Kopane Diamond Developments PLC

March 16, 2010 03:00 ET

Interim Report for the six months ended 31 December 2009

                                  Kopane Diamond Developments PLC

                                           PRESS RELEASE

16 March 2010
                     Interim Report for the six months ended 31 December 2009

Highlights  for the second half of calendar 2009 for Kopane Diamond Developments Plc ("Kopane"  or
"the Company") were as follows:

    *   141%  increase  in indicated resource to 38.5 million tonnes follows  resource  block
        modelling of LDD data, potentially increases the depth of a future open pit to 180 metres.

    *   90.7 million tonnes of kimberlite - Main Pipe total resource, an increase of 19.1% over
        the interim resource statement issued in November 2008.

    *   31.1 million carats (Kopane attributable 23.4 million) gross diamond resource contained in
        the Main Pipe to an average depth of 510 metres, with an estimated in situ value of $2.7 billion
        based on September 2008 bulk sample diamond values.

    *   34.3 cpht average resource grade to at least 510 metres average depth supported by large
        diameter reverse circulation drilling results.

    *   £1.2 million loss for the period (2008: loss of £3.1 million).

    *   Memorandum of Understanding signed for funding power line to Liqhobong.

    *   £9.9 million of funding secured during period: November 2009 of £3.9 million and a further
        £6 million in January 2010.

    *   In January 2010, a non-binding MOU was entered into with a mining company regarding their
        possible investment in the Liqhobong assets.

    *   In February 2010, there was an announcement of talks regarding a possible offer for the

Definitive Feasibility Study

Following  completion  of a programme of Large Diameter Drilling ("LDD"),  the  Company  issued  a
resource  statement on 7 December 2009, prepared by independent mining and geological  consultants
ACA  Howe  International  Limited ("Howe") which showed substantially more  kimberlite  and  rough
diamonds than estimated in the Interim resource statement published in November 2008, as follows:

Category             Attributable to LMDC (100%)                 Net Attributable to Kopane (75%)

MAIN PIPE                 Tonnes       Grade         Contained        Tonnes   Grade          Contained
Mineral Resources      (millions)      (cpht)         Diamonds     (millions)  (cpht)          Diamonds
                                                      (million                                 (million
                                                        carats)                                  carats)

Indicated                  38.54        32.8             12.64         28.90    32.8               9.48

Inferred                   52.12        35.5             18.49         39.09    35.5              13.87

Total                      90.66        34.3             31.14         67.99    34.3              23.35

Source: ACA Howe International Limited

The above resource statement updated an earlier statement issued In September 2009 which showed an
overall  grade  estimate  of  33  cpht,  which was  the  lowest  estimate  in  a  range  of  grade
results   ultimately   possible   in  the  Main  Pipe  due   to   anomalies   arising   from   the
diamond  recovery  analysis of the LDD samples because of the loss of  stones  from  the  drilling
process.  The  revised  higher grade of 34.3 cpht shown in the table above  results  from  further
review  by  Howe  of  the LDD results and the kimberlite rock density and confirms  the  Company's
opinion of grade.

The  estimated  in-situ value of the Main Pipe increased to $2.7 billion, based on an  independent
run  of  mine valuation of $86 per carat in September 2008 of rough diamonds recovered  from  bulk

The  $86  per carat run of mine valuation does not include the impact of large and bonanza stones,
which could provide material economic enhancement to the project value. This is illustrated by the
sale,  at  the end of 2006, of four stones which totalled 78 carats in aggregate and had  a  total
value  of $1.43 million and by the sale in July 2008 of three premium stones, totalling, 27 carats
for  $0.63  million. All of these stones were sourced from the K5 facies. In addition, Kopane  has
seen the occurrence in the Main Pipe of several large pieces of polycrystalline boart of over  100
carats, including one of 263 carats. This is consistent with the report of Howe in respect of  the
PFS,  in  mid 2007, which identified two potential areas of upside for the economics of  the  Main
Pipe project, namely ore grade and stone value.

