Kopane Diamond Developments PLC

November 25, 2008 02:00 ET


                                           Kopane Diamond Developments Plc

                                                    PRESS RELEASE

25 November 2008
                                       PRELIMINARY ANNOUNCEMENT OF RESULTS FOR
                              YEAR ENDED 30 JUNE 2008; NOTICE OF ANNUAL GENERAL MEETING

Kopane  Diamond  Developments Plc ("Kopane") is a diamond producer, developer and explorer  with  core  projects  at
Liqhobong in Lesotho, Southern Africa. The Liqhobong operations are operated by Liqhobong Mining Development Company
("LMDC") which is 75% owned by Kopane and 25% by the Government of Lesotho ("GoL").

LMDC  has  to  date produced over 340,000 carats of diamonds since operations commenced at the end of  2005  and  is
currently producing at a rate of 160,000 carats per annum. The principal development project is the Main Pipe  which
has the potential to produce at a rate of one million carats per annum.

Highlights of the year include:

>   Diamond production of 152,013 carats in the year to 30 June 2008 compared to 111,372 carats in previous year, an
increase of 36.5%

>   Sales of 148,824 carats valued at $6.9 million in the year to 30 June 2008, an increase of 28% when compared to
the 77,311 carats sold at a value of $5.4m in the year to 30 June 2007

>   Recovery of 13.32 carat vivid yellow stone in June 2008 for $35,136 per carat, sold in July 2008

>   Substantial progress on the Main Pipe Definitive Feasibility Study

            *       33,921 tonnes near surface bulk sampling programme recovering 12,514 carats
            *       Completion of 25 hole, 4,415 metre, large diameter drilling programme

>   New interim resources statement:

            *       76 million tonnes of Kimberlite

            *       Average grade of 39.1 carats per hundred tonnes

            *       Gross diamond resource of 29.6 million carats

            *       Run of mine value of $86 per carat

            *       Indicative Main Pipe value $2.5 billion

>   Joint venture for exploration and development of Finnish assets

At  30  June  2008 the Company's cash balance was £4.7 million, upon which the Company has drawn down  in  order  to
progress  the  Definitive Feasibility Study on the Main Pipe. In line with the current severe  economic  and  market
turbulence,  diamond prices have fallen significantly over the last couple of months and this, in  conjunction  with
planned discretionary project expenditure, has required that the Company assess its current funding requirements  in
the immediate future. All steps necessary to preserve the Company and its principal assets are being reviewed.

Notice of Annual General Meeting
The  Annual General Meeting will be held at the Park Plaza Hotel, Edward Suite 1, 239 Vauxhall Bridge Road,
London SW1V 1EQ on Thursday, 18 December 2008 at 11.00 am.

At the AGM shareholders will be asked to vote, inter alia, on a resolution which proposes a reduction in the nominal
value of the ordinary shares in the Company. The resolution is being proposed to facilitate the Company's ability to
raise  equity  capital  for the business should the Directors deem it to be in the best interests  of  the  Company.
Currently the ordinary shares in the Company have a nominal value of 5p per share, below which level the Company  is
legally  not  able to issue shares. Against this, the Company's shares are currently trading below that level.  Full
details  of the process of the change in nominal value of the ordinary shares has been sent to shareholders together
with the notice of AGM.

The  2008  Annual  Report  and Accounts, Notice of Annual General Meeting and Form of  Proxy  have  been  mailed  to

Copies of the 2008 Annual Report and Accounts, Notice of Annual General Meeting and Form of Proxy are available  for
download  from the Company's website at www.kopanediamonds.com and are also available from the Company's  registered
office at 43 North Audley Street, London, W1K 6WH.

For further information contact:
Kopane Diamond Developments PLC
Tim Read, Executive Chairman                                     +44 (0) 20 7529 7502
James Cable, Finance Director
Threadneedle Communications
Laurence Read                                                    +44 (0) 20 7653 9855
Canaccord Adams Limited
Robert Finlay                                                    +44 (0) 20 7050 6500
Mike Jones

                                           Kopane Diamond Developments Plc

                                         PRELIMINARY ANNOUNCEMENT OF RESULTS
                                               YEAR ENDED 30 JUNE 2008

Chairman's Letter to Shareholders

Dear Shareholders

At  the  time  that  I write this annual letter to you, reports on the state of the global economy  continue  to  be
universally negative. No sector seems immune to this downturn and its impact upon the pricing of resource  companies
has  been  severe. The ultimate effect of this crisis upon the demand for diamonds and consequently  the  realisable
prices  for our rough diamonds has yet to be fully determined. Prices have fallen significantly over the last couple
of months and your Board is reviewing all steps necessary to preserve the Company and its principal assets.

Against  this gloomy background, I am very pleased to say that over the last year, the Company ("Kopane"  or  "KDD")
has  achieved considerable progress in the development of the Liqhobong project and has added substantial  value  to
its diamond resource.

The following is a summary of the Company's principal operational and financial highlights of the past year:-

    *   Progressing the Definitive Feasibility Study ("DFS") for the Liqhobong Main Pipe project, including the
        completion of a 4,415 metre large diameter drilling programme and a 33,921 tonne near-surface bulk  sampling
        programme. These bulk samples produced 12,514 carats, including boart, which were valued by independent diamond
        brokers at $86 per carat. Excluding the boart, prices exceeded $106 per carat. These values compare very
        favourably with that of $70 per carat, including boart, used in the Pre Feasibility Study.

    *   Following  this  work, KDD has published a new preliminary resource statement,  prepared  by  ACA  Howe
        International Limited ("Howe"), under strict QA/QC protocols to a DFS standard, giving a total resource 
        tonnage of 76 million tonnes, up 79 % on the Pre-Feasibility Study ("PFS") statement published last year of 
        42 million tonnes. The average grade has increased to 39.1 carats per hundred tonnes ("cpht") 
        (PFS - 27.8 cpht), giving a 156 % increase in the gross diamond resource of 29.6 million carats 
        (PFS - 11.5 million carats).

    *   Applying the value generated by the bulk sample of $86 per carat, the indicative value of the Main Pipe has
        increased by 213% to $2.54 billion (29.6 million carats at $86 per carat) from the $0.81 billion (11.5 million
        carats at $70 per carat) shown in the PFS resource statement.

