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Dominion Diamond Corporation Reports Fiscal 2014 Third Quarter Results

TORONTO, December 11, 2013 /PRNewswire/ --

Dominion Diamond Corporation (TSX:DDC, NYSE:DDC) (the "Company") today announced its third quarter results for the period ending October 31, 2013.

Robert Gannicott, Chairman and Chief Executive Officer, stated, "We continue to progress all of our operational and strategic objectives at Ekati while Diavik also continues to trim both capital and operating costs. The modest loss this quarter reflects expenditures on the Jay Project and a decision to hold inventory of some diamond parcels during the Diwali holiday season in India. The diamond market is generally stable, with a few items increasing in price while a few others are down, in a market that is focused on cash generation to decrease debt through inventory sales into robust retail demand."

Third Quarter Summary

  • Consolidated rough diamond sales from DDC's ownership in the Diavik and Ekati Diamond Mines for the third quarter were $151.6 million, resulting in an EBITDA margin of $42.6 million or 28%. Consolidated operating profit from continuing operations was $10.7 million.
    • Sales from the Diavik Diamond Mine generated an EBITDA margin of $24.2 million or 46% for the third quarter.
    • Sales from the Ekati Diamond Mine generated an EBITDA margin of $24.0 million or 23% for the third quarter.
  • Although retail demand in the key markets of the US, China and Japan remains firm, tightened credit terms available to the polishing industry have led to softened prices for rough diamonds recently. The Company has therefore elected to hold $95 million of rough diamond inventory (at market value) available for sale as stock at October 31, 2013 in the anticipation of improved demand. At October, 31, 2013, the Company held rough diamond inventory (goods available for sale plus work in progress) of 1.5 million carats with an approximate market value of $250 million and cash on the balance sheet of $318 million (of which $122 million is restricted cash).
  • The Company incurred $7.1 million of exploration expense for the third quarter (compared to $0.7 million for the comparable period of the prior year) including $6.0 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine.
  • The Company recorded a consolidated net loss attributable to shareholders of $2.9 million or $(0.03) per share for the quarter.
  • The relocation of the Dominion Diamond senior management team and the Company's headquarters to Yellowknife is already demonstrating benefits at the Ekati Diamond Mine. The focus on maximizing efficiencies and costs savings has resulted in a new lower cash cost forecast for FY2014 of $310 million (the previous FY2014 cash cost forecast was $320 million). Likewise a similar emphasis on achieving cost savings at the Diavik Diamond Mine has led to a slightly lower cash cost forecast for FY2014 of $165 million (on a 40% basis) versus a previous forecast of $170 million (on a 40% basis).
  • The capital expenditure forecast for FY2014 for the Ekati Diamond Mine has increased from $85 million to $100 million inclusive of capital expenditures at the Misery pipe of $42 million; first production from the Misery reserve is expected in March FY2017. The Misery pipe contains 3.0 million tonnes of probable reserve at a grade of 4 carats per tonne and an approximate value of $112 per carat.
  • The Company has sold post October 31, 2013, 0.3 million carats for a value of approximately $60 million.
  • Given the decision to hold back some inventory from sale in the third quarter, the Company currently expects rough diamond sales for fiscal 2014 from the Diavik Diamond Mine to be in the range of $320 to $365 million and the cost of sales for fiscal 2014 to be in the range of $235 to $270 million (including depreciation and amortization in the range of $70 to $85 million). For the Ekati Diamond Mine, the Company currently expects rough diamond sales for fiscal 2014 to be in the range of $385 to $455 million (on a 100% basis) and the cost of sales for fiscal 2014 from the Ekati Diamond Mine to be in the range of $365 to $430 million (including depreciation and amortization in the range of $50 to $60 million).

Exploration Development

  • In September 2013 the Company filed an application with the Wek'éezhii Land and Water Board ("WLWB") requesting a land use permit and water license to enable mining of the Lynx kimberlite pipe at the Ekati Diamond Mine.
  • In October 2013, the Company filed an application with the WLWB requesting a new land use permit and a Class A Water License for extension of the Ekati Diamond Mine to include the Jay and Cardinal kimberlite pipes (the "Jay-Cardinal Project").
    • The Jay-Cardinal Project involves the development of the largest diamondiferous resource in North America. It has the potential to extend the operating life of the Ekati Diamond Mine in the order of 10 to 20 years beyond the currently scheduled closure in 2019. The development and mining of these kimberlites is the cornerstone of Dominion Diamond Corporation's strategy for building a long-term, sustainable Canadian diamonds business.
  • During the winter of 2013/4, a diamond and sonic core drilling programme will be carried out at the Jay and Cardinal pipes and along alignments for the dikes planned for the proposed development. The purpose of the programme is to provide geological, geotechnical, and hydrogeological data to enable higher resolution pipe models and to support pre-feasibility and environmental assessment studies.  It also will be used to obtain site specific subsurface bedrock and hydrogeological characteristics along the proposed dike locations. The Company is working on a pre-feasibility report for the Jay Cardinal development which it aims to complete in calendar 2014.

Diavik Diamond Mine

  • Production for the third calendar quarter at the Diavik Diamond Mine was 1.7 million carats on a 100% basis.
  • During the third quarter, the Company sold approximately 0.4 million carats from the Diavik Diamond Mine for a total of $52.9 million for an average price per carat of $118. Had the Company sold only the last production shipped in the third quarter, the estimated achieved price would have been approximately $117 per carat based on the prices achieved in the September/October sale.
  • The 23% increase in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the third quarter of the prior year resulted primarily from the sale during the third quarter of the prior year of a higher proportion of lower priced Diavik Diamond Mine goods due to an improved market for those goods at that time.
  • At October 31, 2013, the Company had 0.8 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $110 million.

Ekati Diamond Mine

  • Production for the third calendar quarter at the Ekati Diamond Mine was 0.6 million carats on a 100% basis.
  • During the period of April 10th to December 31st it is estimated that 3.3 million tonnes of ore will be sourced from the Fox pipe, which is approaching the end of its open pit life. But as the plant is already working at full capacity only 2.4 million tonnes of Fox pipe ore will be processed during FY 2014, leaving a substantial stockpile which will be available for processing during the following year. During the fiscal third quarter, 1.3 million tonnes of Fox ore were mined and 0.3 million tonnes was stockpiled. An accounting cost is only attributable to ore that has actually been processed, and not stockpiled; therefore the cash cost of mining the stockpiled ore is added to the cost of carats recovered from other sources.
  • During the third quarter, the Company sold approximately 0.4 million carats from the Ekati Diamond Mine for a total of $98.7 million for an average price per carat of $271.
  • At October 31, 2013, the Company had 0.6 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $141 million.
  • The development of the Misery Pipe is continuing. As of September 30, 2013, the Company had processed approximately 0.18 million tonnes of kimberlite material excavated as part of the waste stripping for advancing the pit profile of the Misery Pipe, and has recovered approximately 0.24 million carats of diamonds from this material. These diamond recoveries, all of which occurred after June 30, 2013, are not included in the Company's reserves and resource statement and are therefore incremental to production.
  • During November, 0.04 million tonnes of previously accumulated coarse ore rejects were processed and 0.02 million carats of diamonds were recovered for an average grade of 0.60 carats per tonne processed. The diamonds recovered were determined to have a current market value of approximately $93 per carat. The total stockpile of coarse ore rejects at the Ekati Diamond Mine was accumulated from a number different sources over the history of operations, and this value may not be indicative of the value of other diamonds that may be recoverable from other sources within such rejects.

Conference Call and Webcast

Beginning at 8:30AM (ET) on Wednesday, December 11th, 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 http://www.ddcorp.ca or by dialing 800-706-7745 within North America or 617-614-3472 from international locations and entering passcode 84601972.

An online archive of the broadcast will be available by accessing the Company's web site at http://www.ddcorp.ca. A telephone replay of the call will be available one hour after the call through 11:00PM (ET), Tuesday, December 24th, 2013 by dialing 888-286-8010 within North America or 617-801-6888 from international locations and entering passcode 70101033.

Qualified Person

The scientific and technical information contained in this press release has been prepared under the supervision of Mats Heimersson, P. Eng., an employee of the Company and a Qualified Person within the meaning of National Instrument 43-101. For more information see the Company's Technical Report regarding the Ekati Diamond Mine dated May 24, 2013, filed on SEDAR.

About Dominion Diamond Corporation

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

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

For more information, please visit http://www.ddcorp.ca

Highlights

(All figures are in United States dollars unless otherwise indicated)

Dominion Diamond Corporation (the "Company") recorded a consolidated net loss attributable to shareholders of $2.9 million or $(0.03) per share for the quarter, compared to a net profit attributable to shareholders of $3.4 million or $0.04 per share in the third quarter of the prior year. Net loss from continuing operations attributable to shareholders (which now represents the Diavik and Ekati mining segments) was $2.9 million or $(0.03) per share, compared to a net profit from continuing operations of $0.2 million or $0.00 per share in the comparable quarter of the prior year. Continuing operations includes all costs related to the Company's mining operations. Prior year numbers relate only to results from the Diavik Diamond Mine.

Consolidated sales from continuing operations were $151.6 million for the quarter, compared to $84.8 million for the comparable quarter of the prior year, resulting in an operating profit of $10.7 million, compared to an operating profit of $5.6 million in the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $42.6 million compared to $26.2 million in the comparable quarter of the prior year.

During the third quarter, the Company recorded sales from the Diavik Diamond Mine of $52.9 million compared to $84.8 million in the comparable quarter of the prior year. The Company sold approximately 0.4 million carats from the Diavik Diamond Mine for an average price per carat of $118, compared to 0.9 million carats for an average price per carat of $96 in the comparable quarter of the prior year. The 49% decrease in volume of Diavik Diamond Mine carats sold versus the comparable quarter of the prior year resulted from a combination of the decision to hold back some inventory from sale in the third quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India, and the change in the sales schedule resulting from a change in the rough diamond sales platform. The 23% increase in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the third quarter of the prior year resulted primarily from the sale during the third quarter of the prior year of a higher proportion of lower priced Diavik Diamond Mine goods due to an improved market for those goods at that time. The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 24.4% and 46%, respectively, compared to 15.5% and 38%, respectively, in the comparable quarter of the prior year. At October 31, 2013, the Company had 0.8 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $110 million.

During the third quarter, the Ekati Diamond Mine recorded sales of $98.7 million and sold approximately 0.4 million carats for an average price per carat of $271. This segment generated gross margins and EBITDA margins of 5.2% and 23%, respectively. At October 31, 2013, the Company had 0.6 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $141 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 $5.9 million, compared to $6.3 million in the comparable quarter of the prior year.

Management's Discussion and Analysis

PREPARED AS OF DECEMBER 10, 2013 (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 and nine months ended October 31, 2013, and its financial position as at October 31, 2013. This MD&A is based on the Company's unaudited interim condensed consolidated financial statements prepared in accordance with IAS 34 "Interim Financial Reporting", as issued by the International Accounting Standards Board, and should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto for the three and nine months ended October 31, 2013, and the audited consolidated financial statements for the year ended January 31, 2013. Unless otherwise specified, all financial information is presented in United States dollars. Unless otherwise indicated, all references to "third quarter" refer to the three months ended October 31, 2013.

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, 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, estimated rough diamond revenue, 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, estimated rough diamond revenue, 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 Diavik Diamond Mine and the Ekati 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, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate and cash flow and liquidity risks. Please see page 21 of this MD&A, as well as the Company's current Annual Information Form, available at http://www.sedar.com and http://www.sec.gov, respectively, for a discussion of these and other risks and uncertainties involved in the Company's operations. Actual results may vary from the forward-looking information.

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

Summary Discussion

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

The Company has an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Diavik Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI") (60%) and Dominion Diamond Diavik Limited Partnership ("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.

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

Market Commentary

Diamond market sentiment in the third quarter was mixed. Liquidity remained tight for diamond manufacturers in India and combined with a weakening of the Indian rupee to restrict demand for polished diamonds from local jewelry manufacturers even in the run-up to the gift giving season of Diwali. This led to a very cautious rough diamond market leading into the annual factory shutdowns for Diwali. Conversely, retail markets outside India remained buoyant, especially in the US as expectations for a positive holiday season there remain high. The Chinese market has shown increased activity and is competing with the US for mid-range polished diamonds. The market for higher end polished diamonds in China remains subdued but there is evidence that Chinese consumers continue to purchase these ranges overseas.