The  Company deferred incurring expenditure on certain elements of the DFS in favour of  proposing
to incur expenditure on other items which will have a more immediate revenue generation potential.
These  include  the re-commencement of diamond production at Liqhobong alongside  investing  in  a
significant  expansion  of  the  existing Satellite Plant,  which  currently  has  a  capacity  of
approximately  450,000  tonnes per annum, in order to take advantage of a  sustained  increase  in
diamond prices.


The  Company  is  not  currently producing rough diamonds, having suspended  production  from  its
Satellite  Plant  operations at the beginning of December 2008 due to the  sharp  fall  in  prices
available for rough diamonds as a result of the world economic situation. Prices fell by some  50%
from  October  2008  until  the first quarter of calendar 2009; since then  prices  have  improved
considerably and are reported to be near previously prevailing levels, although market indications
are  that  there could be some short term price turbulence. The medium and long term  outlook  for
rough diamond prices is likely to be robust in the face of projected supply shortages.

Financing and development strategy

The  Company  arranged £3.9m of finance in November 2009 and a further £6 million in January  2010
before  expenses to provide it with flexibility to restart production and invest in the facilities
at  Liqhobong as well as to progress certain key parts of the DFS. Part of this funding is payable
to  the  Company  over  periods of 24 and 18 months under equity swap  arrangements,  whereby  the
amounts to be received by the Company will vary according to its share price.

The  Company  has  been  assessing the feasibility of operating the Satellite  Plant  with  diesel
generated  power  ahead of connection to the grid electricity supply planned in  2011.  A  further
review  is  ongoing to assess the most economical ways of expanding production to potentially  1.4
million  carats  per  annum  with the aim of limiting Shareholders' equity  dilution  as  much  as
possible. This review will encompass trade off studies to assess the timing and impact of  further
expansion of the Satellite Plant as well as the possible gradual construction of the new Main Pipe
plant and funding options for the Main Pipe Project.

Power line arrangement

The successful development of the Liqhobong Main Pipe will be totally dependent upon the provision
of  grid  electrical  power from an extension of the Lesotho electricity  grid.  A  Memorandum  of
Understanding  ("MOU")  between  the Company's subsidiary, Liqhobong  Mining  Development  Company
("LMDC"),  Lesotho Electricity Company ("LEC"), the Government of the Kingdom of  Lesotho  ("GoL")
and  Standard Lesotho Bank, in respect of funding of the construction of an electrical power  line
to the Company's mine at Liqhobong, was signed and announced on 17 August 2009.

The  MOU  contemplates that funds will be lent by the bank to the LEC to fund the construction  of
the  power line from the LEC's sub-station at Ha Lejone, which is approximately 30 kilometres from
Liqhobong. In addition, the LEC and the GoL will contribute funds towards the cost of the  project
and  the  GoL  has  agreed to provide a sovereign guarantee to the bank in  respect  of  the  loan
funding. LMDC will finance the servicing of the loan and its repayment on terms which are expected
to be agreed shortly.

The  engineering  specifications of the power line, together with environmental impact  assessment
studies,  have been completed in readiness for to start construction once funding is in place.  It
is  planned  that  the loan documentation will be finalised shortly between the parties  and  that
construction will commence by the third quarter of 2010, which should allow grid electricity to be
connected to the mine site by the end of 2011.


In  October  2009,  the  Company entered into a period of exclusivity with  a  mining  company  to
facilitate  review of the Liqhobong assets with a view to an investment in the Liqhobong  project.
The  period  of exclusivity was extended until 15 December 2009 when it ended so that the  Company
could  further  investigate  expressions of interest at a  corporate  level  received  from  other
organisations, to determine whether they would better serve the development of the Main  Pipe  and
the interests of shareholders.

On  26  January  2010, the Company announced that it had entered into a non-binding Memorandum  of
Understanding  ("MOU")  with the mining company to develop its Liqhobong assets  in  Lesotho.  The
principal  terms of the MOU were that the mining company would fund and operate the recommencement
of  production at Liqhobong and remaining work on the DFS and would have an option to acquire  51%
of  the  Company's interest in the Main Pipe in return for funding 80% of the cost  of  developing
Liqhobong to production of in excess of one million carats per annum. The mining company estimated
that  the cost of constructing new plant will be approximately $80 million and on this basis would
invest $64 million for a 51% of the Company's interest in Liqhobong, which is currently 75% of the
project, the other 25% being owned by the GoL.

