters of credit of CDN $127
            million with the Government of the Northwest Territories
            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 on an
            appropriate form of security. The Company has provided a
            guarantee of CDN $20 million for other obligations under the
            environmental agreement. 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 by dividing 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
such measures do not have any standardized meaning under IFRS. These
measures should not be considered in isolation or as a 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)                                                                                                            

                                                                                                           Three      Three
                                                                                                          months     months
                                                                                                           ended      ended
                                                                                                           April      April
                          2015      2014      2014       2014       2014      2013      2013      2013       30,        30,

                            Q1        Q4        Q3         Q2         Q1        Q4        Q3        Q2      2014       2013

    Operating
    profit
    (loss) from
    continuing
    operations       $  30,694 $  20,016 $   4,509 $   15,661 $   10,459 $  20,987 $   5,574 $   8,939 $  30,694 $   10,459

    Depreciation
    and
    amortization        38,885    55,228    31,978     32,644     20,211    24,346    20,588    13,160    38,885     20,211

    EBITDA from
    continuing
    operations       $  69,579 $  75,244 $  36,487 $   48,305 $   30,670 $  45,333 $  26,162 $  22,099 $  69,579 $   30,670

    DIAVIK
    DIAMOND MINE
    SEGMENT                                                                                                                

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

                                                                                                           Three      Three
                                                                                                          months     months
                                                                                                           ended      ended
                                                                                                           April      April
                          2015      2014      2014       2014       2014      2013      2013      2013       30,        30,

                            Q1        Q4        Q3         Q2         Q1        Q4        Q3        Q2      2014       2013

    Operating
    profit           $  25,468 $  30,404 $  11,765 $   21,530 $   25,918 $  29,213 $  11,876 $  13,639 $  25,468 $   25,918

    Depreciation
    and
    amortization        18,389    28,885    12,434     21,768     19,906    24,042    20,283    12,874    18,389     19,906

    EBITDA           $  43,857 $  59,289 $  24,199 $   43,298 $   45,824 $  53,255 $  32,159 $  26,513 $  43,857 $   45,824

    EKATI
    DIAMOND MINE
    SEGMENT                                                                                                                

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

                                                                                                           Three      Three
                                                                                                          months     months
                                                                                                           ended      ended
                                                                                                           April      April
                          2015      2014      2014       2014       2014      2013      2013      2013       30,        30,

                            Q1        Q4        Q3         Q2         Q1        Q4        Q3        Q2      2014       2013

    Operating
    profit
    (loss)           $   9,924 $ (1,513) $ (1,332) $    7,102 $    (246) $       - $       - $       - $   9,924 $    (246)

    Depreciation
    and
    amortization        20,154    25,892    19,166     10,513          -         -         -         -    20,154          -

    EBITDA           $  30,078 $  24,379 $  17,834 $   17,615 $    (246) $       - $       - $       - $  30,078 $    (246)

    CORPORATE
    SEGMENT                                                                                                                

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

                                                                                                           Three      Three
                                                                                                          months     months
                                                                                                           ended      ended
                                                                                                           April      April
                          2015      2014      2014       2014       2014      2013      2013      2013       30,        30,

                            Q1        Q4        Q3         Q2         Q1        Q4        Q3        Q2      2014       2013

    Operating
    profit
    (loss)           $ (4,698) $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (4,698) $ (15,213)

    Depreciation
    and
    amortization           342       451       378        363        305       304       306       286       342        305

    EBITDA           $ (4,356) $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (4,356) $ (14,908)

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 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 April 30, 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 April 30, 2014 posted letters of credit
of CDN $127 million with the Government of the Northwest Territories
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 on an appropriate form of
security. The Company has provided a guarantee of CDN $20 million for
other obligations under the environmental agreement. 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
during the second quarter of 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.

Changes in Internal Controls over Financial Reporting

During the first quarter of fiscal 2015, 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.