The rough and polished diamond markets will be focused on restocking in the fourth quarter. Despite positive trends at the retail market level, jewelry manufacturers are hesitant to accumulate diamond stocks and are relying on just in time replenishment. Rough diamond polishers have been equally or more cautious so rough diamond stocks available for polishing in India and Israel are low. This, combined with an increase in demand for polished diamonds leading into the holiday season, could see a swift return of confidence that will bode well for the diamond market in 2014.

Consolidated Financial Results

The Company's consolidated results from continuing operations relate solely to its mining operations, which include the production, sorting and sale of rough diamonds. The results of the Company's luxury brand segment, which it disposed of on March 26, 2013, are treated as discontinued operations for accounting and reporting purposes and current and prior period results have been recast accordingly. The following is a summary of the Company's consolidated quarterly results for the eight quarters ended October 31, 2013.

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

                                        2014        2014       2014         2013      2013
                                          Q3          Q2         Q1           Q4        Q3

    Sales                          $ 151,639  $  261,803  $ 108,837  $   110,111 $  84,818
    Cost of sales                    133,577     234,372     81,535       79,038    71,663
    Gross margin                      18,062      27,431     27,302       31,073    13,155
    Gross margin (%)                   11.9%       10.5%      25.1%        28.2%     15.5%
    Selling, general and
    administrative expenses            7,408      15,056     16,843       10,086     7,581
    Operating profit (loss)
    from continuing operations        10,654      12,375     10,459       20,987     5,574
    Finance expenses                  (5,676)    (19,637)    (3,994)      (2,382)   (2,308)
    Exploration costs                 (7,074)     (3,145)    (1,039)        (306)     (673)
    Finance and other income             825       1,032        804          601        60
    Foreign exchange gain (loss)       1,122      (2,814)       732          116      (301)
    Profit (loss) before income
    taxes from continuing operations    (149)    (12,189)     6,962       19,016     2,352
    Income tax expense (recovery)      3,858       6,913      4,699        6,977     1,583
    Net profit (loss) from
    continuing operations           $ (4,007)  $ (19,102) $   2,263  $    12,039 $     769
    Net profit (loss) from
    discontinued operations                -           -    497,385        2,802     3,245
    Net profit (loss)               $ (4,007)  $ (19,102) $ 499,648  $    14,841 $   4,014
    Net profit (loss) from
    continuing operations
    attributable to Shareholders    $ (2,895)  $ (16,304) $   2,822  $    12,146 $     152
    Non-controlling interest          (1,112)     (2,798)      (559)        (107)      617
    Net profit (loss) attributable
    to Shareholders                 $ (2,895)  $ (16,304) $ 500,207  $    14,948 $   3,397
    Non-controlling interest          (1,112)     (2,798)      (559)        (107)      617
    Earnings (loss) per share
    - continuing operations
    Basic                           $  (0.03)  $   (0.19) $    0.03  $      0.14 $    0.00
    Diluted                         $  (0.03)  $   (0.19) $    0.03  $      0.14 $    0.00
    Earnings (loss) per share
    Basic                           $  (0.03)  $   (0.19) $    5.89  $      0.18 $    0.04
    Diluted                         $  (0.03)  $   (0.19) $    5.82  $      0.18 $    0.04
    Cash dividends declared
    per share                       $    0.00  $     0.00 $    0.00  $      0.00 $    0.00
    Total assets(i)                 $   2,308  $    2,295 $   2,412  $     1,710 $   1,733
    Total long-term liabilities(i)  $     692  $      696 $     695  $       269 $     682
    Operating profit (loss) from
    continuing operations           $  10,654  $   12,375 $  10,459  $    20,987 $   5,574
    Depreciation and
    amortization(ii)                   31,978      32,644    20,211       24,346    20,588
    EBITDA from continuing
    operations(iii)                 $  42,632  $   45,019 $  30,670  $    45,333 $  26,162



Table cont'd.

    (expressed in thousands of United States dollars except per share amounts and where
     otherwise noted)
    (unaudited)
                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                        2013       2013       2012  October 31, October 31,
                                          Q2         Q1         Q4        2013        2012

    Sales                          $  61,473  $  89,009  $ 102,232  $  522,280 $   235,300
    Cost of sales                     46,784     70,099     72,783     449,483     188,546
    Gross margin                      14,689     18,910     29,449      72,797      46,754
    Gross margin (%)                   23.9%      21.2%      28.8%       13.9%       19.9%
    Selling, general and
    administrative expenses            5,750      6,739      5,464      39,308      20,070
    Operating profit (loss) from
    continuing operations              8,939     12,171     23,985      33,489      26,684
    Finance expenses                  (2,151)    (2,242)    (1,616)    (29,305)     (6,701)
    Exploration costs                   (568)      (254)      (177)    (11,260)     (1,495)
    Finance and other income              67         52         51       2,661         179
    Foreign exchange gain (loss)       1,048       (370)       680        (961)        377
    Profit (loss) before income
    taxes from continuing operations   7,335      9,357     22,923      (5,376)     19,044
    Income tax expense (recovery)      3,386      3,330     10,281      15,469       8,299
    Net profit (loss) from
    continuing operations          $   3,949  $   6,027  $  12,642  $  (20,845) $   10,745
    Net profit (loss) from
    discontinued operations              804      5,583      3,946     497,385       9,632
    Net profit (loss)              $   4,753  $  11,610  $  16,588  $  476,540  $   20,377
    Net profit (loss) from
    continuing operations
    attributable to
    Shareholders                   $   3,951  $   6,027  $  12,654  $  (16,374) $   10,130
    Non-controlling interest              (2)         -        (12)     (4,471)        615
    Net profit (loss) attributable
    to Shareholders                $   4,755  $  11,610  $  16,600  $  481,011  $   19,762
    Non-controlling interest              (2)         -        (12)     (4,471)        615
    Earnings (loss) per share
    - continuing operations
    Basic                          $    0.05  $    0.07  $    0.15  $    (0.19) $     0.12
    Diluted                        $    0.05  $    0.07  $    0.15  $    (0.19) $     0.12
    Earnings (loss) per share
    Basic                          $    0.06  $    0.14  $    0.20  $     5.66  $     0.23
    Diluted                        $    0.06  $    0.14  $    0.19  $     5.61  $     0.23
    Cash dividends declared
    per share                      $    0.00  $    0.00  $    0.00  $     0.00  $     0.00
    Total assets(i)                $   1,660  $   1,716  $   1,607  $    2,308  $    1,733
    Total long-term liabilities(i) $     461  $     472  $     641  $      692  $      682
    Operating profit (loss) from
    continuing operations          $   8,939  $  12,171  $  23,985  $   33,489  $   26,684
    Depreciation and
    amortization(ii)                  13,160     22,172     24,284      84,833      55,921
    EBITDA from continuing
    operations(iii)                $  22,099  $  34,343  $  48,269  $  118,322  $   82,605



    (i)   Total assets and total long-term liabilities are expressed in millions of
          United States dollars.
    (ii)  Depreciation and amortization included in cost of sales and selling, general and
          administrative expenses.
    (iii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
          "Non-IFRS Measures" on page 20.


Three Months Ended October 31, 2013, Compared to Three Months Ended October 31, 2012

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The Company recorded a third quarter consolidated net loss attributable to shareholders of $2.9 million or $(0.03) per share, compared to a net profit attributable to shareholders of $3.4 million or $0.04 per share in the third quarter of the prior year. Net loss from continuing operations attributable to shareholders was $2.9 million or $(0.03) per share, compared to a net profit from continuing operations of $0.2 million or $0.00 per share in the comparable quarter of the prior year.

CONSOLIDATED SALES

Sales for the third quarter totalled $151.6 million, consisting of Diavik rough diamond sales of $52.9 million and Ekati rough diamond sales of $98.7 million. This compares to sales of $84.8 million in the comparable quarter of the prior year (Diavik rough diamond sales of $84.8 million and Ekati rough diamond sales of $nil).

The Company expects that results for its mining operations will fluctuate depending on the seasonality of production at its mineral properties, the number of sales events conducted during the quarter, rough diamond prices and the volume, size and quality distribution of rough diamonds delivered from the Company's mineral properties and sold by the Company in each quarter. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN

The Company's third quarter cost of sales was $133.6 million resulting in a gross margin of 11.9%, compared to a cost of sales of $71.7 million and a gross margin of 15.5% for the comparable quarter of the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED INCOME TAXES

The Company recorded a net income tax expense of $3.9 million during the third quarter, compared to a net income tax expense of $1.6 million in the comparable quarter of the prior year. The Company's combined federal and provincial statutory income tax rate for the quarter is 26.5%. There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate and unrecognized tax benefits. As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the third quarter, the Canadian dollar weakened against the US dollar. As a result, the Company recorded an unrealized foreign exchange gain of $3.5 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability. This compares to an unrealized foreign exchange loss of $0.7 million in the comparable quarter of the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the third quarter, the Company also recognized a deferred income tax expense of $6.4 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 $1.0 million recognized in the comparable quarter of the prior year. The recorded tax provision during the quarter also included a net income tax recovery of $0.5 million relating to foreign exchange differences between income in the currency of the country of origin and US dollars. This compares to net income tax recovery of $2.1 million recognized in the comparable period of the prior year.

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

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The principal components of selling, general and administrative ("SG&A") expenses include expenses for salaries and benefits, professional fees, consulting and travel. The Company incurred SG&A expenses of $7.4 million for the third quarter, compared to $7.6 million in the comparable quarter of the prior year. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS

Finance expenses for the third quarter were $5.7 million, compared to $2.3 million for the comparable quarter of the prior year. The increase was due primarily to accretion expense associated with future site restoration liability at the Ekati Diamond Mine, which was not present in the comparable quarter of the prior year. Accretion expense was $5.3 million (three months ended October 31, 2012 - $0.6 million) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS

Exploration expense of $7.1 million was incurred during the third quarter, compared to $0.7 million in the comparable quarter of the prior year. Included in exploration expense for the third quarter is $6.0 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $1.0 million of exploration work on the Company's claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS

Finance and other income of $0.8 million was recorded during the third quarter, compared to $0.06 million in the comparable quarter of the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS

A net foreign exchange gain of $1.1 million was recognized during the third quarter, compared to a net foreign exchange loss of $0.3 million in the comparable quarter of the prior year. The Company does not currently have any significant foreign exchange derivative instruments outstanding.

Nine Months Ended October 31, 2013, Compared to Nine Months Ended October 31, 2012

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The Company recorded a consolidated net profit attributable to shareholders of $481.0 million or $5.66 per share for the nine months ended October 31, 2013, compared to a net profit attributable to shareholders of $19.8 million or $0.23 per share in the comparable period of the prior year. Included in this amount is a $497.6 million gain on the sale of the luxury brand segment on March 26, 2013. Net loss from continuing operations attributable to shareholders was $16.4 million or $(0.19) per share, compared to a net profit from continuing operations attributable to shareholders of $10.1 million or $0.12 per share in the comparable period of the prior year. Discontinued operations represented $497.4 million of net profit or $5.85 per share, compared to $9.6 million or $0.11 per share in the comparable period of the prior year.

CONSOLIDATED SALES

Sales totalled $522.3 million for the nine months ended October 31, 2013, consisting of Diavik rough diamond sales of $233.1 million and Ekati rough diamond sales of $289.2 million. This compares to sales of $235.3 million in the comparable period of the prior year (Diavik rough diamond sales of $235.3 million and Ekati rough diamond sales of $nil). The Ekati rough diamond sales are for the period from April 10, 2013, which was the date the Ekati Diamond Mine Acquisition was completed, to October 31, 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 period, rough diamond prices and the volume, size and quality distribution of rough diamonds delivered from the Company's mineral properties and sold by the Company in each quarter. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED COST OF SALES AND GROSS MARGIN

The Company's cost of sales was $449.5 million for the nine months ended October 31, 2013, resulting in a gross margin of 13.9%, compared to a cost of sales of $188.5 million and a gross margin of 19.9% for the comparable period of the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED INCOME TAXES

The Company recorded a net income tax expense of $15.5 million during the nine months ended October 31, 2013, compared to a net income tax expense of $8.3 million in the comparable period of the prior year. The Company's combined federal and provincial statutory income tax rate for the nine months ended October 31, 2013 is 26.5%. There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate and unrecognized tax benefits. As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the nine months ended October 31, 2013, the Canadian dollar weakened against the US dollar. As a result, the Company recorded an unrealized foreign exchange gain of $9.5 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability during the nine months ended October 31, 2013. This compares to an unrealized foreign exchange loss of $0.8 million recorded in the comparable period of the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the nine months ended October 31, 2013, the Company recognized a deferred income tax expense of $16.9 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 $3.5 million recognized in the comparable period of the prior year. The recorded tax provision during the nine months ended October 31, 2013, included a net income tax recovery of $0.6 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 $4.0 million recognized in the comparable period of the prior year.