    *   Total Liqhobong diamond production, which included production from the Satellite Pipe as well as production
        and bulk sampling from the Main Pipe, in the year to June 2008, totalled 152,013 carats, compared with 111,752
        carats in the previous year. This was due to a substantial improvement in the operational efficiencies as the
        average grade of the kimberlite feed fell to 43.5 cpht, from 53.5 cpht in 2007, as a greater proportion of ore 
        was sourced from the lower grade Main Pipe.

    *   In  June 2008, a 13.32 carat vivid yellow was recovered from K5. This stone sold post the year-end  for
        $466,679 equivalent to $35,136 per carat, which is the highest price per carat achieved by LMDC so far.

    *   Continued improvement in sales of diamonds in terms of both quantity and value per carat. In  the  past
        financial year we were able to ship and sell 148,824 carats, including 13,321 carats of boart stones, with a 
        total value of $6.9 million. This compares to total sales in the previous financial year of 77,312 carats 
        with gross proceeds of $5.4 million, which included no boart sales and benefited from the sale of 4 diamonds
        with an aggregate weight of 78 carats that realised $1.46 million. In recent weeks, the diamond market has 
        shown a sudden and severe weakness.

    *   309,480 dry tonnes of kimberlite were mined and processed in the year to the 30 June 2008 representing an
        increase of 67% over the previous year. Despite increased mining and processing costs, due in part to the high
        cost of diesel used to power generators at site, the average cost per tonne mined and processed, in Sterling
        terms was similar to the previous year at £11.1 per tonne versus £11.8 per tonne.

    *   Raising £6 million of new equity capital in May 2008 by the issue of 60 million new ordinary shares, to
        finance the DFS and to provide working capital.  HSBC Principal Investments Limited ("HSBC") subscribed 
        £2.7 million of this equity raising, so becoming a 15.85% shareholder of KDD's enlarged share capital. 
        This investment by HSBC was only made after it had conducted extensive technical and legal due diligence on
        the Company and its projects.

    *   Significant progress achieved in sourcing and structuring the funding of a 132 KVA power  line  to  the
        Liqhobong mine, a critical component of the Main Pipe project. The feasibility study and environmental impact
        assessment for this project have been completed.

    *   Execution of a joint venture agreement with Mantle Diamonds Limited ("Mantle") for the exploration  and
        development of the Company's Finnish assets. Mantle will earn up to a 70% interest in the properties by
        spending $5 million on a Definitive Feasibility Study.

The  Company's  assets  in  Lesotho are owned and managed by its operating subsidiary Liqhobong  Mining  Development
Company ("LMDC"). KDD owns 75% of LMDC with the balance of ownership held by the Government of Lesotho ("GoL"). This
partnership  has  proved to be outstandingly successful and I would like to thank the Ministry of Natural  Resources
for  the  considerable support and cooperation we have received. In return, LMDC endeavours to operate the Liqhobong
assets with the highest level of responsibility due to all its stakeholders.

Throughout  2008,  LMDC  has  been tasked with managing two important objectives, namely  progressing  the  advanced
geological  evaluation  elements  of the Main Pipe DFS as quickly as possible whilst  simultaneously  attempting  to
improve the operational efficiencies of the existing Satellite Plant (the "Plant"). The evaluation work for the  DFS
has  necessitated the extraction and processing of a series of bulk samples to test the grade of the four identified
facies,  namely  the K2, K4, K5 and K6. This bulk sampling programme totalled 33,921 tonnes and  extended  over  two
months.  A  total  of  12,514  carats were produced from the bulk samples and a value of  $86  per  carat  has  been
determined by putting the parcel out to independent valuation. This value compares very favourably with the $70  per
carat value used in the PFS. The bulk sampling has provided grade, stone size distribution and stone value data  for
each of the four facies.

The  second  element  to  the  resource evaluation has been a programme of narrow (HQ/NQ)  diameter  core  drilling,
comprising  4  holes with a total depth of 1,705 metres plus a further 5 geotechnical holes with a  total  depth  of
1,247  metres. This programme has permitted a recalculation of the dimensions of the Main Pipe, resulting in a  much
larger  resource tonnage of 75.6 million tonnes, a 79% increase on the 42 million tonnes resource identified in  the
PFS, as disclosed to shareholders on 17 November 2008.

The  third  component of the advanced geological evaluation has been the Large Diameter Drilling  ("LDD")  programme
utilising  a  Prakla  RB-40  RC drill rig. This was a 25 hole programme, now completed, totalling  4,415  metres  of
drilling  and  recovering  some  1,800 tonnes of mini bulk samples. These samples are  currently  being  treated  at
Liqhobong  in a custom-built dense media separation ("DMS") plant with a capacity of 5 tonnes per hour.  Once  these
samples  have  been  processed we will have depth continuity data on grade for each of the facies,  enabling  us  to
report  a  substantial  increase  in the measured and indicated categories of the resource  beyond  that  which  was
released on 17 November 2008.

The  LDD  programme has overrun by some three months owing to drilling rates being initially slower  than  expected.
This has had some knock-on effect on the schedule for the completion of the DFS.

We  are  expecting  Howe, the project's geological consultants, to publish the final resource in  early  2009.  This
statement  will include the results of the LDD mini bulk samples and, as a consequence, the measured  and  indicated
categories  should  represent  a  substantially greater proportion of the  total  resource.  In  comparison  to  the
previously released PFS parameters, we now find we have a 79% larger resource, with a 41.7% higher grade and a 22.9%
improvement in value per carat resulting in an in-situ value increase of 213% over the previous study.

Work  is  continuing on the other elements of the DFS under the project management of AMC Consultants  (UK)  Limited
("AMC"),  supported  by  a  number  of  sub contractors, including DRA, Golder  Associates,  SRK  and  Africom.  The
substantial increase in the resource has necessitated a rethink of the project's physical and commercial  parameters
which,  in  conjunction with the delays in the LDD programme noted before, has led to some delay. As a  result,  the
full  document  will  now  be completed in the first half of 2009. In the meantime we have  sought  more  up-to-date
capital and operating cost estimates to enable KDD to progress its work on funding the project.

In  this  regard,  we  have  already  commenced preliminary discussions  with  certain  project  lending  banks  and

The  successful  development  of  the  Liqhobong Main Pipe will be totally dependent  upon  the  provision  of  grid
electrical  power from the Lesotho electricity grid. I am pleased to report that negotiations are now well  advanced
with  the  GoL,  the Lesotho Electricity Company and certain lending institutions to finance a 132  KVA  power  line
construction  to  proceed  without  the need for LMDC to make any up-front capital  contribution.  If  all  goes  to
schedule, power should be available to site by mid 2010.