Critical Accounting Estimates

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

The critical accounting estimates applied in the preparation of the
Company’s unaudited interim condensed consolidated financial statements
are consistent with those applied and disclosed in the Company’s MD&A
for the year ended January 31, 2014.

Changes in Accounting Policies


    (a)   New Accounting Standards Effective in 2014

          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 has performed an assessment of the impact of IFRIC 21
          and concluded it did not have a significant impact on our
          consolidated financial statements.

    (b)   New Accounting Standards Issued but Not Yet 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.

Outstanding Share Information


    As at May 31, 2014                   

    Authorized                           Unlimited

    Issued and outstanding shares       85,134,480

    Options outstanding                  2,695,819

    Fully diluted                       87,830,299

Additional Information

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


                             Condensed Consolidated Balance Sheets

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

                                       April 30, 2014     January 31, 2014

    ASSETS                                                                

    Current assets                                                        

     Cash and cash
    equivalents (note 4)             $        212,468   $          224,778

     Accounts receivable                 25,598               20,879

     Inventory and supplies
    (note 5)                                  513,951              440,853

     Other current assets                15,414               27,156

                                              767,431              713,666

    Property, plant and equipment           1,463,369            1,469,557

    Restricted cash (note 4)                  115,553              113,612

    Other non-current assets                    4,389                4,737

    Deferred income tax assets                  9,902                3,078

    Total assets                     $      2,360,644   $        2,304,650

    LIABILITIES AND EQUITY                                                

    Current liabilities                                                   

     Trade and other
    payables                         $        145,463   $          103,653

     Employee benefit plans               1,399                3,643

     Income taxes payable                46,068               33,442

     Current portion of
    interest-bearing loans and
    borrowings                                    822                  794

                                              193,752              141,532

    Interest-bearing loans and
    borrowings                                  3,349                3,504

    Deferred income tax
    liabilities                               226,341              242,563

    Employee benefit plans                     12,214               14,120

    Provisions                                433,908              430,968

    Total liabilities                         869,564              832,687

    Equity                                                                

     Share capital                      508,570              508,523

     Contributed surplus                 23,518               23,033

     Retained earnings                  790,090              775,419

     Accumulated other
    comprehensive income                      (2,050)              (2,447)

     Total shareholders'
    equity                                  1,320,128            1,304,528

     Non-controlling
    interest                                  170,952              167,435

    Total equity                            1,491,080            1,471,963

    Total liabilities and equity     $      2,360,644   $        2,304,650

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


                         Condensed Consolidated Statements of Income

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

                                          Three months   Three months ended
                                                 ended       April 30, 2013
                                        April 30, 2014   (Recast - Note 12)

    Sales                             $        175,522 $            108,837

    Cost of sales                              137,680               81,535

    Gross margin                                37,842               27,302

    Selling, general and                         7,148               16,843
    administrative expenses

    Operating profit                            30,694               10,459

    Finance expenses                           (3,310)              (2,742)

    Exploration costs                          (9,044)              (1,039)

    Finance and other income                     2,827                  804

    Foreign exchange (loss)                      (947)                  732
    gain

    Profit before income                        20,220                8,214
    taxes from continuing
    operations

    Income tax expense                           9,533                5,042

    Net profit from                             10,687                3,172
    continuing operations

    Net profit from                                  -              502,656
    discontinued operations
    (Note 6)

    Net profit                        $         10,687 $            505,828

    Net profit from
    continuing operations
    attributable to

       Shareholders                   $         14,671 $              3,504

       Non-controlling                         (3,984)                (332)
    interest

    Net profit (loss)
    attributable to

       Shareholders                   $         14,671 $            506,160

       Non-controlling                         (3,984)                (332)
    interest

    Earnings (loss) per share
    - continuing operations

     Basic                      $           0.17 $               0.04

       Diluted                                    0.17                 0.04

    Earnings per share                                                     

     Basic                                  0.17                 5.96

       Diluted                                    0.17                 5.89

    Weighted average number                 85,125,476           84,890,564
    of shares outstanding