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

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The Company incurred SG&A expenses of $39.3 million during the nine months ended October 31, 2013, compared to $20.1 million in the comparable period of the prior year. The increase from the comparable period of the prior year was primarily due to $11.2 million of transaction costs and $6.0 million of restructuring costs at the Antwerp, Belgium office, related in each case to the Ekati Diamond Mine Acquisition. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS

Finance expenses were $29.3 million for the nine months ended October 31, 2013, compared to $6.7 million for the comparable period of the prior year. The increase was due primarily to the expensing of approximately $14.0 million relating to the cancellation of the credit facilities that had previously been arranged in connection with the Ekati Diamond Mine Acquisition. The Company ultimately determined to fund the Ekati Diamond Mine Acquisition by way of cash on hand and did not draw on these credit facilities, which were subsequently cancelled. Also included in consolidated finance expense is accretion expense of $12.2 million (nine months ended October 31, 2012 - $1.9 million) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS

Exploration expense of $11.3 million was incurred during the nine months ended October 31, 2013, compared to $1.5 million in the comparable period of the prior year. Included in exploration expense for the current year is $6.9 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $4.0 million of exploration work on the Company's claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS

Finance and other income of $2.7 million was recorded during the nine months ended October 31, 2013, compared to $0.2 million in the comparable period of the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS

A net foreign exchange loss of $1.0 million was recognized during the nine months ended October 31, 2013, compared to a net foreign exchange gain of $0.4 million in the comparable period 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)
                                                 2014     2014     2014      2013     2013
                                                   Q3       Q2       Q1        Q4       Q3
    Sales
    North America                          $        - $      - $  6,179 $   4,604 $  7,697
    Europe                                     45,088   80,530   61,642    84,346   57,438
    India                                       7,818   10,737   21,095    21,161   19,683
    Total sales                                52,906   91,267   88,916   110,111   84,818
    Cost of sales                              40,018   68,328   61,888    79,038   71,663
    Gross margin                               12,888   22,939   27,028    31,073   13,155
    Gross margin (%)                            24.4%    25.1%    30.4%     28.2%    15.5%
    Selling, general and administrative
    expenses                                    1,123    1,409    1,110     1,860    1,279
    Operating profit                       $   11,765 $ 21,530 $ 25,918 $  29,213 $ 11,876
    Depreciation and amortization (i)          12,434   21,768   19,906    24,042   20,283
    EBITDA (ii)                            $   24,199 $ 43,298 $ 45,824 $  53,255 $ 32,159



Table cont'd.

      (expressed in thousands of United States dollars)
                         (unaudited)
                                                                         Nine        Nine
                                                                       months      months
                                                                        ended       ended
                                          2013     2013      2012  October 31, October 31,
                                            Q2       Q1        Q4       2013         2012
    Sales
    North America                   $    2,269 $  7,432 $   2,727 $     6,179 $    17,398
    Europe                              50,514   54,370    78,846     187,260     162,322
    India                                8,690   27,207    20,659      39,650      55,580
    Total sales                         61,473   89,009   102,232     233,089     235,300
    Cost of sales                       46,784   70,099    72,783     170,234     188,546
    Gross margin                        14,689   18,910    29,449      62,855      46,754
    Gross margin (%)                     23.9%    21.2%     28.8%       27.0%       19.9%
    Selling, general and
    administrative expenses              1,050      972     1,308       3,641       3,301
    Operating profit                $   13,639 $ 17,938 $  28,141 $    59,214 $    43,453
    Depreciation and
    amortization (i)                    12,874   21,876    23,849      54,108      55,033
    EBITDA (ii)                     $   26,513 $ 39,814 $  51,990 $   113,322 $    98,486



    (i)  Depreciation and amortization included in cost of sales and selling, general and
         administrative expenses.
    (ii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
         "Non-IFRS Measures" on page 20.


Three Months Ended October 31, 2013, Compared to Three Months Ended October 31, 2012

DIAVIK SALES

During the third quarter, the Company sold approximately 0.4 million carats from the Diavik Diamond Mine for a total of $52.9 million for an average price per carat of $118, compared to 0.9 million carats for a total of $84.8 million for an average price per carat of $96 in the comparable quarter of the prior year. The 49% decrease in volume of carats sold versus the comparable quarter of the prior year resulted from a combination of the decision to hold back some inventory from sale in the third quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India, and the change in the sales schedule resulting from a change in the rough diamond sales platform. The 23% increase in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the third quarter of the prior year resulted primarily from the sale during the third quarter of the prior year of a higher proportion of lower priced Diavik Diamond Mine goods due to an improved market for those goods at that time. At October 31, 2013, the Company had 0.8 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $110 million, compared to 0.8 million carats with an estimated market value of approximately $110 million in the comparable quarter of the prior year.

Had the Company sold only the last production shipped in the third quarter, the estimated achieved price would have been approximately $117 per carat based on the prices achieved in the September / October 2013 sale.

DIAVIK COST OF SALES AND GROSS MARGIN

The Company's third quarter cost of sales for the Diavik Diamond Mine was $40.0 million resulting in a gross margin of 24.4%, compared to a cost of sales of $71.7 million and a gross margin of 15.5% in the comparable quarter of the prior year. Cost of sales for the third quarter included $12.4 million of depreciation and amortization, compared to $19.8 million in the comparable quarter of the prior year. The decrease in depreciation and amortization is due primarily to the decision to hold back some inventory from sale in the third quarter. The Diavik segment generated gross margins and EBITDA margin of 24.4% and 46%, respectively, compared to 15.5% and 38%, 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 third quarter, the Diavik cash cost of production was $37.6 million compared to $42.0 million in the comparable quarter of the prior year. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the unit-of-production method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Diavik Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Diavik Diamond Mine's cost of sales disclosed for the three months ended October 31, 2013 and 2012.


    (expressed in thousands of United    Three months ended   Three months ended
    States dollars)                        October 31, 2013     October 31, 2012

    Diavik cash cost of production              $    37,558          $    42,048
    Private royalty                                   1,006                1,632
    Other cash costs                                    759                1,057
    Total cash cost of production                    39,323               44,737
    Depreciation and amortization                    19,318               20,547
    Total cost of production                         58,641               65,284
    Adjusted for stock movements                   (18,623)                6,379
    Total cost of sales                         $    40,018          $    71,663


DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Diavik Diamond Mine segment during the quarter was $1.1 million, compared to $1.3 million in the comparable quarter of the prior year.

Nine Months Ended October 31, 2013, Compared to Nine Months Ended October 31, 2012

DIAVIK SALES

During the nine months ended October 31, 2013, the Company sold approximately 1.9 million carats from the Diavik Diamond Mine for a total of $233.1 million for an average price per carat of $121 compared to 2.3 million carats for a total of $235.3 million for an average price per carat of $101 in the comparable period of the prior year. The 19% increase in the Company's achieved average rough diamond prices resulted primarily from the sale during the first quarter of the prior year of almost all of the remaining lower priced goods originally held back in inventory by the Company at October 31, 2011 due to an oversupply in the market at that time. The 17% decrease in volume of carats sold was due primarily to two offsetting factors that impacted the comparable period of the prior year: first, an increase in volume of carats sold from the sale during the first quarter of the prior year of almost all of the remaining lower priced goods originally held back in inventory at October 31, 2011; and second, a decrease in volume of carats sold during the current quarter due to a combination of the decision to hold back some inventory from sale and the change in the sales schedule resulting from a change in the rough diamond sales platform.

DIAVIK COST OF SALES AND GROSS MARGIN

The Company's cost of sales for the Diavik Diamond Mine for the nine months ended October 31, 2013, was $170.2 million resulting in a gross margin of 27.0% compared to a cost of sales of $188.5 million and a gross margin of 19.9% in the comparable period of the prior year. Cost of sales for the nine months ended October 31, 2013 included $53.5 million of depreciation and amortization compared to $53.8 million in the comparable period of the prior year. This segment generated gross margins and EBITDA margins of 27.0% and 49%, respectively, compared to 19.9% and 42%, respectively, in the comparable period 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 nine months ended October 31, 2013, the Diavik cash cost of production was $119.4 million compared to $126.7 million in the comparable period 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 nine months ended October 31, 2013 and 2012.



    (expressed in thousands of United      Nine months ended   Nine months ended
    States dollars)                         October 31, 2013    October 31, 2012

    Diavik cash cost of production               $   119,364         $   126,679
    Private royalty                                    3,930               5,359
    Other cash costs                                   2,717               3,088
    Total cash cost of production                    126,011             135,126
    Depreciation and amortization                     60,766              50,334
    Total cost of production                         186,777             185,460
    Adjusted for stock movements                    (16,543)               3,086
    Total cost of sales                          $   170,234         $   188,546


DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Diavik Diamond Mine segment for the nine months ended October 31, 2013 was $3.6 million, compared to $3.3 million in the comparable period of the prior year.

OPERATIONAL UPDATE

Production for the third calendar quarter at the Diavik Diamond Mine was 1.7 million carats (at 100%), compared to 1.9 million in the third calendar quarter of the prior year. Total production includes reprocessed plant rejects ("RPR"), which are not included in the Company's reserves and resource statement and are therefore incremental to production.

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

(reported on a one-month lag)

    For the three months ended September
    30, 2013
                                                   Ore
                                             processed
                                                 (000s  Carats           Grade
    Pipe                                       tonnes)  (000s)  (carats/tonne)
    A-154 South                                     56     233            4.15
    A-154 North                                     81     165            2.04
    A-418                                           81     236            2.91
    RPR                                              1      35               -
    Total                                          219     669          2.91(a)

    (a) Grade has been adjusted to exclude RPR.


    For the three months ended September
    30, 2012
                                                   Ore
                                             processed
                                                 (000s  Carats           Grade
    Pipe                                       tonnes)  (000s)  (carats/tonne)
    A-154 South                                     71     334            4.71
    A-154 North                                     62     137            2.21
    A-418                                           77     293            3.82
    RPR                                              -       9               -
    Total                                          210     773          3.65(a)

    (a) Grade has been adjusted to exclude RPR.


    For the nine months ended September
    30, 2013
                                                   Ore
                                             processed
                                                 (000s  Carats           Grade
    Pipe                                       tonnes)  (000s)  (carats/tonne)
    A-154 South                                    176     757            4.29
    A-154 North                                    219     462            2.11
    A-418                                          232     741            3.20
    RPR                                              4     111               -
    Total                                          631   2,071          3.13(a)

    (a) Grade has been adjusted to exclude RPR.


    For the nine months ended September
    30, 2012
                                                   Ore
                                             processed
                                                 (000s  Carats           Grade
    Pipe                                       tonnes)  (000s)  (carats/tonne)
    A-154 South                                     99     437            4.42
    A-154 North                                    131     265            2.02
    A-418                                          405   1,388            3.42
    RPR                                              2      42               -
    Total                                          637   2,132         3.29(a)

    (a) Grade has been adjusted to exclude RPR.


DIAVIK OPERATIONS OUTLOOK

PRODUCTION

The Diavik Diamond Mine full-year production target (on a 100% basis) is expected to be approximately 7.1 million carats from the mining of approximately 1.9 million tonnes of ore and the processing of approximately 2.2 million tonnes of material from both mining and stockpiles. The approximately 18% increase in carats in expected production for calendar 2013, as compared to the original plan of approximately 6 million carats, results from both the expected processing of more stockpiled ore and an increase in underground mining velocity during the calendar year. Diavik's full-year target production expects mining activities will be exclusively underground with approximately 0.7 million tonnes expected to be sourced from A-154 North, approximately 0.5 million tonnes from A-154 South and approximately 0.7 million tonnes from A-418 kimberlite pipes. Included in the estimated production for calendar 2013 is approximately 0.4 million carats from RPR and 0.1 million carats from the improved recovery process for small diamonds. These RPR and small diamond recoveries are not included in the Company's reserves and resource statement and are therefore incremental to production. Given the decision to hold back some inventory from sale in the third quarter, the Company currently expects rough diamond sales for fiscal 2014 from the Diavik Diamond Mine to be in the range of $320 to $365 million.