The  Board of Directors announced on 10 February 2010 that it is in discussions which may  or  may
not  lead  to an offer being made for the entire issued and to be issued share capital of  Kopane.
The  discussions are at a preliminary stage and there can be no certainty that an  offer  will  be
made  for  Kopane or as to the terms on which any offer would be made. In these circumstances  the
discussions, regarding the co-development of the Company's Liqhobong kimberlite asset, pursuant to
the non-binding MOU announced on 26 January 2010, were put on hold.


As  indicated  in  the trading update announcement on 15 December 2009, the Company  believes  the
outlook  for  2010  to  be  very positive. The market price for rough diamonds  has  substantially
recovered  from falls in late 2008 and early 2009 and progress is being made towards  the  funding
and  commencement of construction of a power line to connect Liqhobong to the Lesotho  electricity
grid by 2011.

The Finnish Joint Venture

The  Company's  Finnish assets are being operated, financed and developed under  a  joint  venture
agreement with Mantle Diamonds Limited. Under this agreement, Mantle can earn up to a 70% interest
in  the Finnish assets by expending $5 million, including producing a definitive feasibility study
on  the  Lahtojoki property and issuing Kopane with 10 million shares in Mantle.  To date,  Mantle
has spent approximately £725,000 in respect of the feasibility study at Lahtojoki.

The  Company owns 3.3 million shares in Mantle, which have an attributed value of £334,000  at  31
December  2009.  Under the terms of the joint venture agreement, in January 2010 the  Company  has
earned a further 3.3 million shares in Mantle.


The  interim unaudited consolidated financial statements for the six months ended 31 December 2009
are attached.

These unaudited consolidated financial statements have been prepared on the basis of International
Financial Reporting Standards ("IFRS") as adopted by the European Union and implemented in the UK.

The  consolidated  net loss for the six months ended 31 December 2009, after  taxation,  was  £1.2
million  (loss  per  share 0.5p) compared to the consolidated net loss of £3.1 million  (loss  per
share 1.8p) for the same period last year. The consolidated loss for the period is after expensing
£0.1  million  in  respect of the fair value of share options issued (2008 - £0.1  million).   The
Liqhobong  mine  was  on  a  care and maintenance basis throughout  the  period  with  no  diamond
production since December 2008, with a consequent substantial reduction in operating costs in  the
current period.  This has also resulted in a reduction in employee expenses to £0.3 million  (2008
-  £1.0 million) and in other expenses to £0.3 million (2008 - £1.3 million).  In addition,  as  a
consequence  of  extending  the useful life of the mining assets at  30  June  2009,  depreciation
charged in the period reduced to £0.4 million (2008 - £0.6 million).

Property,  plant and equipment of £3.2 million in the consolidated balance sheet  at  31  December
2009  (2008  -  £2.8  million) represent primarily the cost of the mine at Liqhobong,  Kingdom  of
Lesotho, after depreciation and differences on exchange.

The  intangible assets of £6.7 million in the consolidated balance sheet at 31 December 2009 (2008
-  £5.0  million)  represent primarily accumulated deferred exploration and  evaluation  costs  in
respect  of the Company's exploration of the Main Pipe at Liqhobong of £5.8 million (2008  -  £4.1
million).   Expenditure in the 6 month period to December 2009 was lower at £0.2 million  (2008  -
£2.0  million)  due  to the earlier completion of field evaluation work. The Company's  accounting
policy in respect of these costs is to capitalise them pending determination of the feasibility of
the  project  to which they relate.  In addition, there is Goodwill of £0.9 million (2008  -  £0.9
million) included in intangible assets.

The  Company's investment in its Finnish joint venture is £2.0 million (2008 - £2.1) and there  is
an additional £0.3 million (2008 - £0.7m) shown in available for sale investments representing its
holding in Mantle Diamonds Limited.