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


              Condensed Consolidated Statements of Comprehensive Income

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

                                         Three month      Three month ended
                                               ended         April 30, 2013
                                      April 30, 2014     (Recast - Note 12)

    Net profit                      $         10,687   $            505,828

    Other comprehensive
    income

     Items that may be
    reclassified to profit

          Net loss on                      397               (10,735)
    translation of net
    foreign operations (net
    of tax of $nil)

    Other comprehensive loss,                    397               (10,735)
    net of tax

    Total comprehensive             $         11,084   $            495,093
    income

       Comprehensive income         $         11,084   $              3,042
    from continuing
    operations

       Comprehensive income                        -                492,051
    from discontinued
    operations

    Comprehensive income
    attributable to

       Shareholders                 $         15,068   $            495,425

       Non-controlling                       (3,984)                  (332)
    interest

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


                Condensed Consolidated Statements of Changes in Equity

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

                                           Three months        Three months
                                        ended April 30,     ended April 30,
                                                   2014                2013
                                                          (Recast - Note12)

    Common shares:                                                         

    Balance at beginning of period    $         508,523 $           508,007

    Issued during the period                         47                 394

    Balance at end of period                    508,570             508,401

    Contributed surplus:                                                   

    Balance at beginning of period               23,033              20,387

    Stock-based compensation expense                498               1,036

    Exercise of stock options                      (13)                   -

    Balance at end of period                     23,518              21,423

    Retained earnings:                                                     

    Balance at beginning of period              775,419             295,738

    Net profit attributable to common            14,671             506,160
    shareholders

    Balance at end of period                    790,090             801,898

    Accumulated other comprehensive
    income:

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

    Other comprehensive income                                             

     Items that may be
    reclassified to profit

          Net loss on                         397            (10,735)
    translation of net foreign
    operations (net of tax of $nil)

    Balance at end of period                    (2,050)             (4,378)

    Non-controlling interest:                                              

    Balance at beginning of period              167,435                 763

    Non-controlling interest                    (3,984)             152,464

    Contributions made by minority                7,501                   -
    partners

    Balance at end of period                    170,952             153,227

    Total equity                      $       1,491,080 $         1,480,571

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


                     Condensed Consolidated Statements of Cash Flows

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

                                        Three months    Three months ended
                                               ended        April 30, 2013
                                      April 30, 2014    (Recast - note 12)

    Cash provided by (used in)                                             

    Operating                                                             

    Net profit                      $         10,687 $              505,828

     Depreciation and                   38,885                 20,211
    amortization

     Deferred income tax              (23,195)                (8,397)
    recovery

     Current income tax                 32,728                 13,439
    expense

     Finance expenses                    3,310                  2,742

     Stock-based compensation              498                  1,036

       Other non-cash items                    3,115                  (859)

     Foreign exchange (gain)             (210)                (1,037)
    loss

     Loss on disposition of                862                    362
    assets

       Gain on sale of assets                (2,375)                      -

    Change in non-cash operating            (15,568)               (28,671)
    working capital, excluding
    taxes and finance expenses

    Cash provided by operating                48,737                504,654
    activities

       Interest paid                           (384)                (1,212)

     Income and mining taxes          (20,679)               (10,249)
    paid

    Cash provided by operating                27,674                493,193
    activities - continuing
    operations

    Cash used in operating                         -              (502,656)
    activities - discontinued
    operations

    Net cash from (used in)                   27,674                (9,463)
    operating activities

    FINANCING                                                              

    Increase (decrease) in                     (194)                  (196)
    interest-bearing loans and
    borrowings

    Increase in revolving credit                   -                 27,863

    Decrease in revolving credit                   -                (1,128)

    Issue of common shares, net of                34                    394
    issue costs