PRICING

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

                       September /
                      October 2013
                       Sales Cycle
                     Average price
                         per carat
    Ore type       (in US dollars)
    A-154 South     $          140
    A-154 North                180
    A-418                      100
    RPR                         50


COST OF SALES AND CASH COST OF PRODUCTION

Given the decision to hold back some inventory from sale in the third quarter, the Company currently expects cost of sales for fiscal 2014 from the Diavik Diamond Mine to be in the range of $235 to $270 million (including depreciation and amortization in the range of $70 to $85 million). The Company's share of the cash cost of production at the Diavik Diamond Mine for calendar 2013 is expected to be approximately $165 million at an assumed average Canadian/US dollar exchange rate of $1.03.

CAPITAL EXPENDITURES

The Company currently expects DDDLP's 40% share of the planned capital expenditures for the Diavik Diamond Mine in fiscal 2014 to be approximately $26 million, assuming an average Canadian/US dollar exchange rate of $1.03. During the third quarter, DDDLP's share of capital expenditures was $6.9 million ($23.4 million for the nine months ended October 31, 2013).

Ekati Diamond Mine

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

      (expressed in thousands of United States dollars)
                         (unaudited)
                                                     2014      2014     2014   2013   2013
                                                       Q3        Q2       Q1     Q4     Q3
    Sales
    Europe                                     $   98,733 $ 170,536 $ 19,921 $    - $    -
    Total sales                                    98,733   170,536   19,921      -      -
    Cost of sales                                  93,558   166,044   19,647      -      -
    Gross margin                                    5,175     4,492      274      -      -
    Gross margin (%)                                 5.2%      2.6%     1.4%     -%     -%
    Selling, general and administrative expenses      362       676      520      -      -
    Operating profit (loss)                    $    4,813 $   3,816 $  (246) $    - $    -
    Depreciation and amortization (i)              19,166    10,513        -      -      -
    EBITDA (ii)                                $   23,979 $  14,329 $  (246) $    - $    -



Table cont'd.

      (expressed in thousands of United States dollars)
                         (unaudited)
                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                                 2013   2013   2012 October 31, October 31,
                                                   Q2     Q1     Q4       2013        2012
    Sales
    Europe                                  $       - $    - $    - $  289,190 $         -
    Total sales                                     -      -      -    289,190           -
    Cost of sales                                   -      -      -    279,249           -
    Gross margin                                    -      -      -      9,941           -
    Gross margin (%)                               -%     -%     -%       3.4%          -%
    Selling, general and administrative
    expenses                                        -      -      -      1,558           -
    Operating profit (loss)                 $       - $    - $    - $    8,383 $         -
    Depreciation and amortization (i)               -      -      -     29,679           -
    EBITDA (ii)                             $       - $    - $    - $   38,062 $         -


    (i)  Depreciation and amortization included in cost of sales and selling, general and
         administrative expenses. All sales of inventory purchased as part of the Ekati
         Diamond Mine Acquisition are accounted for as cash cost of sales.
    (ii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
         "Non-IFRS Measures" on page 20.


Three months ended October 31, 2013

EKATI SALES

During the third quarter, the Company sold approximately 0.4 million carats from the Ekati Diamond Mine for a total of $98.7 million for an average price per carat of $271. The volume of carats sold during the quarter was lower than what the Company would anticipate going forward as a result of a combination of the decision to hold back some inventory from sale in the third quarter and the change in the sales schedule resulting from a change in the rough diamond sales platform. At October 31, 2013, the Company had 0.6 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $141 million.

EKATI COST OF SALES AND GROSS MARGIN

The Company's cost of sales for the Ekati Diamond Mine during the third quarter was $93.6 million, resulting in a gross margin of 5.2% and an EBITDA margin of 23%. Cost of sales for the third quarter was impacted slightly by the sale of inventory that was recorded at market value as a result of the Ekati Diamond Mine Acquisition. The Company estimates the cost of sales would have been approximately $93.1 million during the third quarter if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. The Company estimates that gross margins and EBITDA margin would have been 5.7% and 24%, respectively if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. At October 31, 2013, 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 third quarter, the Ekati cash cost of production was $91.1 million. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the straight-line method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Ekati Diamond Mine's operations' cost of sales disclosed for the three months ended October 31, 2013.

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

    Ekati cash cost of production                              $    91,091
    Other cash costs including inventory acquisition                 1,137
    Total cash cost of production                                   92,228
    Depreciation and amortization                                   26,129
    Total cost of production                                       118,356
    Adjusted for stock movements                                   (24,798)
    Total cost of sales                                        $    93,558


EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Ekati Diamond Mine segment for the quarter were $0.4 million.


Period from April 10 to October 31, 2013

EKATI SALES

During the period from April 10 to October 31, 2013, the Company sold approximately 0.97 million carats from the Ekati Diamond Mine for a total of $289.2 million for an average price per carat of $299.

Had the Company sold only the last production shipped in the third quarter, the estimated achieved price would have been approximately $200 per carat based on the prices achieved in the September / October 2013 sale. The estimated achieved price includes the sale of rough diamonds from Misery South and Southwest, which has a lower average price per carat.

EKATI COST OF SALES AND GROSS MARGIN

The Company's cost of sales for the Ekati Diamond Mine for the period from April 10 to October 31, 2013, was $279.2 million, resulting in a gross margin of 3.4% and an EBITDA margin of 13%. Cost of sales was impacted by the sale of inventory that was recorded at market value as a result of the Ekati Diamond Mine Acquisition. The Company estimates that the cost of sales would have been approximately $262.5 million during the period if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. The Company estimates that gross margins and EBITDA margins of sales would have been 9.2% and 28%, respectively, if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. At October 31, 2013, the Company had approximately $10 million remaining of inventory acquired as part of the Ekati Diamond Mine Acquisition, the majority of which are made up of production samples. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

A substantial portion of consolidated cost of sales is mining operating costs, which are incurred at the Ekati Diamond Mine. During the period from April 10 to October 31, 2013, the Ekati cash cost of production was $202.6 million. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the straight-line method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Ekati Diamond Mine's operations' cost of sales disclosed for the period April 10 to October 31, 2013.

                                                         Period April 10 to
    (expressed in thousands of United States dollars)      October 31, 2013

    Ekati cash cost of production                      $            202,600
    Other cash costs including inventory acquisition                156,985
    Total cash cost of production                                   359,585
    Depreciation and amortization                                    57,959
    Total cost of production                                        417,544
    Adjusted for stock movements                                   (138,295)
    Total cost of sales                                $            279,249


EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Ekati Diamond Mine segment for the period from April 10 to October 31, 2013 were $1.6 million.

OPERATIONAL UPDATE

Production for the third calendar quarter at the Ekati Diamond Mine was 0.6 million carats at 100%. The development of the Misery pipe is continuing. As of September 30, 2013, the Company had processed approximately 0.18 million tonnes of material excavated as part of the waste stripping for advancing the pit profile of the Misery pipe, and has recovered approximately 0.24 million carats of diamonds from this material. These diamond recoveries, all of which occurred after June 30, 2013, are not included in the Company's reserves and resource statement and are therefore incremental to production.

On November 18th, 2013, the Wek' eezhii Land and Water Board issued a Preliminary Screening Decision Report on the Lynx kimberlite pipe ("Lynx Project") at the Ekati Diamond Mine which determined that the Lynx Project can proceed with the regulatory process. On November 22, 2013, the Wek' eezhii Land and Water Board decided to refer the Company's Detailed Project Report on the Jay and Cardinal kimberlite pipes at the Ekati Diamond Mine to the Mackenzie Valley Environment Impact Review Board for an environmental assessment.

EKATI DIAMOND MINE PRODUCTION (80% SHARE)
(this table reported on a one-month lag)

        For the three months ended
            September 30, 2013
                                         Ore processed  Carats           Grade
    Pipe                                 (000s tonnes)  (000s)  (carats/tonne)
    Koala Phase 5                                   49      19            0.38
    Koala Phase 6                                   62      83            1.33
    Koala North                                     49      34            0.69
    Fox                                            521     158            0.30
    Misery South & Southwest                       143     194            1.36
    Coarse Ore Rejects                              34       6            0.17
    Total                                          857     494            0.58

    For the period from April 10, 2013
    (date of acquisition) to September
                 30, 2013
                                         Ore processed  Carats           Grade
    Pipe                                 (000s tonnes)  (000s)  (carats/tonne)
    Koala Phase 5                                   99      38            0.38
    Koala Phase 6                                   89     117            1.32
    Koala North                                    124      92            0.74
    Fox                                          1,134     357            0.32
    Misery South & Southwest                       143     194            1.36
    Coarse Ore Rejects                              34       6            0.17
    Total                                        1,621     805            0.50


Ekati Operations Outlook

PRODUCTION

The approved and updated mine plan and budget for the Ekati Diamond Mine foresees production (on a 100% basis) for the period from April 10, 2013 to the calendar 2013 year end of approximately 1.0 million carats from the mining of approximately 4.2 million tonnes from mineral reserves. The mine plan foresees processing of approximately 3.3 million tonnes, with some material being made up of diamond-bearing kimberlite from a satellite body in the Misery open pit that is excavated as part of the waste stripping as the pit profile is advanced. Planned mining activities include approximately 0.3 million tonnes expected to be sourced from Koala Phase 5, approximately 0.3 million tonnes from Koala Phase 6, approximately 0.3 million tonnes from Koala North and approximately 3.3 million tonnes from Fox. Given the decision to hold back some inventory from sale in the third quarter, the Company currently expects rough diamond sales for fiscal 2014 from the Ekati Diamond Mine to be in the range of $385 to $455 million (on a 100% basis).

PRICING

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


                                     September /
                                    October 2013
                                     Sales Cycle
                                   Average price
                                       per carat
    Ore type                      (in US dollars)
    Koala Phase 5                  $         345
    Koala Phase 6                            395
    Koala North                              410
    Fox                                      300
    Misery South & South West             80-100
    Coarse Ore Rejects                    65-120


COST OF SALES AND CASH COST OF PRODUCTION

Given the decision to hold back some inventory from sale in the third quarter, the Company currently expects cost of sales for fiscal 2014 from the Ekati Diamond Mine to be in the range of $365 to $430 million (including depreciation and amortization in the range of $50 to $60 million). Cash cost of production at the Ekati Diamond Mine for the period from April 10, 2013 to the fiscal 2014 year-end is expected to be approximately $310 million at an assumed average Canadian/US dollar exchange rate of $1.03.

CAPITAL EXPENDITURES

The planned capital expenditures for the Ekati Diamond Mine for the period from April 10, 2013 to the fiscal 2014 year-end are expected to be approximately $100 million at an assumed average Canadian/US dollar exchange rate of $1.03. The currently expected capital expenditures include approximately $42 million for the continued development of the Misery pipe, consisting largely of mining costs to achieve ore release. During the third quarter, capital expenditures were approximately $28.3 million ($65.3 million for the period from April 10, 2013 to October 31, 2013). The Company expects to spend a total of $11 million for Jay pipe exploration during this fiscal year.

Corporate

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

    (expressed in thousands of United States dollars)
    (unaudited)
                                            2014       2014       2014      2013      2013
                                              Q3         Q2         Q1        Q4        Q3

    Sales                            $         -  $       -  $       -  $      -  $      -
    Cost of sales                              -          -          -         -         -
    Gross margin                               -          -          -         -         -
    Gross margin (%)                          -%         -%         -%        -%        -%
    Selling, general and
    administrative expenses                5,924     12,971     15,213     8,227     6,302
    Operating loss                   $    (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302)
    Depreciation and amortization (i)        378        363        305       304       306
    EBITDA (ii)                      $    (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996)


Table cont'd.