Setting up the Plant to treat these bulk samples and to attain maximum diamond recoveries interrupted production and
reduced  throughput. The Company, however, had determined at an early stage that meeting the goals of the DFS  would
take  precedence over short term production targets. The Company's future lies in the successful development of  the
Main Pipe project and any future corporate valuation would depend upon the clear demonstration of the dimensions and
grade  of the Main Pipe's long term mineable resource. Nevertheless, in the year to 30 June 2008, a total of 309,480
dry  tonnes  were processed through the Plant compared with 185,600 dry tonnes in the previous year.  Following  the
completion of the bulk sampling programme in August 2008, production has attained record levels. In October 2008 the
plant,  on  average, attained its target capacity of 62 tonnes per hour, producing 13,611 carats from  predominantly
Main Pipe material.

From  the  commencement  of production in the second half of 2005 until the end of October  2008,  the  Company  has
recovered some 340,000 carats of rough diamonds, of which 292,000 have been sold, including low grade industrial  or
boart  stones,  at  an average price of $55 per carat. In the financial year to 30 June 2008, production  and  sales
showed substantial increases over the previous year, 92% in terms of carats sold (148,824 versus 77,312) and 27%  in
terms  of revenue (US$6.9 million versus US$5.4 million). The previous year's sales included 4 stones, totalling  78
carats, of very high quality, which realised $1.4 million.  In the first quarter of the new financial year, LMDC has
sold  a  further 31,510 carats realising $2.5 million, including three premium yellow stones, one of which, a  13.32
carat  vivid  yellow, sold for $35,136 per carat, our highest price per carat achieved so far. In  addition,  12,514
carats of rough diamonds, including boart, were recovered in July and August 2008 from the bulk sample programme and
these will be retained in inventory during the financing period for the new Main Pipe project.

In  April 2008, LMDC renewed its sales agreement with BHP Billiton to organise diamond sales on the Company's behalf
in  Antwerp. In September 2008 BHP Billiton gave notice of termination under the Agreement and therefore LMDC is  in
the process of selecting a new sales agent.

A shortlist of potential agents has been compiled and a final selection process is in train. The identity of the new
agency  will  be  announced shortly. The relationship with BHP Billiton has proven to be very constructive  for  the
Company  in  the  early stages of its production, enabling LMDC to achieve a high level of price  discovery  of  its
stones and to develop continuing interest from regular buyers. We believe that the agency agreement has enabled LMDC
to  maximize  prices  obtained  for its rough diamonds. The appointment of a new agent  now  permits  LMDC  to  seek
participation  in  the  down-stream value added by retaining some level of ownership of its premium  stones  through
cutting, polishing and jewellery manufacture.

Between  March  2006 and October 2008, 21 tenders have been held by BHP Billiton on LMDC's behalf in  Antwerp,  with
aggregate sales of 278,706 carats, realising $16 million.

As  I  remarked  at the beginning of this report, there has been, in recent weeks, a dramatic drop in rough  diamond
prices. Until the end of September 2008 rough prices had been buoyant, with prices having risen by some 16-18% since
the start of this calendar year. Since then, however, prices have retreated in US dollar terms by some 25-30%. It is
impossible to gauge how long this market weakness will continue although no recovery is anticipated until next year.
For  the  longer term, the fundamentals for the industry had previously been seen as very positive, with a  widening
gap  between  demand  and  production.  It is expected that this situation  should  reassert  itself  once  consumer
confidence has been restored. It is too early to judge the impact of this price decline on the short term  economics
of  the Liqhobong operations, especially as it has been sheltered to a large degree by the dramatic weakening of the
Rand  from  the average level of R7.3:US$1 which prevailed through the last financial year to the current  level  of

In  May  2008,  the  Company completed a placement of 60 million new ordinary shares at 10p per share  to  raise  £6
million.  Of  these  new shares, 40.3 million were conditional upon shareholder approval, which  was  overwhelmingly
given  at  an EGM held on 18 June 2008. The proceeds of this placement have been applied to progressing the  DFS  as
well  as to general working capital requirements. HSBC took a leading role in this capital raising, subscribing  for
26.6 million shares, and as a result now holds 15.85% of the Company's share capital. Prior to participating in  the
share  placement,  HSBC conducted substantial legal and technical due diligence on the Company  and  its  assets  in

Shareholders will be aware that in May 2008 the Company received an indicative proposal from a third party  relating
to  a  possible  offer for Kopane at 17p in cash for each ordinary share. This proposal contained no equity  element
which would have enabled Kopane shareholders to participate in the future development of Kopane's Liqhobong project.
Furthermore, this proposal stated that the 17p price would cease to be available in the event that Kopane  proceeded
with  its  conditional placing of 40,300,000 shares, announced on 22 May 2008 and in respect of  which  an  EGM  was
called seeking approval.

The  Board  of Kopane considered that although this conditional approach was at a significant premium  to  the  then
current market price, the proposal did not adequately reflect the future prospects of Kopane's Liqhobong project and
did not address the Company's short to medium term funding requirements.

The  Board,  having  consulted  a  number of its major institutional shareholders  and  in  receipt  of  appropriate
professional advice, determined that the pursuit of this tentative, conditional takeover approach at the expense  of
the  refinancing  of the Company would not be in the best interests of Kopane or its shareholders.  It  nevertheless
made  a  public disclosure of this approach ahead of the EGM, at which it received the overwhelming support  of  its
shareholders to issue the placement shares, rendering the offer null and void.

Since  the  last  annual  report,  there have been substantial changes to the management  of  the  Company  and  the
composition  of  the  Board of Directors. In December 2007, Roy Spencer resigned as non-executive  director  of  the
Company.  Roy  had served as Chief Executive Officer since the Company's formation in 2001 until July 2007.  Stephen
Lay, Chief Operating Officer, resigned from the Board and Company on 30 September 2008 to pursue other interests. On
your behalf, I would like to thank both of them for their contribution to the progress of the Company.