Current  assets  in the consolidated balance sheet at 31 December 2009 were £1.8 million  (2008  -
£1.7 million), primarily consisting of cash of £0.2 million (2008 - £0.7 million), inventories  of
rough diamonds of £0.5 million (2008 - £0.8 million) and derivative financial instruments of  £1.1
million  (2008 - nil) which represent the fair value of the monthly amounts due under equity  swap
arrangements.   Amounts due after 12 months of £0.9 million (2008 - nil) are shown  in  derivative
financial instruments within non-current assets.

The  Consolidated  Income Statement has been presented under the 'nature  of  expense'  method  as
permitted under IFRS to provide the most relevant presentation of information.

Francesco Scolaro

Corporate Information:
Stock Exchange listing   London AIM
Trading symbol           KDD
Shares in issue          301,511,651
Website                  www.kopanediamonds.com
E-mail  address          enquiries@kopanediamonds.com

For further information contact:

Kopane Diamond Developments Plc
Frank Scolaro, Chairman
James Cable, Finance Director
+44 (0) 20 7963 9590
Threadneedle Communications
Laurence Read/Beth Harris
+44 (0) 20 7653 9855
Matthew Robinson/Ed Frisby
+44 (0) 20 7600 1658

e-mail: ir@kopanediamonds.com
website: www.kopanediamonds.com

Consolidated balance sheet

As at 31 December 2009
                                                                   (Unaudited)      (Unaudited)        (Audited)
                                                              As at 31 Dec 09  As at 31 Dec 08  As at 30 Jun 09
                                                                        £'000            £'000            £'000
   Property, plant and equipment                                        3,193            2,833            3,321
   Intangible assets                                                    6,716            5,033            6,173
   Investments in joint venture entity                                  1,960            2,092            1,669
   Available for sale investments                                         333              333              333
   Derivative financial instruments                                       898                -                -
   Trade and other receivables due after more than one year             2,584            2,583            2,584
Total non-current assets                                               15,684           12,874           14,080

   Inventories                                                            518              811              474
   Trade and other receivables - due within one year                    1,176              244               61
   Cash and cash equivalents                                              235              651              869

Total current assets                                                    1,929            1,706            1,401
Total assets                                                           17,613           14,580           15,484
   Issued share capital                                                 9,297            8,481            8,981
   Share premium                                                       28,394           24,933           26,111
   Merger reserve                                                       3,242            3,242            3,242
   Share-based payment reserve                                          1,435            1,131            1,301
   Foreign exchange translation reserve                                 1,717              580              868
   Retained loss                                                      (27,428)         (24,868)         (26,271)
Total equity                                                           16,657           13,499           14,232
   Trade and other payables                                               892            1,037            1,196
Total current liabilities                                                 892            1,037            1,196
      Provisions                                                           64               44               56
Total non-current liabilities                                              64               44               56
Total liabilities                                                         956            1,081            1,252
Total equity and liabilities                                           17,613           14,580           15,484

Consolidated income statement

For the 6 months ended 31 December 2009
                                                                (Unaudited)      (Unaudited)     (Audited)
                                                             6 month ended   6 months ended    Year ended
                                                                 31 Dec 09        31 Dec 08     30 Jun 09
                                                                     £'000            £'000         £'000
Revenue                                                                  -            1,615         1,925
Changes in inventories                                                  44               83          (253)
Mining and processing costs                                           (224)          (2,092)       (2,367)
Employee benefits expense                                             (349)          (1,038)       (1,711)
Impairment of investments and deferred income                            -             (334)         (359)
Depreciation expense                                                  (355)            (543)         (582)
Gain on exchange                                                        48               67           140
Other expenses                                                        (316)            (898)       (1,334)
Operating loss                                                      (1,152)          (3,140)       (4,541)
Investment income                                                        -               40            42
Share of loss in joint venture                                          (5)             (14)          (18)
Loss for the period                                                 (1,157)          (3,114)       (4,517)
Basic and diluted loss per share (pence)                              0.5p             1.8p          2.5p