    (expressed in thousands of United States dollars)
    (unaudited)
                                                                           Nine       Nine
                                                                         months     months
                                                                          ended      ended
                                                                        October    October
                                             2013      2013      2012        31,        31,
                                               Q2        Q1        Q4      2013       2012

    Sales                             $         -  $      -  $      -  $      -  $       -
    Cost of sales                               -         -         -         -          -
    Gross margin                                -         -         -         -          -
    Gross margin (%)                           -%        -%        -%        -%         -%
    Selling, general and
    administrative expenses                 4,700     5,767     4,153    34,107     16,769
    Operating loss                    $    (4,700) $ (5,767) $ (4,153) $(34,107) $ (16,769)
    Depreciation and amortization (i)         286       296       434     1,046        888
    EBITDA (ii)                       $    (4,414) $ (5,471) $ (3,719) $(33,061) $ (15,881)


    (i)  Depreciation and amortization included in cost of sales and selling, general and
         administrative expenses.
    (ii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
         "Non-IFRS Measures" on page 20.


Three Months Ended October 31, 2013, Compared to Three Months Ended October 31, 2012

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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

Nine Months Ended October 31, 2013, Compared to Nine Months Ended October 31, 2012

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses for the Corporate segment during the nine months ended October 31, 2013 increased by $17.4 million from the comparable period of the prior year. The increase from the comparable period of the prior year was primarily due to $11.2 million of transaction costs and $6.0 million of restructuring costs at the Antwerp, Belgium office, related in each case to the Ekati Diamond Mine Acquisition.

Discontinued Operations

On March 26, 2013, the Company completed the disposition of its luxury brand segment to Swatch Group. As a result, the Company's consolidated results no longer include the operations of the luxury brand segment and the results of the luxury brand segment are now treated as discontinued operations for reporting purposes. Current and prior period results have been restated to reflect this change.

Liquidity and Capital Resources

Working Capital

As at October 31, 2013, the Company had unrestricted cash and cash equivalents of $195.8 million and restricted cash of $121.9 million compared to $104.3 million and $nil at January 31, 2013. The restricted cash is used to support letters of credit to the Government of Canada of CDN $127 million in support of the reclamation obligations for the Ekati Diamond Mine. During the quarter ended October 31, 2013, the Company reported cash flow from operations of $6.6 million compared to $19.6 million in the comparable period of the prior year.

As at October 31, 2013, the Company had 1.5 million carats of rough diamond inventory with an estimated market value of approximately $250 million, of which approximately $95 million represented inventory available for sale, with the remaining $155 million being sorted.

Working capital increased to $509.5 million at October 31, 2013 from $361.5 million at January 31, 2013. During the quarter, the Company increased accounts receivable from continuing operations by $5.7 million, decreased other current assets from continuing operations by $3.8 million, increased inventory and supplies from continuing operations by $39.9 million, increased trade and other payables from continuing operations by $10.6 million and increased employee benefit plans from continuing operations by $0.9 million.

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

The Company assesses liquidity and capital resources on a consolidated basis. The Company's requirements are for cash operating expenses, working capital, contractual debt requirements and capital expenditures. The Company believes that it will generate sufficient liquidity to meet its anticipated requirements for the next 12 months.

Financing Activities

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

Investing Activities

During the third quarter, the Company purchased property, plant and equipment of $35.2 million for its continuing operations, of which $6.9 million was purchased for the Diavik Diamond Mine and $28.3 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 2013 to 2017 of approximately $70 million in the aggregate assuming a Canadian/US average exchange rate of $1.05 for each of the five years and 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 are any capital expenditures for the Ekati Diamond Mine. The most significant contractual obligations for the ensuing five-year period can be summarized as follows:

    CONTRACTUAL OBLIGATIONS

    (expressed in thousands               Less than     Year    Year     After
    of United States dollars)     Total      1 year      2-3     4-5   5 years
    Interest-bearing loans
    and borrowings (a)(b)     $   5,792 $     1,178 $  2,356 $ 2,258 $       -
    Environmental and
    participation agreements
    incremental commitments
    (c)                         210,098     200,983    4,608       -     4,507
    Operating lease
    obligations (d)              18,664       4,965    9,701   3,998         -
    Total contractual
    obligations               $ 234,554 $   207,126 $ 16,665 $ 6,256 $   4,507


    (a)  (i) Interest-bearing loans and borrowings presented in the foregoing
          table include current and long-term portions. The Company does not
                           have any credit facilities.

          (ii) The Company has available a $45.0 million revolving financing
          facility (utilization in either US dollars or Euros) with Antwerp
        Diamond Bank for inventory and receivables funding in connection with
        marketing activities through its Belgian subsidiary, Dominion Diamond
        International NV, and its Indian subsidiary, Dominion Diamond (India)
         Private Limited. Borrowings under the Belgian facility bear interest
            at the bank's base rate plus 1.5%. Borrowings under the Indian
        facility bear an interest rate of 13.5%. At October 31, 2013, $nil was
             outstanding under this facility relating to Dominion Diamond
          International NV and Dominion Diamond (India) Private Limited. The
               facility is guaranteed by Dominion Diamond Corporation.

          (iii) The Company's first mortgage on real property has scheduled
          principal payments of approximately $0.2 million quarterly, may be
        prepaid at any time, and matures on September 1, 2018. On October 31,
             2013, $4.8 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 October 31,
            2013, 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 Ekati Diamond Mine, under
           environmental and other agreements, must provide funding for the
         Environmental Monitoring Advisory Board. These agreements also state
         that the mines must provide security deposits for the performance of
        their reclamation and abandonment obligations under all environmental
          laws and regulations. The operator of the Diavik Joint Venture has
           fulfilled such obligations for the security deposits by posting
         letters of credit, of which DDDLP's share as at October 31, 2013 was
        $62 million based on its 40% ownership interest in the Diavik Diamond
         Mine. There can be no assurance that the operator will continue its
             practice of posting letters of credit in fulfillment of this
            obligation, in which event DDDLP would be required to post its
         proportionate share of such security directly, which would result in
        additional constraints on liquidity. The requirement to post security
        for the reclamation and abandonment obligations may be reduced to the
             extent of amounts spent by the Diavik Joint Venture on those
           activities. The Company has posted letters of credit of CDN $127
        million with the Government of Canada supported by restricted cash in
          support of the reclamation obligations for the Ekati Diamond Mine.
        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

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

EBITDA and EBITDA margin are measures 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.

                                              CONSOLIDATED

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

                                            2014       2014       2014      2013      2013
                                              Q3         Q2         Q1        Q4        Q3
    Operating profit (loss) from
    continuing operations              $  10,654 $   12,375 $   10,459 $  20,987 $   5,574
    Depreciation and amortization         31,978     32,644     20,211    24,346    20,588
    EBITDA from continuing operations  $  42,632 $   45,019 $   30,670 $  45,333 $  26,162

    Table cont'd.

                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                           2013      2013      2012 October 31, October 31,
                                             Q2        Q1        Q4       2013        2012
    Operating profit (loss) from
    continuing operations              $  8,939 $  12,171 $  23,985 $   33,489 $    26,684
    Depreciation and amortization        13,160    22,172    24,284     84,833      55,921
    EBITDA from continuing operations  $ 22,099 $  34,343 $  48,269 $  118,322 $    82,605


                                       DIAVIK DIAMOND MINE SEGMENT

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



                                            2014       2014       2014      2013      2013
                                              Q3         Q2         Q1        Q4        Q3
    Operating profit                   $  11,765 $   21,530 $   25,918 $  29,213 $  11,876
    Depreciation and amortization         12,434     21,768     19,906    24,042    20,283
    EBITDA                             $  24,199 $   43,298 $   45,824 $  53,255 $  32,159

    Table cont'd.

                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                           2013      2013      2012 October 31, October 31,
                                             Q2        Q1        Q4       2013        2012
    Operating profit                   $ 13,639 $  17,938 $  28,141 $   59,214 $    43,453
    Depreciation and amortization        12,874    21,876    23,849     54,108      55,033
    EBITDA                             $ 26,513 $  39,814 $  51,990 $  113,322 $    98,486


                                        EKATI DIAMOND MINE SEGMENT

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



                                           2014       2014      2014      2013      2013
                                             Q3         Q2        Q1        Q4        Q3
    Operating profit (loss)           $   4,813 $    3,816 $    (246) $      - $       -
    Depreciation and amortization        19,166     10,513         -         -         -
    EBITDA                            $  23,979 $   14,329 $    (246) $      - $       -

    Table cont'd.

                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                           2013      2013     2012  October 31, October 31,
                                             Q2        Q1       Q4        2013        2012
    Operating profit (loss)           $       - $       - $      - $      8,383 $        -
    Depreciation and amortization             -         -        -       29,679          -
    EBITDA                            $       - $       - $      - $     38,062 $        -


                                              CORPORATE SEGMENT

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



                                           2014       2014       2014      2013      2013
                                             Q3         Q2         Q1        Q4        Q3
    Operating loss                     $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302)
    Depreciation and amortization           378        363        305       304       306
    EBITDA                             $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996)

    Table cont'd.
                                                                          Nine        Nine
                                                                        months      months
                                                                         ended       ended
                                           2013      2013      2012 October 31, October 31,
                                             Q2        Q1        Q4       2013        2012
    Operating loss                     $ (4,700) $ (5,767) $ (4,153)$  (34,107) $  (16,769)
    Depreciation and amortization           286       296       434      1,046         888
    EBITDA                             $ (4,414) $ (5,471) $ (3,719)$  (33,061) $  (15,881)



Risks and Uncertainties

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

Nature of Mining

The Company's 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 virtually all Diavik Joint Venture management decisions respecting the development and operation of the Diavik Diamond Mine and the development of the Diavik group of mineral claims. Accordingly, DDMI is able to determine the timing and scope of future project capital expenditures, and therefore is able to impose capital expenditure requirements on DDDLP that the Company may not have sufficient cash to meet. A failure to meet capital expenditure requirements imposed by DDMI could result in DDDLP's interest in the Diavik Diamond Mine and the Diavik group of mineral claims being diluted.

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 upheavals in the Middle East, could cause the Company to experience revenue declines due to deteriorated consumer confidence and spending, and a decrease in the availability of credit, which could have a material adverse effect on the Company's business prospects or financial condition. The credit facilities essential to the diamond polishing industry are largely underwritten by European banks that are currently under stress. The withdrawal or reduction of such facilities could also have a material adverse effect on the Company's business prospects or financial condition. The Company monitors economic developments in the markets in which it operates and uses this information in its continuous strategic and operational planning in an effort to adjust its business in response to changing economic conditions.

Currency Risk

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

Licences and Permits

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

Regulatory and Environmental Risks

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

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

The environmental agreements relating to the Diavik Diamond Mine and the Ekati Diamond Mine require that security be provided to cover estimated reclamation and remediation costs. The operator of the Diavik Joint Venture has fulfilled such obligations for the security deposits by posting letters of credit, of which DDDLP's share as at October 31, 2013 was $62 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 Company has as at October 31, 2013 posted letters of credit of CDN $127 million with the Government of Canada supported by restricted cash in support of the reclamation obligations for the Ekati Diamond Mine. As reclamation and remediation cost estimates are updated and revised, the Company expects that it will be required to post additional security for those obligations, which could result in additional constraints on liquidity.

Climate Change

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

Resource and Reserve Estimates

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

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

Insurance

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

Fuel Costs

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

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

Reliance on Skilled Employees

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

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

Labour Relations

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

Changes in Internal Control over Financial Reporting

During the third quarter of fiscal 2013, there were no changes in the Company's disclosure controls and procedures or internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's disclosure controls and procedures or internal control over financial reporting.

Limitation on Scope of Design

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

Since the acquisition was closed 20 days prior to the end of the first quarter of fiscal 2014, management was unable to adequately test the internal control systems in place. While management believes that internal controls were operating effectively, since it was unable to test these systems, it elected to exclude them from the scope of certification as allowed by NI 52-109. Management intends to perform such testing by April 10, 2014.

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

    As at October 31, 2013
    Current assets            388,465
    Long-term assets          831,581
    Current liabilities        82,821
    Long-term liabilities     562,480


Critical Accounting Estimates

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

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

Changes in Accounting Policies

The International Accounting Standards Board ("IASB") has issued a new standard, IFRS 9, "Financial Instruments" ("IFRS 9"), which will ultimately replace IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39"). IFRS 9 provides guidance on the classification and measurement of financial assets and financial liabilities. The IASB has repealed the mandatory effective date of February 1, 2015, and has not yet decided on the effective date.  This standard is not yet effective for the Company.