In May 2008, Ed Marlow, Managing Director of HSBC Principal Investors, joined the Board as a non-executive director,
following  HSBC's  investment  in  the  Company. In August 2008, Mike Wittet, former  Deputy  Managing  Director  of
Debswana,  the  partnership  between  De Beers and the Government of Botswana, joined  the  board  as  non-executive
director.  In  November  2008, Mike was subsequently appointed Chief Executive Officer  and  executive  director  of
Kopane. He will be based in South Africa to oversee management of operations at Liqhobong, completion of the DFS and
subsequent construction and start up of the proposed new Main Pipe plant. At the same time, we have appointed  Danie
Smit  as  General Manager of the Liqhobong Mine. Prior to joining LMDC, Danie, like Mike, another De Beers  veteran,
had  been General Manager of the Williamson diamond mine in Tanzania. We welcome the relevant experience and  skill-
sets that Ed, Mike and Danie will each bring to your Company and its operations.

Last  year  I reported that the Company was considering a secondary flotation on the AltX market of the Johannesburg
Stock  Exchange.  The  Company obtained the necessary regulatory approvals but in consequence of  the  deteriorating
market  conditions and after discussions with our advisors, we decided to shelve such a listing for the  foreseeable

Kopane  retains important diamond claims in Finland and exploration conducted on these properties has  continued  to
support  the prospectivity of the Finnish Karelian Craton. In January 2008 the Company announced that it had entered
into a Joint Venture Agreement with Mantle Diamonds Ltd ("Mantle") whereby Mantle will earn up to a 70% interest  in
all the properties by fulfilling certain investment conditions in the Lahtojoki property.

The  principal challenges now facing your company's executive management and its Board of Directors in  the  current
year,  are to close the considerable gap between the intrinsic value of Kopane's assets and its stock-market  price,
whilst continuing to progress the development of Liqhobong and conserving the company's cash resources.

As  I mentioned at the start of this letter, your Board is reviewing all steps necessary to preserve the Company and
its  principal  assets. In order to provide maximum financial flexibility to access additional equity  funding  when
required on the best terms available, the Company is proposing resolutions at the Annual General Meeting which  give
the  directors' power to issue new shares for cash on a non pre-emptive basis over 30% of the issued  share  capital
and  a  change  in the share capital structure whereby each existing ordinary share of 5p each is divided  into  one
ordinary  share  of  1p  nominal value and one deferred share of 4p nominal value. This latter  change  is  proposed
because  the Company's shares are currently trading at a discount to the nominal value of 5p per ordinary share  and
company law does not permit the Directors to issue new shares at less than nominal value.

An  explanation  of  these  resolutions as well as changes to be made to the Company's Articles  of  Association  is
included in the Appendix to the Notice of Meeting attached to the Annual Report.

Over the past twelve months, great success has been achieved in building the Liqhobong resource to almost 30 million

The  great  prospectivity of Kopane's assets should no longer be in any doubt. Meanwhile, production  is  now  being
sustained  at  consistently high levels. This has been achieved against a background of deteriorating financial  and
commercial  markets  and tight working capital rationing. All this has placed considerable  demands  on  our  staff,
consultants  and advisors and I would like to thank them all for their contribution to a successful  year.  I  would
also  thank our shareholders for their continued support and patience in challenging stock market conditions as  the
company continues to evolve as a major diamond producer.

Tim Read
Executive Chairman

Operational Review

The  Company's diamond operations are located at the head of the Liqhobong Valley, high in the Maluti  Mountains  of
northern  Lesotho, on a mining lease covering 390 hectares.  This licence contains five kimberlites of  which  three
have  yet  to  be extensively explored. Current operations comprise the Satellite Pipe, with a surface area  of  0.9
hectare, the much larger Main Pipe, with a surface area of over 8.5 hectares, and the Satellite Plant ("the Plant").
The  Liqhobong operating company, LMDC, received the original production licence for the Satellite Pipe from the GoL
in  2001  and  in  February 2007 was successful in reaching agreement with the GoL for an extension to  this  mining
licence to enable it to mine from the Main Pipe for up to 20 years.

Kopane owns a 75% interest in LMDC and the remainder is owned by the GoL.

Capacity, Production and Sales
The Plant, which has a name-plate capacity of 60 tonnes per hour ("tph"), commenced production in late 2005. By July
2006, throughput had reached 40 tph, which was determined to be the formal Commencement of Commercial Production, so
satisfying the provisions of the mining licence with the GoL.

In  2007/8,  a  total of 309,480 dry tonnes were treated in the Plant producing 152,013 carats. This  compares  with
equivalent figures of 185,600 dry tonnes and 111,752 carats in the previous year. The grade of the feed declined  to
49.1  cpht from 60.2 cpht in 2007, as a greater proportion of the feed was sourced from the lower grade, but  higher
diamond value, Main Pipe.  Plant efficiencies have  improved throughout the year although, of necessity there was in
the  latter  part  of  the year certain planned interruptions to production as preparation was  made  for  the  bulk
sampling  of the individual facies, as required for the DFS. Following completion of the bulk sampling programme  in
late August 2008, production was ramped up to a rate of approximately 60 tph from a blend of Satellite and Main Pipe
kimberlites  to maximise production and revenues. In October, the Plant throughput consistently exceeded  name-plate
capacity.  Additional  diesel generator capacity is being sourced and, when this is installed,  estimated  in  early
2009,  the  plant, after modest flow-sheet modifications, should support at least a 10% increase in throughput.  The
Company  is also reviewing more wide-ranging plant de-bottlenecking scenarios to permit a more substantial  increase
in production at the Plant once grid electricity is available at site.

From  the  commencement  of production, in the second half of 2005 until the end of October 2008,  the  Company  has
recovered some 340,000 carats of rough diamonds, of which 292,000 have been sold, including low grade industrial  or
boart  stones, at an average price of $55 per carat. In the financial year to 30 June 2008, sales showed substantial
increases  over the previous year, 92% in terms of carats sold (148,824 versus 77,312) and 27% in terms  of  revenue
(US$6.9 million versus US$5.4 million). The previous year's sales included four stones, totalling 78 carats, of very
high  quality, which realised $1.4 million.  In the first quarter of the new financial year, LMDC has sold a further
31,510  carats  realising $2.5 million, including three premium yellow stones, one of which,  a  13.32  carat  vivid
yellow, sold for $35,136 per carat, our highest price per carat achieved so far.