    Contribution from                         10,816                      -
    non-controlling interest

    Cash provided from financing              10,656                 26,933
    activities - continuing
    operations

    Cash provided from financing                   -                      -
    activities - discontinued
    operations

    Cash provided from financing              10,656                 26,933
    activities

    INVESTING                                                              

    Acquisition of Ekati                           -              (490,925)

    Proceeds from sale of assets               3,726                       

    Property, plant and equipment           (56,023)               (19,718)

    Net proceeds from sale of                    585                  1,796
    property, plant and equipment

    Other non-current assets                     672                (3,125)

    Cash provided in investing              (51,040)              (511,972)
    activities - continuing
    operations

    Cash provided in investing                     -                746,738
    activities - discontinued
    operations

    Cash used in investing                  (51,040)                234,766
    activities

    Foreign exchange effect on cash            2,341                    354
    balances

    (Decrease) increase in cash and         (10,369)                252,590
    cash equivalents

    Cash and cash equivalents,               338,390                104,313
    beginning of period

    Cash and equivalents, end of             328,021                356,903
    period

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

    Cash and cash equivalents of    $        328,021 $              356,903
    continuing operations, end of
    period

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

    Accounts receivable                      (7,384)                (3,182)

    Inventory and supplies                  (58,655)               (31,011)

    Other current assets                      11,739                  1,780

    Trade and other payables                  41,076                  4,735

    Employee benefit plans                   (2,344)                  (993)

                                    $       (15,568) $             (28,671)

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

Notes to Condensed Consolidated Financial Statements

APRIL 30, 2014 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 assuming control over 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 Harry Winston, Inc.
(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 6.

Note 2:

Basis of Preparation

(a) Statement of compliance

These unaudited interim condensed consolidated financial statements
(“interim financial statements”) have been prepared in accordance with
IAS 34, “Interim Financial Reporting” (“IAS 34″). The accounting
policies applied in these unaudited interim financial statements are
consistent with those used in the annual audited consolidated financial
statements for the year ended January 31, 2014, except as disclosed in
Note 3.

These interim financial statements do not include all disclosures
required by International Financial Reporting Standards (“IFRS”) for
annual audited consolidated financial statements and accordingly should
be read in conjunction with the Company’s annual audited consolidated
financial statements for the year ended January 31, 2014 prepared in
accordance with IFRS as issued by the IASB.

(b) Currency of presentation

These interim 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 interim 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
interim 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

(a) New Accounting Standards Effective in 2014

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
has performed an assessment of the impact of IFRIC 21 and concluded it
did not have a significant impact on our consolidated financial
statements.

(b) New Accounting Standards Issued but not yet 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 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.

Note 4:

Cash and Cash Equivalents


                                    April 30, 2014       January 31, 2014

    Cash on hand and balances     $        212,468     $          224,778
    with banks

    Restricted cash                        115,553                113,612

    Total cash and cash           $        328,021     $          338,390
    equivalents

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

Note 5:

Inventory and Supplies


                                      April 30, 2014       January 31, 2013

    Stockpile ore                   $         36,077     $           38,475

    Rough diamonds - work in                 113,169                139,520
    progress

    Rough diamonds - finished                120,317                 35,573
    goods (available for
    sale)

    Supplies inventory                       244,388                227,285

    Total inventory and             $        513,951     $          440,853
    supplies

Total inventory and supplies is net of a provision for obsolescence of
$0.5 million ($0.6 million at January 31, 2014).

Note 6:

Assets Held for Sale (Discontinued Operations)

On March 26, 2013, the Company completed the sale of Harry Winston Inc.
(the “Luxury Brand Segment”) to Swatch Group. Continuing operations no
longer includes the operations of the Luxury Brand Segment and the
results of this segment are now treated as discontinued operations for
reporting purposes.