(a) New Accounting Standards

(i) IFRS 10 - CONSOLIDATED FINANCIAL STATEMENTS

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

(ii) IFRS 11 - JOINT ARRANGEMENTS

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

(iii) IFRS 13 - FAIR VALUE MEASURMENT

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

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

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

(v) IAS 19 - EMPLOYEE BENEFITS

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

(vi) IAS 1 - PRESENTATION OF FINANCIAL STATEMENTS

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

Outstanding Share Information

    As at November 30, 2013
    Authorized                        Unlimited

    Issued and outstanding shares    85,124,480
    Options outstanding               2,438,000
    Fully diluted                    87,562,480


Additional Information

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


                      Condensed Consolidated Balance Sheets
          (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                                       October 31,  January 31,
                                                             2013         2013
    ASSETS

    Current assets
                           Cash and cash
                           equivalents                $   195,771  $   104,313
                           Accounts receivable             13,275        3,705
                           Inventory and supplies
                           (note 5)                       424,491      115,627
                           Other current assets            23,871       29,486
                           Assets held for sale
                           (note 6)                             -      718,804
                                                          657,408      971,935
    Property, plant and equipment                       1,508,809      727,489
    Restricted cash (note 7)                              121,912            -
    Goodwill                                               10,066            -
    Other non-current assets                                1,848        6,937
    Deferred income tax assets                              7,482        4,095
    Total assets                                      $ 2,307,525  $ 1,710,456

    LIABILITIES AND EQUITY

    Current liabilities
                           Trade and other payables   $   113,551  $    39,053
                           Employee benefit plans
                           (note 9)                         2,155        2,634
                           Income taxes payable            31,402       32,977
                           Current portion of
                           interest-bearing loans
                           and borrowings (note 11)           831       51,508
                           Liabilities held for
                           sale (note 6)                        -      484,252
                                                          147,939      610,424
    Interest-bearing loans and borrowings (note
    11)                                                     3,961        4,799
    Deferred income tax liabilities                       232,436      181,427
    Employee benefit plans (note 9)                        20,614        3,499
    Provisions (note 10)                                  435,154       79,055
    Total liabilities                                     840,104      879,204
    Equity
                           Share capital                  508,523      508,007
                           Contributed surplus             22,555       20,387
                           Retained earnings              776,749      295,738
                           Accumulated other
                           comprehensive income               539        6,357
                           Total shareholders'
                           equity                       1,308,366      830,489
                           Non-controlling interest       159,055          763
    Total equity                                        1,467,421      831,252
    Total liabilities and equity                      $ 2,307,525  $ 1,710,456


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


                         Condensed Consolidated Income Statements
         (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER
                                      SHARE AMOUNTS)

                                        Three         Three          Nine          Nine
                                       months        months        months        months
                                        ended         ended         ended         ended
                                      October       October       October       October
                                           31,           31,           31,           31,
                                         2013          2012          2013          2012

    Sales                        $    151,639  $     84,818  $    522,280  $    235,300
    Cost of sales                     133,577        71,663       449,483       188,546
    Gross margin                       18,062        13,155        72,797        46,754
    Selling, general and
    administrative expenses             7,408         7,581        39,308        20,070
    Operating profit                   10,654         5,574        33,489        26,684
    Finance expenses                   (5,676)       (2,308)      (29,305)       (6,701)
    Exploration costs                  (7,074)         (673)      (11,260)       (1,495)
    Finance and other income              825            60         2,661           179
    Foreign exchange gain (loss)        1,122          (301)         (961)          377
    Profit (loss) before
    income taxes                         (149)        2,352        (5,376)        19,044
    Income tax expense                  3,858         1,583        15,469         8,299
    Net profit (loss) from
    continuing operations              (4,007)          769       (20,845)        10,745
    Net profit from
    discontinued operations
    (note 6)                                -         3,245       497,385         9,632
    Net profit (loss)            $     (4,007) $      4,014  $    476,540  $     20,377
    Net profit (loss) from
    continuing operations
    attributable to
      Shareholders               $     (2,895) $        152  $    (16,374) $     10,130
      Non-controlling interest         (1,112)          617        (4,471)          615
    Net profit (loss)
    attributable to
       Shareholders                    (2,895)        3,397       481,011        19,762
       Non-controlling interest  $     (1,112)  $       617  $     (4,471) $        615
    Earnings (loss) per share
    - continuing operations
       Basic                     $      (0.03)  $         -  $      (0.19) $       0.12
       Diluted                          (0.03)            -         (0.19)         0.12
    Earnings (loss) per share
       Basic                            (0.03)         0.04          5.66          0.23
       Diluted                          (0.03)         0.04          5.61          0.23
    Weighted average number
    of shares outstanding          85,055,716    84,874,781    84,984,911    84,874,781


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


             Condensed Consolidated Statements of Comprehensive Income
           (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                         Three      Three        Nine       Nine
                                        months     months      months     months
                                         ended      ended       ended      ended
                                       October    October     October    October
                                            31,        31,         31,        31,
                                          2013       2012        2013       2012
    Net profit
    (loss)                            $ (4,007) $   4,014  $  476,540  $  20,377
    Other comprehensive income
        Items that may be
        reclassified to profit
            Net gain (loss)
            on translation
            of net foreign
            operations (net
            of tax of nil)                (40)      3,452     (11,089)    (2,517)
        Items that will not be
        reclassified to profit
            Actuarial loss
            on employee
            benefit plans
            (net of tax of
            $0.7 million)                   -           -       5,271          -
    Other comprehensive loss,
    net of tax                            (40)      3,452      (5,818)    (2,517)
    Total comprehensive
    income (loss)                    $ (4,047)  $   7,466  $  470,722  $  17,860
            Comprehensive income
            (loss) from continuing
            operations               $ (4,047)  $     785  $  (21,329) $  10,717
            Comprehensive income
            from discontinued
            operations                      -       6,681     492,051      7,143
    Comprehensive income (loss)
    attributable to
            Shareholders             $ (2,935)  $   6,849  $  475,193  $  17,245
            Non-controlling interest   (1,112)        617      (4,471)       615


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


              Condensed Consolidated Statements of Changes in Equity
          (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                                             Nine         Nine
                                                           months       months
                                                            ended        ended
                                                       October 31,  October 31,
                                                             2013         2012
    Common shares:
    Balance at beginning of period                   $    508,007   $  507,975
    Issued during the period                                  516            -
    Balance at end of period                              508,523      507,975
    Contributed surplus:
    Balance at beginning of period                         20,387       17,764
    Stock-based compensation expense                        2,168        1,288
    Balance at end of period                               22,555       19,052
    Retained earnings:
    Balance at beginning of period                        295,738      261,028
    Net profit attributable to common
    shareholders                                          481,011       19,762
    Balance at end of period                              776,749      280,790
    Accumulated other comprehensive income:
    Balance at beginning of period                          6,357       10,086
    Other comprehensive income
        Items that may be reclassified to profit
            Net loss on translation of net
            foreign operations (net of tax of nil)        (11,089)      (2,517)
        Items that will not be reclassified to profit
            Actuarial loss on employee benefit
            plans (net of tax of $0.7 million)              5,271            -
    Balance at end of period                                  539        7,569
    Non-controlling interest:
    Balance at beginning of period                            763          255
    Non-controlling interest                              158,292          615
    Balance at end of period                              159,055          870
    Total equity                                     $  1,467,421   $  816,256


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


                       Condensed Consolidated Statements of Cash Flows
               (UNAUDITED) (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                       Three months Three months  Nine months  Nine months
                                              ended        ended        ended        ended
                                         October 31,  October 31,  October 31,  October 31,
                                               2013         2012         2013         2012
    Cash provided by (used in)
    Operating
    Net profit (loss)                    $   (4,007)  $      769   $  476,540   $   10,745
      Depreciation and amortization          31,978       20,588       84,833       55,916
      Deferred income tax recovery           (6,432)     (11,087)     (19,460)     (15,248)
      Current income tax expense             10,290       12,670       34,929       23,546
      Finance expenses                        5,676        2,308       29,305        6,701
      Stock-based compensation                  939          434        2,168        1,288
      Other non-cash items                   (1,359)          32       (3,819)      (2,073)
      Foreign exchange (gain) loss            3,097          334        2,873         (156)
      Loss (gain) on disposition of
      assets                                      -            -          361         (330)
      Net loss on discontinued
      operations                                  -            -          257            -
      Gain on sale of luxury brand
      segment                                     -            -     (497,642)           -
    Change in non-cash operating working
    capital, excluding taxes and
    finance expenses                        (30,481)      10,161       27,259       (2,964)
    Cash provided by (used in)
    operating activities                      9,701       36,209      137,604       77,425
       Interest paid                           (922)      (1,453)      (5,995)      (3,730)
       Income and mining taxes paid          (2,200)         (99)     (29,355)     (14,959)
    Cash provided by (used in) operating
    activities - continuing operations        6,579       34,657      102,254       58,736
    Cash provided by (used in) operating
    activities - discontinued operations          -      (15,059)           -       (5,629)
    Net cash from (used in) operating
    activities                                6,579       19,598      102,254       53,107
    FINANCING
    Increase (decrease) in interest-bearing
    loans and borrowings                       (198)        (193)        (590)        (563)
    Increase in revolving credit                  -       11,223       27,863       38,765
    Decrease in revolving credit                  -            -      (28,991)     (25,178)
    Repayment of senior secured credit facility   -            -      (50,000)           -
    Issue of common shares, net of issue costs    -            -          516            -
    Contribution from non-controlling interest  990            -          990            -
    Cash provided from financing activities
    - continuing operations                     792       11,030      (50,212)      13,024
    Cash provided from financing activities
    - discontinued operations                     -       21,546            -       24,179
    Cash provided from financing activities     792       32,576      (50,212)      37,203
    Investing
    Acquisition of Ekati                          -            -     (490,925)           -
    Cash proceeds from sale of luxury brand       -            -      746,738            -
    Property, plant and equipment - Diavik   (6,872)     (13,446)     (23,363)     (47,383)
    Property, plant and equipment - Ekati   (28,314)           -      (65,325)           -
    Net proceeds from sale of property,
    plant and equipment                         115            -        1,911        2,619
    Other non-current assets                    394           62       (2,655)         333
    Cash provided in investing activities
    - continuing operations                 (34,677)     (13,384)     166,381      (44,431)
    Cash provided in investing activities
    - discontinued operations                     -       (5,185)           -      (12,513)
    Cash used in investing activities       (34,677)     (18,569)     166,381      (56,944)
    Foreign exchange effect on cash balances (2,655)       2,616       (5,053)        (670)
    Increase in cash and cash equivalents   (29,961)      36,221      213,370       32,694
    Cash and cash equivalents,
    beginning of period                     347,644       74,589      104,313       78,116
    Cash and equivalents, end of period     317,683      110,810      317,683      110,810
    Less cash and equivalents of
    discontinued operations,
    end of period                                 -       24,082            -       24,082
    Cash and cash equivalents of
    continuing operations,
    end of period                       $   317,683   $   86,728   $  317,683   $   86,728
    Change in non-cash operating
    working capital, excluding taxes
    and finance expenses
    Accounts receivable                      (5,739)      (1,906)      (8,320)      (2,183)
    Inventory and supplies                  (39,937)         723       30,758      (13,469)
    Other current assets                      3,766        5,405        6,122       10,418
    Trade and other payables                 10,573        5,736         (940)       1,387
    Employee benefit plans                      856          203         (361)         883
                                        $   (30,481)  $   10,161   $   27,259   $   (2,964)


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


Notes to Condensed Consolidated Financial Statements

OCTOBER 31, 2013 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. The address of its registered office is Toronto, Ontario.

The Company has ownership interests in the Diavik and the Ekati group of mineral claims. The Diavik Joint Venture (the "Diavik Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI") (60%) and Dominion Diamond Diavik Limited Partnership ("DDDLP") (40%) where DDDLP holds an undivided 40% ownership interest in the assets, liabilities and expenses of the Diavik Diamond Mine. DDMI is the operator of the Diavik Diamond Mine. DDMI 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 unaudited interim condensed consolidated financial statements with a one-month lag. The accounting policies described below include those of the Diavik Joint Venture.

On April 10, 2013, the Company completed the $553.1 million acquisition from BHP Billiton Canada Inc. and its various affiliates of all of BHP Billiton's diamond assets, including its controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium (the "Ekati Diamond Mine Acquisition"). The Ekati Diamond Mine consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential. As a result of the completion of the Ekati Diamond Mine Acquisition on April 10, 2013, the Company acquired an 80% interest in the Core Zone and a 58.8% interest in the Buffer Zone. The Company controls and consolidates the Ekati Diamond Mine and minority shareholders are presented as non-controlling interests on the condensed consolidated balance sheet.