During  the course of the year, different facies of the Main Pipe have been processed in discrete campaigns  through
the Plant in order to determine specific processing characteristics ahead of the rigorously controlled processing of
bulk  samples that were conducted in July and August 2008 as part of the DFS of the Main Pipe. The most  significant
campaign, processing ore from the K5 facies of the Main Pipe, commenced in late April 2008, continued through to the
end  of  May.  A total of 38,433 dry tonnes (not surveyed) was processed from the K5 facies, resulting  in  a  total
diamond production of 19,887 carats at a calculated grade of 51.7 carats per hundred tonnes ("cpht"). This grade  is
materially greater than the average K5 grade used in the PFS of 30 cpht. Of this production, 17,165 carats,  of  gem
quality,  were  sold  for $1.69 million in July 2008. If these proceeds were applied to the total  production,  i.e.
ascribing no value to the industrial stones, it would give an average value of $85 per carat.

The  33,921 tonne bulk sampling campaign, which took place during July and August 2008, recovered 12,514 carats  and
these were sent to Antwerp for valuation by several established diamantiers, generating an average value of $86  per
carat. It is planned that these stones will be retained in inventory by the Company to allow further inspection  and
valuation, as may be required from time to time as part of funding due diligence for the Main Pipe plant project.

The  Liqhobong  project employs 113 workers, including sub contractors, most of whom are Lesotho  nationals  and  of
these  a  significant number are sourced from local communities. In addition, 25 other workers have been temporarily
employed during the conduct of the DFS. In previous years, operator training remains a key issue and the Company  is
committed  to  maintaining a high standard of operation in this challenging location. There  is  little  doubt  that
LMDC's  operating  experience at Liqhobong will place the company in a very strong position when  the  planned  much
larger Main Pipe plant is constructed and commissioned over the next few years.

Liqhobong diamonds have so far been marketed in Antwerp by BHP Billiton. In April 2008, we renewed our contract with
BHP  Billiton to an "evergreen" basis with a three month notice period by either party, although BHP Billiton issued
notice  of termination in September 2008. As mentioned in the Chairman's Report to Shareholders, the Company  is  in
the  process  of selecting a new sales agent to market the rough diamonds. Liqhobong stones are established  in  the
marketplace and regular buyers have been attracted to the parcels of diamonds sold in the 10 tenders held each  year
in Antwerp.

The  Company is reviewing the most appropriate sales arrangements going forward as it increases the number of stones
offered over the period until the new Main Pipe plant is implemented.

Sales  of  premium  stones  represent a relatively high proportion of sales revenues and the  Company  is  therefore
reviewing the best way to maximise its revenues taking into account how and where its diamonds are sold and from the
benefit  from  retaining  an  interest in the eventual sale of certain high value cut  and  polished  diamonds.  The
Company's approach to these matters is likely to develop gradually according to circumstances.

Since  diamond  sales began in Antwerp in March 2006, 21 tenders have been conducted and the general  response  from
buyers  has  been excellent, our production of Lesotho yellow diamonds being particularly in demand. Sales,  to  end
October  2008, have totalled 278,706 carats, excluding industrial grade boart stones which are accumulated and  sold
separately, realising total proceeds of $16 million, equivalent to $58.16 per carat. In addition, inventory of rough
diamonds,  excluding  boart  stones,  at 31 October 2008 amounted to some 43,000  carats,  including  12,514  carats
recovered during the bulk sample.

The above table shows a steady increase in sales and prices achieved per carat since 2005, with the exception of the
second half of the 2007/8 financial year when production and thus sales reduced due to the requirement for the Plant
to  be prepared for bulk sampling. The rate of production in the first 4 months since the end of the financial  year
increased  over the first 6 months of 2008 and the number of carats sold increased despite retention of  the  12,514
carats of bulk sample stones.

The  sales  shown in the table below in 2008/9 include a sale in early July 2008 of 17,020 carats which, except  for
approximately 200 carats of small stones recovered from the Satellite Pipe, were all campaign recovered from the  K5
facies  of  the  Main Pipe. Sales revenue achieved was $1.69 million, which represents $99.36/ct  and  included  the
following three premium stones:

* 13.32 ct Vivid yellow sold for $35,136/ct

* 9.86 ct Fancy yellow sold for $10,149/ct

* 5.98 ct Fancy yellow sold for $10,066/ct

In  line with general market conditions for rough diamonds, there was a gradual increase in sales prices as is shown
in  the above table, although this is somewhat distorted by the sale of special premium diamonds from time to  time.
Prices  for  better high quality goods remained particularly robust with consistent prices being  achieved  at  each
tender  and the sales have continued to attract interest from established buyers of Liqhobong rough diamonds. Prices
in  the  next  months  are likely to be weak as a result of the global economic situation, but  the  markets  should
recover once consumer confidence is restored.

Sales in Antwerp (excluding boart)

Year                    Carats    $m  $/Carat           No. of sales

(4 months to 31 Oct.)   40,504  2.73    67.40           3
2007/8  - H2            57,928  3.10    53.57           5
        - H1            77,575  3.81    49.09           5
2006/7  - H2            47,287  2.28    48.26           4
        - H1            30,025  3.16    105.15*         2
2005/6  - H2            25,387  1.13    44.36           2
Total                   278,706 16.21   58.16           21

* In the first half of 2006/7, 4 stones with an aggregate weight of 78 carats were sold for a consideration of $1.46
million (equivalent to a value of $18,718 per carat).

The impact of high value stones is illustrated by the following table:

High value stones sold since H2 2005/6

        Total           Ave. Price              Revenue         % of total
Stones  Carats          $/ct                    $m              Sales

Top 20  185.42          13,966                  2.59            16%
Top 40  320.09          9,696                   3.10            19%
Top 86* 665.03          5,658                   3.76            23%

        * Stones with individual values greater than $1,000 per carat.

Electricity  for  the  current operations is supplied by diesel generation but it is not envisaged  that  this  will
provide  a  long  term solution for Liqhobong, particularly for the full development of the Main  Pipe  project.  In
future,  Liqhobong will need to have to access grid power for both cost and logistical reasons. In 2007 a  technical
steering committee was established between the Lesotho Electricity Company ("LEC"), LMDC and Lesotho Diamond Company
Limited, which is developing the Kao mine in a valley adjacent to Liqhobong, to progress the provision of grid power
to  these two mines and to the adjacent region. LMDC had previously commissioned Plantech Associates to conduct both
technical  feasibility  and environmental impact studies and these have been completed.  Tender  documents  for  the
construction of the line have already been prepared.