Consolidated statement of cash flows

For the 6 months ended 31 December 2009
                                                                    (Unaudited)      (Unaudited)    (Audited)
                                                                 6 month ended   6 months ended   Year ended
                                                                        Dec 09        31 Dec 08    30 Jun 09
                                                                         £'000            £'000        £'000
Cash flows from operating activities                                                             
Operating loss for the period                                           (1,152)          (3,140)      (4,541)
Adjustments for:                                                                                            
Depreciation                                                               355              543          582
Impairment of investments and deferred income                                -              334          359
Exchange Difference                                                        (26)             159          388
Equity-settled share-based payment transactions                            134              143          314
                                                                          (689)          (1,961)      (2,898)
(Increase)/decrease in trade and other receivables                         (55)             (14)         145
(Increase)/decrease in inventories                                          (2)              42          289
Increase in provisions for liabilities and charges                           8                6           18
(Decrease)/increase in trade and other payables                           (309)             (16)         104
Net cash used in operating activities                                   (1,047)          (1,943)      (2,342)

Cash flows from investing activities         
Interest received                                                            -               40           42
Acquisition of intangibles                                                (180)          (1,994)      (3,039)
Acquisition of property, plant and equipment                                 -             (181)        (199)
Net cash used in investing activities                                     (180)          (2,135)      (3,196)

Cash flows from financing activities                   
Proceeds from issue of share capital                                       768                -        1,750
Proceeds from derivative financial instruments                              88                -            -
Payment of transaction costs                                              (263)               -          (72)
Net cash from financing activities                                         593                -        1,678
Net (decrease) in cash and cash equivalents                               (634)          (4,078)      (3,860)
Cash and cash equivalents at start of period                               869            4,729        4,729
Cash and cash equivalents at end of period                                 235              651          869
Consolidated statement of changes in shareholders' equity

For the 6 months ended 31 December 2009
                                             Share      Share     Merger  Share based   Foreign   Retained      Total
                                           capital    premium    reserve      payment  exchange   earnings     equity
                                                                              reserve   reserve                      
                                             £'000      £'000      £'000        £'000     £'000      £'000      £'000
Opening balance 1 July 2008                  8,481     24,933      3,242          987      (879)   (21,754)    15,010
Loss for the period                              -          -          -            -         -     (3,114)    (3,114)
Foreign exchange loss                            -          -          -            -     1,459          -      1,459
Total recognised loss for period                 -          -          -            -     1,459     (3,114)    (1,655)
Share based payments                             -          -          -          144         -          -        144
As at 31 December 2008                       8,481     24,933      3,242        1,131       580    (24,868)    13,499
Loss for the period                              -          -          -            -         -     (1,403)    (1,403)
Foreign exchange loss                            -          -          -            -       288          -        288
Total recognised loss for period                 -          -          -            -       288     (1,403)    (1,115)
Shares issued for cash                         500      1,250          -            -         -          -      1,750
Share based payments                             -          -          -          170         -          -        170
Share issue costs                                -        (72)         -            -         -          -        (72)
As at 30 June 2009                           8,981     26,111      3,242        1,301       868    (26,271)    14,232
Loss for the period                              -          -          -            -         -     (1,157)    (1,157)
Foreign exchange gain                            -          -          -            -       849          -        849
Total recognised gain/(loss) for period          -          -          -            -       849     (1,157)      (308)
Shares issued for cash                         316      2,861          -            -         -          -      3,177
Share issue costs                                -       (578)         -            -         -          -       (578)
Share based payments                             -          -          -          134         -          -        134
As at 31 December 2009                       9,297     28,394      3,242        1,435     1,717    (27,428)    16,657

Notes to the consolidated financial statements

These  unaudited consolidated financial statements have been prepared on the basis of the recognition requirements  of
International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU") and implemented  in  the
UK  and  their interpretations adopted by the International Accounting Standards Board ("IASB").  They have also  been
prepared in accordance with those parts of the Companies Act 2006 applicable to those companies reporting under IFRS.