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 condensed consolidated financial statements are consistent with those used in the annual audited consolidated financial statements for the year ended January 31, 2013, except as disclosed in Note 3.

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

(b) Currency of presentation

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

(c) Use of estimates, judgments and assumptions

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

Note 3:

Significant Accounting Policies

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

(a) Accounting standards applied on Ekati Diamond Mine Acquisition

(i) STRIPPING COSTS

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

(ii) EMPLOYEE BENEFIT PLANS

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

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

(b) New accounting standards

(i) IFRS 10 - CONSOLIDATED FINANCIAL STATEMENTS

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

(ii) IFRS 11 - JOINT ARRANGEMENTS

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

(iii) IFRS 13 - FAIR VALUE MEASURMENT

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

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

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

(v) IAS 19 - EMPLOYEE BENEFITS

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

(vi) IAS 1 - PRESENTATION OF FINANCIAL STATEMENTS

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

Note 4:

Acquisition

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

Acquisitions are accounted for under the acquisition method of accounting, and the results of operations since the respective dates of acquisition are included in the statement of comprehensive income. From time to time, as a result of the timing of acquisitions in relation to the Company's reporting schedules and the availability of information, certain information relating to the purchase allocations and valuations may not be finalized at the time of reporting. Purchase price allocations are completed after the vendor's final financial statements and income tax returns have been prepared and accepted by the Company within one year of acquisition.  Such purchase price allocations are based on management's best estimates of the fair value of the acquired asset and liabilities.

The allocation of the purchase price to the fair values of assets acquired and liabilities assumed is set forth below. In accordance with IFRS 3, "Business Combinations" ("IFRS 3"), the provisional price allocations at acquisition have been revised to reflect revisions to fair values during the third quarter.

                             Fair values at        Further      Fair values at
                              July 31, 2013    adjustments    October 31, 2013

    Consideration          $        553,142  $           -  $          553,142
    Cash and cash
    equivalents            $         62,217  $           -  $           62,217
    Accounts receivable
    and other current
    assets                            7,465             (2)              7,463
    Inventory and
    supplies                        319,613             24             319,637
    Property, plant and
    equipment                       800,741         10,266             811,007
    Trade and other
    payables                        (70,618)        (1,924)            (72,542)
    Income taxes payable             (6,085)        12,328               6,243
    Provisions, future
    site restoration
    costs                          (348,230)         5,077            (343,153)
    Deferred income tax
    liabilities                     (68,833)         1,847             (66,986)
    Other long-term
    liabilities                     (19,017)           (20)            (19,037)
    Non-controlling
    interest                       (152,798)        (8,976)           (161,774)
    Total net
    identifiable assets
    acquired                        524,455         18,620             543,075
    Goodwill                         28,687        (18,620)             10,067
                           $        553,142  $           -  $          553,142


The main adjustments to the provisional fair value relates to the fair value attributed to property, plant and equipment and provision for future site restoration costs acquired as part of the Ekati Diamond Mine Acquisition and the related tax adjustment.

Goodwill comprises the value of expected synergies arising from the acquisition and the expertise and reputation of the assembled workforce acquired. None of the goodwill recognized is expected to be deductible for tax purposes.

From the closing date of the acquisition, revenues of $289.2 million and a net loss of $12.6 million were generated by Ekati's operations. If the acquisition had taken place at the beginning of the fiscal year, the Company's consolidated pro forma revenue including the Ekati mining segment would have been $630.9 million and pro forma net loss would have been $15.8 for the nine months ended October 31, 2013. The Company incurred total transaction costs of $14.4 million related to the Ekati Diamond Mine Acquisition, of which $11.2 million has been expensed and included in selling, general and administrative costs during the current year, with the balance of $3.2 million expensed in fiscal 2013.

Note 5:

Inventory and Supplies


                                    October 31,   January 31,
                                          2013          2013

    Rough diamonds               $     212,291 $      45,467
    Supplies inventory                 212,200        70,160
    Total inventory and supplies $     424,491 $     115,627


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

Note 6:
Assets Held for Sale (Discontinued Operations)

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

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

                                                       March 26,
                                                           2013

    Cash and cash equivalents                       $    25,914
    Accounts receivable and other current assets         61,080
    Inventory and supplies                              403,157
    Property, plant and equipment                        76,700
    Intangible assets, net                              126,779
    Other non-current assets                              7,478
    Deferred income tax assets                           54,017
    Trade and other payables                           (96,246)
    Income taxes payable                                (2,465)
    Interest-bearing loans and borrowings             (292,709)
    Deferred income tax liabilities                   (106,137)
    Other long-term liabilities                         (8,472)
    Net assets                                      $   249,096
    Consideration received, satisfied in cash       $   746,738
    Cash and cash equivalents disposed of              (25,914)
    Net cash inflow                                 $   720,824


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

                                                                   Nine months
                                                   Period ended          ended
                                                       March 26,    October 31,
                                                           2013           2012

    Sales                                        $       63,799   $    314,457
    Cost of sales                                       (31,355)      (149,972)
    Other expenses                                      (30,964)      (151,823)
    Other income and foreign exchange gain
    (loss)                                               (1,551)           251
    Net income tax (expense) recovery                      (186)        (3,281)
    Net profit (loss) from discontinued
    operations before gain                       $         (257)  $      9,632
    Gain on sale                                        497,642              -
    Net profit from discontinued operations             497,385          9,632
    Earnings per share - discontinued
    operations
                       Basic                     $         5.86   $       0.11
                       Diluted                             5.80           0.11


Note 7:

Restricted Cash

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

Note 8:

Diavik Joint Venture

The following represents DDDLP's 40% interest in the Diavik Joint Venture as at September 30, 2013 and December 31, 2012:

                                                     October 31,    January 31,
                                                           2013           2013

    Current assets                                $      96,498  $     102,299
    Non-current assets                                  639,525        677,808
    Current liabilities                                  29,984         30,517
    Non-current liabilities and participant's
    account                                             706,039        749,590


                      Three months     Three months    Nine months    Nine months
                             ended            ended          ended          ended
                        October 31,      October 31,    October 31,    October 31,
                              2013             2012           2013           2012
    Expenses net
    of interest
    income (a)(b)    $      58,155       $   61,087  $     183,838  $     176,410
    Cash flows used
    in operating
    activities             (30,426)         (28,936)      (120,606)      (126,311)
    Cash flows
    resulting from
    financing activities    33,507           56,264        137,101        168,464
    Cash flows used in
    investing activities    (3,466)         (23,310)       (18,869)       (42,451)


    (a)             The Joint Venture only earns interest income.
    (b)  Expenses net of interest income for the three and nine months ended
        October 31, 2013 of $nil and $0.1 million (three and nine months ended
                    October 31, 2012 of $nil and $0.1 million).


DDDLP is contingently liable for DDMI's portion of the liabilities of the Diavik Joint Venture, and to the extent DDDLP's participating interest has increased because of the failure of DDMI to make a cash contribution when required, DDDLP would have access to an increased portion of the assets of the Diavik Joint Venture to settle these liabilities. Additional information on commitments and contingencies related to the Diavik Joint Venture is found in Note 13.

Note 9:

Employee Benefit Plans

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

                                                         October       January
                                                              31,           31,
                                                            2013          2013
    Defined benefit plan obligation - Ekati
    Diamond Mine (a)                                $     17,742  $          -
    Defined contribution plan obligation - Ekati
    Diamond Mine (b)                                         200             -
    Defined contribution plan obligation - the
    Company's head office (b)                                158             -
    Post-retirement benefit plan - Diavik Diamond
    Mine (c)                                                 772           699
    RSU and DSU plans (d)                                  3,897         5,434
    Total employee benefit plan obligation          $     22,769  $      6,133

                                                         October       January
                                                              31,           31,
                                                            2013          2013

    Non-current                                     $     20,614  $      3,499
    Current                                                2,155         2,634
    Total employee benefit plan obligation          $     22,769  $      6,133


(a) Defined benefit pension plan

Dominion Diamond Ekati Corporation sponsors a non-contributory defined benefit registered pension plan covering employees in Canada who were employed by BHP Billiton Canada Inc. and employed in its diamond business prior to June 30, 2004. As a result of the Ekati Diamond Mine Acquisition, the plan was assigned to Dominion Diamond Ekati Corporation and renamed the Dominion Diamond Ekati Corporation Defined Benefit Pension Plan. Pension benefits are based on the length of service and highest average covered earnings. Any benefits in excess of the maximum pension limit for registered pension plans under the Income Tax Act accrue for the employee, via an unfunded supplementary retirement plan. New employees could not become members of this defined benefit pension arrangement after June 30, 2004.

(i)   NET BENEFIT OBLIGATION:

                                     October 31,
                                           2013

    Accrued benefit obligation    $      81,166
    Plan assets                          63,424
    Funded status - plan deficit  $     (17,742)


(ii)   PLAN ASSETS

Canadian plan assets represented approximately 95% of total plan assets at October 31, 2013.

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

                              October 31,
                                    2013
    ASSET CATEGORY
    Cash equivalents                 89%
    Equity securities                10%
    Fixed income securities           1%
    Total                           100%


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

                                       October 31,
                                             2013
    ACCRUED BENEFIT OBLIGATION
    Discount rate                            4.6%
    Expected rate of salary increase           4%
    BENEFIT COSTS FOR THE YEAR
    Discount rate                              4%
    Expected rate of salary increase           4%
    Rate of compensation increase           2.25%


(b) Defined contribution plan

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

Dominion Diamond Corporation sponsors a defined contribution plan for Canadian employees whereby the employer contributes to a maximum of 6% of the employee's salary to the maximum contribution limit under Canada's Income Tax Act. The total defined contribution plan liability at October 31, 2013 was $0.2 million ($nil at January 31, 2013).

Dominion Diamond Ekati Corporation sponsors a defined contribution arrangement for its employees who are not members of the defined benefit pension plan referred to in 9(a) above. The employer contributes 8% of earnings up to 2.5 times the Year's Maximum Pensionable Earnings (as defined under the Canada Pension Plan), and 12% of earnings above 2.5 times YMPE. The employer also matches additional contributions made by an employee up to 3% of earnings. Employer contributions in excess of the maximum contribution limit for defined contribution plans under Canada's Income Tax Act are credited by the employer to a notional (unfunded) supplementary retirement plan. The defined contribution plan liability at October 31, 2013 was $0.2 million. (Supplemental plan liability has been included in the accrued benefit obligation disclosed in 9(a) above.)

(c) Post-retirement benefit plan

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

(d) Restricted Stock Units ("RSU") and Deferred Stock Units ("DSU") plans

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

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

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

Note 10:

Provisions


                                                      October 31,   January 31,
    Future site restoration costs                           2013          2013
    Diavik Diamond Mine (a)
    At February 1, 2013 and 2012                   $      79,055  $     65,245
    Revisions of previous estimates                          734        11,369
    Accretion of provision                                 1,493         2,441
    Ekati Diamond Mine (b)
    At April 10, 2013 (restated as at date of
    acquisition)                                         343.153             -
    Accretion of provision                                10,719             -
    Total site restoration costs                   $     435,154  $     79,055


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

(a)     Diavik Diamond Mine

The Company's share of the total undiscounted amount of the future cash flows that will be required to settle the obligation incurred at October 31, 2013 is estimated to be $120 million. The expenditures are discounted using a discount rate of 2.6%. The revision of previous estimates in fiscal 2013 and 2014 is based on revised expectations of reclamation activity costs and changes in estimated reclamation timelines. The Diavik Joint Venture is required to provide security for future site closure and reclamation costs for the Diavik Diamond Mine's operations and for various permits and licenses. The operator of the Diavik Joint Venture has fulfilled such obligations for the security deposits by posting letters of credit, of which DDDLP's share as at October 31, 2013 was $62 million based on its 40% ownership interest in the Diavik Diamond Mine.

(b)     Ekati Diamond Mine - Future site restoration

The undiscounted estimated expenditures required to settle the obligation totals approximately CDN $420 million through 2048. The expenditures are discounted using a discount rate of 2.6%. The Company is required to provide security for future site closure and reclamation costs for the Ekati Diamond Mine's operations and for various permits and licenses. As at October 31, 2013, the Company provided CDN $127 million in letters of credit as security with various regulatory authorities.