A  capital estimate for this project was completed by Plantech in August 2008, which showed a total cost of  between
$12  and  $18  million depending upon whether the reticulation extends to the Kao mine in the initial stage.  LMDC's
share  of  these costs would be $7 to $8 million accordingly. The Company has naturally been reluctant to  seek  new
capital  to  fund this project or to provide power offtake guarantees ahead of completing the DFS and ensuring  that
project  finance  for  the Main Pipe project were secure. On the other hand, the availability of  grid  power  would
mitigate  important  risks for the Main Pipe project and facilitate its project financing. LMDC has  therefore  been
investigating  ways  to fund the powerline and enable its construction to start, whilst eliminating  LMDC's  capital
contribution. Discussions have been held with LEC, the GoL and certain financial institutions to help  provide  this

The  GoL  views  this project's as being of considerable infrastructural importance and is, therefore,  prepared  to
provide assistance. The Company is optimistic that funding for this project's construction could be put in place, to
enable construction to start in 2009 and for supply to be available from 2010.

LMDC's  fuel cost savings from the availability of grid power, even for the existing scale of operations,  would  be
considerable. It would also facilitate a brown-field expansion of the Plant to 750,000 tonnes per annum.

The Definitive Feasibility Study
The  DFS  commenced  in  the  fourth  quarter of 2007, with AMC selected as manager  and  with  leading  engineering
companies; DRA for plant design, Golder Associates for tailings disposal, Africon for infrastructure and civil  work
and  SRK  for  the  environmental, geotechnical and social impact studies. Howe were  contracted  to  supervise  the
geological components of the DFS, to ensure that the drilling and bulk sampling programmes were conducted under  the
highest standards of QA/QC's and to produce the geological resource estimate.

This geological work has comprised three separate programmes:

* A bulk sampling programme of all four separately identified facies

* A HQ/NQ diamond drill programme

* A large diameter reverse circulation drill programme

The  bulk sampling programme consisted of a series of samples extracted and processed to test the grade of the  four
identified  facies, namely the K2, K4, K5 and K6, totalling 33,921 tonnes, to provide grade, stone size distribution
and stone value data in each case. A total of 12,514 carats were produced from the bulk samples, at a bottom cut-off
of 1 millimetre.

Valuation  of  the  bulk samples of $86 per carat, for run of mine production, has been determined  by  putting  the
parcel  out  to independent valuation. This would be equivalent to $34 per tonne processed. This new value  compares
favourably with $70 per carat run of mine valuation used in the PFS.

The programme of narrow (HQ/NQ) diameter core drilling comprising 4 holes with a total depth of 1,705 metres plus  a
further 5 geotechnical holes with a total depth of 1,247 metres.

This programme has permitted a recalculation of the dimensions of the Main Pipe, resulting in a much larger resource

The  LDD  programme undertaken by Bauer Technologies South Africa (Pty) Limited, using a Prakla RB-40 RC drill  rig,
commenced in March 2008 and has now completed. This was a 25 hole programme, totalling 4,415 metres of drilling  and
recovering some 1,800 tonnes of mini bulk samples. These samples are currently being treated in a custom-built dense
media  separation  ("DMS") plant at Liqhobong with a capacity of 5 tonnes per hour, under the QA/QC  supervision  of
Howe.  Once these samples have been processed, the Company will have depth continuity data on grade for each of  the
facies,  which  will enable more of the resource to be classified into the higher definition measured and  indicated

On  17  November  2008, the Company published a preliminary resource statement produced by Howe under  strict  QA/QC
protocols  to  a  DFS standard, giving a total resource tonnage of 76 million tonnes, up 79 % on the Pre-Feasibility
Study ("PFS") statement published last year of 42 million tonnes.

The  resource  categorization and limits are based on the same parameters used for the  2007  PFS  interim  resource
estimate. The average grade has increased to 39.1 carats per hundred tonnes ("cpht") (PFS - 27.8 cpht), giving a 156
%  increase in the gross diamond resource of 29.6 million carats (PFS - 11.5 million carats). This resource has been
calculated  to  the 2,140 metre level only, which is to a mean depth of 420 metres below surface. The mineralization
is  open  at depth and one earlier diamond drill hole remained in kimberlite to a depth of 650 metres below surface.
The details of the preliminary resource are as follows:

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

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

Measured           -            -       -               -               -       -
Indicated       16.0            34.12   5.498           12.0            34.12   4.124
Inferred        59.6            40.42   24.078          21.13           40.42   18.059
Total           75.6            39.12   29.576          31.62           39.12   22.182

Other  progress  in  the  DFS  includes collection of ore dressing study samples to  assist  in  the  plant  design,
completion  of  an  airborne  laser topographic survey in connection with identifying  infrastructure  requirements,
including grid power road access and the installation of environmental monitoring equipment.

The  DFS, which was originally expected to be finalised by the end of 2008, now is expected to be completed by  mid-
2009,  due  to  initial  slow  start  in  completing holes under the LDD  programme  and  because  the  Resource  is
significantly larger than that indicated in the PFS.

In  January 2008, Kopane and Mantle Diamonds Limited signed the Joint Venture Agreement ("JVA") to establish  a  new
joint  venture  to  operate,  finance  and  develop  the  Company's  diamond  exploration  assets  in  Finland  (the
"Properties").  Mantle  is  a privately-owned UK company with diamond exploration interests  in  Australia,  Canada,
Liberia, Mali, the DRC, Angola and Zimbabwe as well as Finland.

Kopane currently holds 28 mineral claims and reservations in Finland, including its assets at Lahtojoki, Kuusumo and
Lentiira. Under the JVA, Mantle will be able to earn up to a 70% interest in the Properties by spending
$5 million on exploration and evaluation on the Properties, primarily a bankable feasibility study in respect of the
Company's  Lahtojoki property. In return Kopane will be paid a total of 10 million Mantle shares  over  three  years
subject to certain conditions, of which 3.3 million shares have been earned so far.

During  the  first quarter of 2008 Mantle completed a diamond drilling programme into the Lahtojoki kimberlite  pipe
comprising  11 shallow angled holes totalling 495m. This programme was carried out to provide a better understanding
of  the surface outline of the kimberlite beneath the till cover. An environmental permit has been obtained to carry
out  a  bulk  sampling  programme  at Lahtojoki. In order to expose sufficient kimberlite  for  the  bulk  sample  a
significant  amount of overburden till will be stripped. A detailed design was generated following geotechnical  and
pit  mining  consultancy studies carried out by Golder Associates and AMC. During the second quarter of 2008  Mantle
signed  an  agreement with Hartikainen Oy, an experienced surface mining contractor to commence  stripping  work  at
Lahtojoki.  To  date  50,000m3  of  overburden  till has been stripped  over  Lahtojoki.  Mantle  plans  to  collect
approximately 6,000 tonnes of representative kimberlite sample from surface trenching and a large diameter Kelly Bar
Bauer drill rig during the second half of 2008.