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


                                                              Three months
                                                           ended April 30,
                                                                      2013
                                                        (Recast - Note 12)

    Sales                                             $             63,799

    Cost of sales                                                 (31,355)

    Other expenses                                                (30,964)

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

    Net income tax (expense) recovery                                (186)

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

    Gain on sale                                      $            502,913

    Net profit from discontinued                      $            502,656
    operations

    Earnings per share - discontinued
    operations

     Basic                                                      5.91

       Diluted                                                        5.85

Note 7:

Diavik Joint Venture

The following represents DDDLP’s 40% interest in the net assets and
operations of the Diavik Joint Venture as at March 31, 2014 and
December 31, 2013:


                                    March 31, 2014       December 31, 2013

    Current assets                $        106,292     $            97,078

    Non-current assets                     603,335                 618,141

    Current liabilities                     48,921                  31,296

    Non-current liabilities
    and participant's account              660,706                 683,923

                                      Three months
                                             ended            Three months
                                         March 31,             ended March
                                              2014                31, 2013

    Expenses net of interest
    income of $nil (2013 -
    $nil)(a)                      $         59,095     $            66,647

    Cash flows used in
    operating activities                  (39,518)                (44,828)

    Cash flows resulting from
    financing activities                    44,593                  53,159

    Cash flows used in
    investing activities                   (5,076)                (10,711)

    (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 9.

Note 8:

Related Party Disclosure

There were no material related party transaction in fiscal year 2015 and
2014 other than compensation of key management personnel.

(a) Operational information

The Company had the following investments in significant subsidiaries at
April 30, 2014:


    Name of company               Effective interest          Country of
                                                           incorporation

    Dominion Diamond                            100%              Canada
    Holdings Ltd.

    Dominion Diamond Diavik                     100%              Canada
    Limited Partnership

    Dominion Diamond                            100%               India
    (India) Private Limited

    Dominion Diamond                            100%             Belgium
    International N.V.

    Dominion Diamond                            100%              Canada
    Marketing Corporation

    Dominion Diamond (UK)                       100%             England
    Limited

    6019838 Canada Inc.                         100%              Canada

    Dominion Diamond Ekati                      100%              Canada
    Corporation

    Dominion Diamond                            100%              Canada
    Resources Corporation

    Dominion Diamond                            100%             Belgium
    Marketing N.V.

Note 9:

Commitments and Guarantees


    Contractual                        Less than     Year    Year     After
    Obligations

                               Total      1 year      2-3     4-5   5 years

    Interest-bearing loans $   4,950 $     1,121 $  2,241 $ 1,588 $       -
    and borrowings

    Environmental and        182,057      60,096    2,121   4,328   115,512
    participation
    agreements incremental
    commitments (a)(b)

    Operating lease           13,149       7,469    5,680       -         -
    obligations (c)

    Total contractual      $ 200,156 $    68,686 $ 10,042 $ 5,916 $ 115,512
    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
April 30, 2014 was $59 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 the Northwest Territories supported by restricted cash in
support of the reclamation obligations for the Ekati Diamond Mine.

The Company has provided a guarantee of CDN $20 million to the
Government of the Northwest Territories for other obligations under the
environmental agreement.

(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 10:

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 IASB.

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
April 30, 2014 are considered to approximate their carrying value.

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


                                     April 30, 2014        January 31, 2014

                               Estimated   Carrying    Estimated   Carrying
                              fair value      value   fair value      value

    Financial assets                                                       

     Cash and cash    $    328,021 $  328,021 $    338,390 $  338,390
    equivalents, including
    restricted cash

     Accounts               25,598     25,598       20,879     20,879
    receivable

                            $    353,619 $  353,619 $    359,269 $  359,269

    Financial liabilities                                                  

     Trade and other  $    145,463 $  145,463 $    103,653 $  103,653
    payables

     Interest-bearing        4,171      4,171        4,298      4,298
    loans and borrowings

                            $    149,634 $  149,634 $    107,951 $  107,951

Note 11:

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 three months ended April 30, 2014.