Note 11:

Interest-Bearing Loans and Borrowings

                                                                       October     January
                                                                            31,         31,
                                                                          2013        2013

    Credit facilities                                                $       -  $   49,560
    First mortgage on real property                                      4,792       5,619
    Bank advances                                                            -       1,128
    Total interest-bearing loans and borrowings                          4,792      56,307
    Less current portion                                                  (831)    (51,508)
                                                                     $   3,961  $    4,799

                                                  Carrying     Face
                                                    amount    value
                                                        at       at
                               Nominal             October  October
                              interest    Date of       31,      31,
                     Currency     rate   maturity     2013     2013               Borrower

    First mortgage                      September     $4.8     $4.8
    on real property      CDN    7.98%    1, 2018  million  million     6019838 Canada Inc.


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

Note 12:

Related Party Disclosure

(a)     Operational information

The Company had the following investments in significant subsidiaries at October 31, 2013:

    Name of company                         Effective interest    Country of incorporation

    Dominion Diamond Holdings Ltd.                        100%                      Canada
    Dominion Diamond Diavik Limited Partnership           100%                      Canada
    Dominion Diamond (India) Private Limited              100%                       India
    Dominion Diamond International NV                     100%                     Belgium
    Dominion Diamond Marketing Corporation                100%                      Canada
    Dominion Diamond (UK) Limited                         100%                     England
    6019838 Canada Inc.                                   100%                      Canada
    Dominion Diamond Building Services Inc.               100%                      Canada
    Dominion Diamond Ekati Corporation                    100%                      Canada
    Dominion Diamond Resources Corporation                100%                      Canada
    Dominion Diamond Marketing NV                         100%                     Belgium


Note 13:

Commitments and Guarantees

(a) Environmental agreements

Through negotiations of environmental and other agreements, both the Diavik Joint Venture and Ekati Diamond Mine must provide funding for the Environmental Monitoring Advisory Board, and the Independent Environmental Monitoring Agency, respectively. Further funding will be required in future years; however, specific amounts have not yet been determined. These agreements also state that the mines must provide security 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 October 31, 2013, was $62 million. The agreement specifically provides that these funding requirements will be reduced by amounts incurred by the Diavik Joint Venture on reclamation and abandonment activities. The Company has posted letters of credit of CDN $127 million with the Government of Canada supported by restricted cash in support of the reclamation obligations for the Ekati Diamond Mine.

(b) Participation agreements

Both the Diavik Joint Venture and Ekati Diamond Mine have signed participation agreements with various native groups. These agreements are expected to contribute to the social, economic and cultural well-being of the Aboriginal bands. The Diavik participation agreements are each for an initial term of twelve years and shall be automatically renewed on terms to be agreed upon for successive periods of six years thereafter until termination. The Diavik participation agreements terminate in the event that the Diavik Diamond Mine permanently ceases to operate. Dominion Diamond Corporation's share of the Diavik Joint Venture's participation agreements as at October 31, 2013 was $1.1 million. 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. Future minimum lease payments under non-cancellable operating leases as at October 31, 2013 are as follows:


    Within one year                               $  4,965
    After one year but not more than three years     9,701
    More than four years                             3,998
                                                  $ 18,664


Note 14:

Capital Management

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

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

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

Note 15:

Financial Instruments

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

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

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

The Company's interest-bearing loans and borrowings are for the most part fully secured, hence the fair values of these instruments at October 31, 2013 are considered to approximate their carrying value.

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

                                         October 31, 2013               January 31, 2013
                                      Estimated                  Estimated
                                           fair     Carrying          fair       Carrying
                                          value        value         value          value
    Financial assets
        Cash and cash equivalents,
        including restricted cash   $   317,683   $  317,683   $   104,313     $  104,313
        Accounts receivable              13,275       13,275         3,705          3,705
                                    $   330,958   $  330,958   $   108,018     $  108,018
    Financial liabilities
        Trade and other payables    $   113,551   $  113,551   $    39,053     $   39,053
        Interest-bearing loans and
        borrowings                        4,792        4,792        56,307         56,307
                                    $   118,343   $  118,343   $    95,360     $   95,360


Note 16:

Segmented Information

The Company operates in three segments within the diamond industry - Diavik Diamond Mine, Ekati Diamond Mine and Corporate - for the three months ended October 31, 2013.  The results of the Company's luxury brand segment, which it disposed of on March 26, 2013, no longer qualify as a reportable operating segment and current and prior period results have been recast accordingly.

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

    For the three months
    ended October 31,
    2013                          Diavik         Ekati     Corporate         Total
    Sales
            North America    $         -   $         -   $         -   $         -
            Europe                45,088        98,733             -       143,821
            India                  7,818             -             -         7,818
            Total sales           52,906        98,733             -       151,639
    Cost of sales
            Depreciation
            and
            amortization          12,323        19,166             -        31,489
            All other
            costs                 27,695        74,392             -       102,087
            Total cost of
            sales                 40,018        93,558             -       133,576
    Gross margin                  12,888         5,175             -        18,063
    Gross margin (%)               24.4%          5.2%            -%         11.9%
    Selling, general and
    administrative
    expenses
            Selling and
            related
            expenses               1,123           362             -         1,485
            Administrative
            expenses                   -             -         5,924         5,924
            Total selling,
            general and
            administrative
            expenses               1,123           362         5,924         7,409
    Operating profit
    (loss)                        11,765         4,813        (5,924)       10,654
    Finance expenses                (770)       (4,906)            -        (5,676)
    Exploration costs             (1,074)       (6,000)            -        (7,074)
    Finance and other
    income                           743            82             -           825
    Foreign exchange loss           (818)        1,940             -         1,122
    Segmented profit
    (loss) before income
    taxes                    $     9,846   $   (4,071)   $    (5,924)  $      (149)
    Segmented assets as
    at October 31, 2013
            Canada           $ 1,016,364   $ 1,216,810   $         -   $ 2,233,174
            Other foreign
            countries             71,116         3,235             -        74,351
                             $ 1,087,480   $ 1,220,045   $         -   $ 2,307,525
    Capital expenditures     $    (6,872)  $   (28,314)  $         -   $   (35,186)
    Inventory                    145,761       278,730             -       424,491
    Total liabilities            194,803       645,301             -       840,104
    Other significant
    non-cash items:
            Deferred
            income tax
            expense
            (recovery)       $    (6,561)  $       129   $         -   $    (6,432)

          Sales to one customer totalled $28.1 million for the three months
                               ended October 31, 2013.

    For the three months
    ended October 31,
    2012                          Diavik         Ekati     Corporate         Total
    Sales
            North America    $     7,697   $         -   $         -   $     7,697
            Europe                57,438             -             -        57,438
            India                 19,683             -             -        19,683
            Total sales           84,818             -             -        84,818
    Cost of sales
            Depreciation
            and
            amortization          19,800             -             -        19,800
            All other
            costs                 51,863             -             -        51,863
            Total cost of
            sales                 71,663             -             -        71,663
    Gross margin                  13,155             -             -        13,155
    Gross margin (%)               15.5%            -%            -%         15.5%
    Selling, general and
    administrative
    expenses
            Selling and
            related
            expenses               1,279             -             -         1,279
            Administrative
            expenses                   -             -         6,302         6,302
            Total selling,
            general and
            administrative
            expenses               1,279             -         6,302         7,581
    Operating profit
    (loss)                        11,876             -        (6,302)        5,574
    Finance expenses              (2,308)            -             -        (2,308)
    Exploration costs               (673)            -             -          (673)
    Finance and other
    income                            60             -             -            60
    Foreign exchange gain           (301)            -             -          (301)
    Segmented profit
    (loss) before income
    taxes                    $     8,654   $         -   $    (6,302)  $     2,352
    Segmented assets as
    at October 31, 2012
            Canada           $   953,484   $         -   $         -   $   953,484
            Other foreign
            countries             34,651             -             -        34,651
                             $   988,135   $         -   $         -   $   988,135
    Capital expenditures     $    13,446   $         -   $         -   $    13,446
    Inventory                    141,410             -             -       141,410
    Total liabilities            418,667             -             -       418,667
    Other significant
    non-cash items:
            Deferred
            income tax
            recovery         $   (11,087)  $         -   $         -   $   (11,087)

    For the nine months
    ended October 31,
    2013                          Diavik         Ekati     Corporate         Total
    Sales
            North America    $     6,180   $         -   $         -   $     6,180
            Europe               187,260       289,190             -       476,450
            India                 39,650             -             -        39,650
            Total sales          233,090       289,190             -       522,280
    Cost of sales
            Depreciation
            and
            amortization          53,510        29,679             -        83,189
            All other
            costs                116,724       249,570             -       366,294
            Total cost of
            sales                170,234       279,249             -       449,483
    Gross margin                  62,856         9,941             -        72,797
    Gross margin (%)               27.0%          3.4%            -%         13.9%
    Selling, general and
    administrative
    expenses
            Selling and
            related
            expenses               3,642         1,559             -         5,201
            Administrative
            expenses                                          34,107        34,107
            Total selling,
            general and
            administrative
            expenses               3,642         1,559        34,107        39,308
    Operating profit
    (loss)                        59,214         8,382       (34,107)       33,489
    Finance expenses             (18,499)      (10,806)            -       (29,305)
    Exploration costs             (4,324)       (6,935)            -       (11,260)
    Finance and other
    income                         2,050           611             -         2,661
    Foreign exchange gain
    (loss)                          (302)         (659)            -          (961)
    Segmented profit
    (loss) before income
    taxes                    $    38,139   $    (9,407)  $   (34,107)  $    (5,376)
    Segmented assets as
    at October 31, 2013
            Canada           $ 1,016,364   $ 1,216,810   $         -   $ 2,233,174
            Other foreign
            countries             71,116         3,235             -        74,351
                             $ 1,087,480   $ 1,220,045   $         -   $ 2,307,525
    Capital expenditures     $   (23,363)  $   (65,325)  $         -       (88,688)
    Inventory                    145,761       278,730             -       424,491
    Total liabilities            194,803       645,301             -       840,104
    Other significant
    non-cash items:
            Deferred
            income tax
            recovery         $    (6,973)  $   (12,487)  $         -   $   (19,460)

           Sales to one customer totalled $77.0 million for the nine months
                               ended October 31, 2013.

    For the nine months
    ended October 31,
    2012                          Diavik         Ekati     Corporate         Total
    Sales
            North America    $    17,398   $         -   $         -   $    17,398
            Europe               162,322             -             -       162,322
            India                 55,580             -             -        55,580
            Total sales          235,300             -             -       235,300
    Cost of sales
            Depreciation
            and
            amortization          53,754             -             -        53,754
            All other
            costs                134,792             -             -       134,792
            Total cost of
            sales                188,546             -             -       188,546
    Gross margin                  46,754             -             -        46,754
    Gross margin (%)               19.9%            -%            -%         19.9%
    Selling, general and
    administrative
    expenses
            Selling and
            related
            expenses               3,301             -             -         3,301
            Administrative
            expenses                   -             -        16,769        16,769
            Total selling,
            general and
            administrative
            expenses               3,301             -        16,769        20,070
    Operating profit
    (loss)                        43,453             -       (16,769)       26,684
    Finance expenses              (6,701)            -             -        (6,701)
    Exploration costs             (1,495)            -             -        (1,495)
    Finance and other
    income                           179             -             -           179
    Foreign exchange gain            377             -             -           377
    Segmented profit
    (loss) before income
    taxes                    $    35,813   $         -   $   (16,769)  $    19,044
    Segmented assets as
    at October 31, 2012
            Canada           $   953,484   $         -   $         -   $   953,484
            Other foreign
            countries             34,651             -             -        34,651
                             $   988,135   $         -   $         -   $   988,135
    Capital expenditures     $   (47,383)  $         -   $         -   $   (47,383)
    Inventory                    141,410             -             -       141,410
    Total liabilities            418,667                                   418,667
    Other significant
    non-cash items:                                  -             -
            Deferred
            income tax
            recovery         $   (15,248)  $         -   $         -   $   (15,248)


For further information:

Mr. Richard Chetwode, Vice President, Corporate Development - +44(0)7720-970-762 or rchetwode@ddcorp.ca

Ms. Kelley Stamm, Manager, Investor Relations - +1-416-205-4380 or kstamm@ddcorp.ca

 

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