Average prices of rough diamonds increased by almost 100% since January 2002 and by around 20% in the nine months to
September  2008, as a result of rough diamond supply failing to satisfy the increased consumer spending  on  diamond
jewellery  in  the USA and Asia. The USA accounts for nearly half of all diamonds sold in jewellery by value,  while
Europe  and Japan account for some 30%. However, it is evident that economic conditions prevailing currently in  the
world  and in particular the USA are causing a severe correction to prices, in the order of 25 - 30% so far.  It  is
unclear how far prices will fall or how long the weakness in the market will continue.

Despite  current  very difficult circumstances, it is well recognised that there is a material  shortage  of  supply
against  forecast long-term demand. Rough production dipped in 2007 and there are no major new mines on the  horizon
beyond  Snap  Lake  and  Victor in Canada, which are not anywhere near the size of the major discoveries  at  Orapa,
Jwaneng,  Argle,  Venetia,  Catoca, Ekati and Diavik. Eight kimberlite mines make up  50%  of  world  rough  diamond
production.  We  believe  that  these fundamentals will allow the market to stabilise once  consumer  confidence  is
restored and the long term prognosis is good.

The  consolidated net loss after taxation in respect of the year ended 30 June 2008 amounted to £4.7  million  (loss
per  share  4.1p) compared to the restated consolidated net loss after taxation for 2007 of £7.2 million  (loss  per
share  8.5p). The loss was less than the previous year due mainly to an increase in sales from £2.8 million to  £3.4
million resulting from greater production of rough diamonds compared to the previous year, a gain on the disposal of
the  Group's  interest in its Finnish subsidiaries of £0.3 million (2007: nil) and a reduction of  £1.0  million  in
depreciation  resulting  from  writing off the mining assets over a longer period, following  an  extension  of  the
estimated expected life of the Satellite Plant to 30 June 2012. These gains were partially offset by higher manpower
costs  and an increase in mining and processing costs, reflecting a substantial increase in the cost of diesel  fuel
and  other  factor  inputs  over the course of the year, although average costs per tonne of  kimberlite  mined  and
processed  were  similar  to  the  previous year. In addition, the previous year's  loss  included  a  £2.7  million
impairment of the carrying value of the Finnish exploration and evaluation costs.

There  were 10 diamond sales in the year to 30 June 2008 totalling 148,824 carats generating revenue of £3.4 million
(2007: £2.8 million). Since the year end there have been further sales to 31 October 2008 generating £1.6 million in
revenue. The Group's only other income in the year arose from bank deposit interest which amounted to £93,000 (2007:
£38,000), the increase being due to higher cash balances held throughout the year.

The  net  assets  of the Group amounted to approximately £15 million as at the year end (2007: £14.1 million)  which
included  fixed  assets  of £3.2 million (2007: £4.3 million). The reduction in fixed assets  relates  primarily  to
depreciation of the plant at Liqhobong. Intangible assets relate to accumulated deferred exploration and  evaluation
costs and goodwill in respect of the Group's diamond interests in the Main Pipe in Lesotho.

The  Group's  accounting  policy is to capitalise exploration and development costs  pending  determination  of  the
feasibility of the project to which they relate.

These  intangible assets at 30 June 2008 were approximately £2.7 million (2007: £5.6 million), the decrease  due  to
new  expenditure  in  Lesotho offset by the Finnish assets being transferred to the Group's investment  in  a  joint
venture  of £1.2 million (2007: nil). In addition, the Group has an investment in its joint venture partner of  £0.7
million  (2007: nil). Inventories, which consist primarily of the cost of diamonds held for sale, increased to  £0.7
million  (2007: £0.6 million). Cash at 30 June 2008 of £4.7 million (2007: £4.4 million) reflected the placement  of
60 million new ordinary shares in the year which raised £6 million.

Kopane  is  committed to adhere to high standards of Corporate and Social Responsibility. The DFS for the  Liqhobong
Main Pipe project incorporates an Environmental and Social Impact Assessment produced in compliance with the Equator
Principles. The development of this project will be structured to ensure the maximum possible positive social impact
on the Liqhobong Valley and the Kingdom of Lesotho as a whole.

The  Group's  diamond sales are based on the number and quality of rough diamonds recovered from production  at  its
mine  in  Lesotho  and  transported to market. The Group's diamond sales are made in  Antwerp,  Belgium  to  invited
customers who submit sealed bids. The Group is therefore dependent on its mine production, recovery of diamonds  and
market conditions which prevail at the time of the sales.

The  exploration activities of the Group are speculative due to the high-risk nature of this part of  its  business.
There can be no assurance that the Group will be able to find or economically recover diamonds from its projects  or
that it will be able to complete planned development.

The Group's diamond sales are made in Belgium in US dollars which are converted into Lesotho Maloti.

The Group also makes expenditure in Lesotho Maloti, South African Rand and Euros.
The  Group  is therefore exposed to the movement in exchange rates for the US dollar, Lesotho Maloti, South  African
Rand  and  Euros  to Sterling. The Group does not hedge foreign exchange risk although monitors this  situation  and
seeks to minimise cash held in foreign currencies.

The  Group's  projects require funding in order to realise their potential. The availability of  funding  cannot  be

The Group is exposed to the impact of changes to environmental legislation on its operations.


This  preliminary statement was approved by the Board of Directors on 19 November 2008 and has been  agreed  by  the
auditors. It does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The
statutory accounts have been sent to shareholders and will be filed following the Company's Annual General  Meeting.
The  Auditors  have  reported  on these financial statements; the auditors' report is  unqualified  but  contains  a
paragraph  drawing attention to the adequacy of disclosures made in note 2(a) to the financial statements  (and  set
out  in note 1 to this announcement) about the existence of a material uncertainty which may cast significant  doubt
about the ability of the company to continue as a going concern. It does not contain statements under section 237(2)
or (3) of the Companies Act 1985.