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 three months         Diavik       Ekati   Corporate       Total
    ended April 30, 2014

    Sales                                                                  

      North America          $        - $         - $         - $         -

     Europe                73,918      88,469           -     162,387

     India                  8,757       4,378           -      13,135

     Total sales           82,675      92,847           -     175,522

    Cost of sales                                                          

     Depreciation and      18,287      20,154           -      38,441
    amortization

     All other costs       37,945      61,294           -      99,239

     Total cost of         56,232      81,448           -     137,680
    sales

    Gross margin                 26,443      11,399           -      37,842

    Gross margin (%)              32.0%       12.3%          -%       21.6%

    Selling, general and
    administrative expenses

     Selling and              975       1,475           -       2,450
    related expenses

     Administrative                                 4,698       4,698
    expenses

     Total selling,           975       1,475       4,698       7,148
    general and
    administrative expenses

    Operating profit (loss)      25,468       9,924     (4,698)      30,694

    Finance expenses              (904)     (2,406)           -     (3,310)

    Exploration costs             (353)     (8,691)           -     (9,044)

    Finance and other income      2,922        (95)           -       2,827

    Foreign exchange gain          (93)       (854)           -       (947)
    (loss)

    Segmented profit (loss)  $   27,040 $   (2,122) $   (4,698) $    20,220
    before income taxes

    Segmented assets as at
    April 30, 2014

     Canada            $  883,020 $ 1,361,939 $         - $ 2,244,959

     Other foreign         63,064      52,621           -     115,685
    countries

                             $  946,084 $ 1,414,560 $         - $ 2,360,644

    Capital expenditures     $  (6,779) $  (49,244) $         - $  (56,023)

    Inventory                   141,845     372,106           -     513,951

    Total liabilities            30,816     838,748           -     869,564

    Other significant
    non-cash items:

     Deferred income   $ (12,041) $  (11,154) $         - $  (23,195)
    tax recovery

    Sales to one customer totalled $25 million for the
    three months ended April 30, 2014.


    For the three months                      Ekati
    ended April 30, 2013         Diavik   (Recast -   Corporate       Total
                                           Note 12)

    Sales                                                                  

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

     Europe                61,642      19,921           -      81,563

      India                      21,095           -           -      21,095

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

    Cost of sales                                                          

     Depreciation and      19,542           -           -      19,542
    amortization

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

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

    Gross margin                 27,028         274           -      27,302

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

    Selling, general and
    administrative expenses

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

     Administrative             -           -      15,213      15,213
    expenses

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

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

    Finance expenses            (2,019)       (723)           -     (2,742)

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

    Finance and other               540         264           -         804
    income

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

    Segmented profit (loss) $    24,960 $   (1,533) $  (15,213) $     8,214
    before income taxes

    Segmented assets as at
    April 30, 2013

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

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

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

    Capital expenditures    $  (10,154) $   (8,780) $     (784) $  (19,718)

    Inventory                   154,561     285,225           -     439,786

    Total liabilities           306,618     625,351           -     931,969

    Other significant
    non-cash items:

     Deferred income  $   (4,474) $   (3,923) $         - $   (8,397)
    tax recovery

Note 12:

Recast

As a result of reflecting the final purchase price adjustments relating
to the Ekati Diamond Mine acquisition retrospectively, the interim
financial statements for the three months ended April 30, 2013 have
been recast. For the three months ended April 30, 2013, finance expense
decreased by $1.3 million, whereas income tax expense increased by $0.3
million. In addition, the Company has reclassified $5.3 million from
gain on sale of the Luxury Brand Segment to other comprehensive income
in connection with the actuarial gain/losses that should not have been
reclassified to profit. As a result, net profit attributed to common
shareholders increased by $6.2 million.

SOURCE Dominion Diamond Corporation


Source: PR Newswire



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