The Group owns diamond interests in Lesotho and Finland.  In Lesotho, production continued from both the Satellite and
Main  Pipes  until  1 December 2008 when production was suspended due to falling rough diamond prices  and  the  plant
placed on a care and maintenance basis. There were no sales of rough diamonds in the reporting period.  The Definitive
Feasibility Study into the viability of the Main Pipe continued through the period.

The  Company's Finnish diamond interests are operated and financed under a Joint Venture Agreement ("JVA")  by  Mantle
Diamonds Limited.   Under the JVA, Mantle is able to earn up to 70% interest in the assets by spending US$5 million on
exploration  and  evaluation of the properties, including a  bankable feasibility study in respect  of  the  Company's
Lahtojoki property, and by paying the Company 10 million Mantle shares over three years.  At 31 December 2009,  Mantle
had  complied with its expenditure requirements under the JVA although it has requested deferral of future expenditure
and  other  obligations, which are under discussion with them.  If agreement is not reached regarding such  deferrals,
the Company may at its option elect to have the assets returned, in which event the Company would seek other means  of
financing  the  evaluation of the properties.  Consequently, the Company has not impaired the carrying  value  of  its
interest in the Finnish assets and this will be reviewed following agreement with Mantle, or, otherwise, clarification
of financing.

The  Company's  expenditure has been reduced as a result of production at Liqhobong being suspended at December  2008.
In  order to provide the ability to re-start production, invest in the Liqhobong facilities and to progress evaluation
and  development  of the Main Pipe, the Company has arranged further finance. On 17 November 2009 the  company  raised
£3.9  million  before  expenses by the issue of 27.9 million new ordinary shares. Of this  amount,  £3.15  million  is
payable over 24 months dependent on the Company's share price compared to a benchmark price of 18.67p per share. On 17
January  2010  the  company raised a further £6.0 million before expenses by the issue of 50.3  million  new  ordinary
shares.  Of this amount, £3.0 million is payable over 18 months dependent on the Company's share price compared  to  a
benchmark  price  of  16p per share.  The directors believe the Company has sufficient funds to meet  its  expenditure

The  consolidated financial statements do not include any adjustment that would result from the Company or any of  its
subsidiary undertakings ceasing to operate as a going concern.


Basis of consolidation
(i)   Subsidiaries
Subsidiaries  are  entities  controlled by the Company. Control exists when the Company has  the  power,  directly  or
indirectly,  to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
In  assessing  control, potential voting rights that presently are exercisable or convertible are taken into  account.
The  financial  statements of subsidiaries are included in the consolidated financial statements from  the  date  that
control commences until the date that control ceases.

(ii)  Joint ventures
A  joint  venture  is  an undertaking over which the Group is in a position to exercise joint control.   The  results,
assets  and  liabilities  of joint ventures are incorporated in these financial statements using  the  equity  method.
Under  the  equity method of accounting the Group's share of the net assets and the profit or loss for the period  are
recognised in the balance sheet and income statement respectively.

(ii)  Transactions eliminated on consolidation
Intra-group  balances and any unrealised gains, losses, income or expenses arising from intra-group  transactions  are
eliminated in preparing the consolidated financial statements.

(iii) Goodwill
All  business  combinations are accounted for by applying the purchase method. Goodwill arises on the  acquisition  of
subsidiaries,  associates and joint ventures. Goodwill represents the difference between the cost of  the  acquisition
and the fair value of the net identifiable assets acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units  and
is  tested annually for impairment.  Goodwill arising on acquisition is capitalised and shown within fixed assets. The
excess of net assets over consideration paid on an acquisition is recognised directly in profit or loss.

Deferred Exploration and Evaluation Costs
These  comprise  costs directly incurred in exploration and evaluation as well as the cost of mineral licences.   They
are  capitalised as intangible assets pending the determination of the feasibility of the project.  When the existence
of  economically recoverable reserves is established the related intangible assets are transferred to property,  plant
and equipment and the exploration and evaluation costs are amortised over the estimated life of the project.  Where  a
project is abandoned or is determined not economically viable, the related costs are written off.

The  recoverability of deferred exploration and evaluation costs is dependent upon a number of factors common  to  the
natural  resource sector.  These include the extent to which a Company can establish economically recoverable reserves
on  its  properties,  the  ability of the Company to obtain necessary financing to complete the  development  of  such
reserves and future profitable production or proceeds from the disposition thereof.

Share-based payment transactions
The  share option programme allows Group employees to acquire shares of the Company. The fair value of options granted
is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date
and  spread  over  the period until the options vest unconditionally to the employee. The fair value  of  the  options
granted is measured using the Black-Scholes model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the  actual
number of share options that vest, except if the change is due to market based conditions not being satisfied.

Revenue recognition
Revenue represents gross revenue from the sale of rough diamonds before selling costs.  Revenue is recognised  at  the
point of acceptance of customers' bids for the rough diamonds.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the rate applicable.

Property, plant and equipment - Depreciation
Depreciation  is  charged to the income statement at the following rates in order to write off  each  asset  over  its
estimated useful life.

*   Mining assets                                            20% on straight line basis until 30 June 2014
*   Fixtures and fittings                                    25% on reducing balance
*   Computer equipment                                       25% on reducing balance

The  residual value, if not insignificant, is reassessed annually.  The Company reviewed the remaining useful life  of
the Mining assets in the year ended 30 June 2009 and extended the write-off period until 30 June 2014.

Financial instruments
(i)   Non-derivative financial instruments
Non-derivative  financial instruments comprise trade and other receivables, cash and cash equivalents  and  trade  and
other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not  at  fair  value
through profit or loss, any directly attributable transaction costs, except as described below.  Subsequent to initial
recognition, non-derivative financial instruments are measured as described below. At 31 December 2009 the fair  value
equated to the historical cost for all non-derivative instruments.

A  financial  instrument is recognised if the Group becomes a party to the contractual provisions of  the  instrument.
Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire
or  if  the Group transfers the financial asset to another party without retaining control or substantially all  risks
and  rewards of the asset.  Regular purchases and sales of financial assets are accounted for at trade date, i.e.  the
date  that  the  Group  commits itself to purchase or sell the asset.  Financial liabilities are derecognised  if  the
Group's obligations specified in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and call deposits.  Bank overdrafts that are repayable on demand  are
included as a component of cash flows from financing activities, for the purposes of the statement of cash flows.

(ii)  Derivative financial instruments
Derivative  financial instruments are initially recognised at fair value on the date a derivative contract is  entered
into and are also subsequently carried at fair value. Gains and losses are charged to financial income or costs in the
income statement.

Share capital
Incremental  costs directly attributable to issue of ordinary shares and share options are recognised as  a  deduction
from equity.

Loss per share
The  calculation  of basic loss per ordinary share on the net basis is based on the loss on ordinary activities  after
taxation  of  £1,157,000 and on 228,760,942 ordinary shares being the weighted average number of  ordinary  shares  in
issue  and ranking for dividend during the period.  The diluted loss per ordinary share is presented on the same basis
as the effect of the exercise of share options would be to decrease the loss per share.

These  interim financial statements were approved by the directors on 12 March 2010. The Group's principal  accounting
policies  are  shown above. These policies are equivalent to those stated in the Annual Report for the year  ended  30
June 2009.

The  financial  information  for  the  six months ended 31 December 2009 and  31  December  2008  is  unaudited.   The
comparative  figures  for the year ended 30 June 2009 were derived from the group's audited financial  statements  for
that  period  as  filed  with the Registrar of Companies.  It does not constitute the financial  statements  for  that
period.   Those  financial statements received an unqualified audit report which did not contain any  statement  under
sections 498(2) or 498(3) of the Companies Act 2006.

No dividend is being declared or paid for the period.

Copies of this report are being sent to all shareholders. Additional copies are available from the Company's office at
Carlyle House 235-237 Vauxhall Bridge Road, London, SW1V 1EJ or the Company's website www.kopanediamonds.com.

Contact Information

  • Kopane Diamond Developments PLC