Consolidated income statement
                                                                             Year                Year
                                                                             ended               ended
                                                                             30 June             30 June
                                                                             2008                2007
                                                                             £'000               £'000

Revenue                                                                      3,422               2,791
Changes in inventories                                                       134                   450
Mining and processing costs                                                  (3,432)             (2,198)
Employee benefit expense                                                     (2,398)             (1,541)
Depreciation expense                                                         (1,073)             (2,040)
Impairment of deferred exploration expenditure                               -                   (2,700)
Gain on disposal of interest in subsidiary undertaking                        325                -
Gain/(loss) on exchange                                                      114                 (219)
Other expenses                                                               (1,815)             (1,776)

Operating loss                                                               (4,723)             (7,233)
Investment income                                                            93                  38
Finance costs                                                                -                   (17)
Share of loss in joint venture                                               (29)                -

Loss for the period                                                          (4,659)             (7,212)

Basic and diluted loss per share (Pence)                                     4.1p                8.5p

All amounts reflected above relate to continuing operations.

Consolidated balance sheet
                                                                            Group               Group
                                                                            as at               as at
                                                                            30 June             30 June
                                                                            2008                2007
                                                                            £'000               £'000

Property, plant & equipment                                                  3,179               4,298
Intangible assets                                                            2,728               5,592
Investments in joint venture entity                                          1,171               -
Available for sale investments                                               667                 -
Trade and other receivables due after more                                   2,583               -
    than one year

Total non-current assets                                                     10,328              9,890

Inventories                                                                  727                 594
Trade and other receivables - due within                                     217                 124
    one year
Cash and cash equivalents                                                    4,729               4,424

Total current assets                                                         5,673               5,142

Total assets                                                                 16,001              15,032

Issued share capital                                                         8,481               5,468
Share premium                                                                24,933              22,286
Merger reserve                                                               3,242               3,271
Share-based payments                                                             987             589
Foreign exchange translation reserve                                         (879)               (416)
Retained loss                                                                (21,754)            (17,095)
Total equity                                                                 15,010              14,103

Trade and other payables                                                     953                 791

Total current liabilities                                                    953                 791

Deferred income                                                              -                   113
Provision for liabilities and charges                                         38                 25

Total liabilities                                                            991                 929

Total equity and liabilities                                                 16,001              15,032

Minority interest - equity                                                   -                   -
                                                                             16,001              15,032

Consolidated statement of cash flows
                                                                            Year                Year
                                                                            ended               ended
                                                                            30 June             30 June
                                                                            2008                2007
                                                                            £'000               £'000

Cash flows from operating activities
Operating loss for the period                                                (4,723)             (7,233)
Adjustments for:
Depreciation                                                                   1,073               2,040
Exchange difference                                                            (272)                 199
Equity-settled share-based payment transactions                                  398                 309
Impairment of deferred exploration expenditure                                     -                 129
Shares issued in lieu of payment of services                                       -               2,700
Profit on disposal of interest in subsidiary                                   (325)                   -

                                                                             (3,849)             (1,856)

(Increase)/decrease in trade and other receivables                             (128)                 119
(Increase) in inventories                                                      (189)               (460)
Increase in provisions for liabilities                                            13                  11
Increase/(decrease) in trade and other payables                                  199                (17)
Interest paid                                                                      -                (17)

Net cash used in operating activities                                        (3,954)             (2,220)

Cash flows from investing activities
Interest received                                                                 93                  38
Acquisition of intangibles                                                   (1,242)               (885)
Acquisition of property, plant and equipment                                   (252)               (135)

Net cash used in investing activities                                        (1,401)               (982)

Cash flows from financing activities
Proceeds from issue of share capital                                           6,030               8,311
Loans                                                                              -               (384)
Payment of transaction costs                                                   (370)               (555)

Net cash from financing activities                                             5,660               7,372

Net increase in cash and cash equivalents                                        305               4,170
Cash and cash equivalents at 1 July 2007                                       4,424                 254

Cash and cash equivalents at 30 June 2008                                      4,729               4,424

Consolidated statement of changes in shareholders' equity

                                                                   Share     Foreign
                                                                   Based     exchange
                                        Share   Share      Merger  payment   translation   Retained
                                        capital premium    reserve reserve   reserve       earnings   Total
                                        £'000   £'000      £'000   £'000     £'000         £'000      £'000

Opening balance 1 July 2007             5,486   22,286     3,271   589       (416)         (17,095)   14,103
Loss for the period                     -       -          -       -         -             (4,659)    (4,659)
Foreign exchange loss                   -       -          -       -         (463)         -          (463)

Total recognised loss for the year      -       -          -       -         (463)         (4,659)    (5,122)
Shares issued for cash                  3,013   3,017      -       -         -             -          6,030
Share issue costs                       -       (370)      -       -         -             -          (370)
Share based payments                    -       -          -       398       -             -          398
Disposal of share in joint venture      -       -          (29)    -         -             -          (29)

Balance at 30 June 2008                 8,481   24,933     3,242   987       (879)         (21,754)   15,010

The  Group  owns diamond interests in Lesotho and Finland. In Lesotho, production continued from both the  Satellite
and  Main Pipes and 10 sales of rough diamonds were held in the reporting period. The Pre-Feasibility Study into the
viability  of the Main Pipe was completed in July 2007 and the recommended Definitive Feasibility Study ("DFS")  was

In  January 2008, the Company entered into an agreement with Mantle Diamonds Plc ("Mantle") whereby Mantle  will  be
able  to  earn  up  to a 70% interest in the Company's Finnish properties by spending $5 million on exploration  and
evaluation on the Properties, including a bankable feasibility study in respect of the Company's Lahtojoki property,
and  by  paying  Kopane  10  million  Mantle shares over three years. The directors  consider  the  planned  Finnish
expenditure to be fully funded.

In May 2008 the Group raised £6 million in cash by the issue of 60 million ordinary shares in order to provide funds
for  the  DFS  and  general working capital. The Group also receives revenue from its diamond sales.  The  Company's
planned  discretionary project expenditure will necessitate the raising of further funds within the next 12  months.
Revenue  from  diamond  sales together with current cash balances and access to additional  funds  will  enable  the
Company to fund the planned expenditure and its general operating overheads. Given the stage of the project and  the
positive initial findings of the DFS, the directors believe that the necessary funds will be available and therefore
the financial statements have been prepared on the going concern basis.

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.

The financial statements have been prepared on the basis of the recognition and measurement requirements of 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  1985  applicable to those companies reporting under IFRS. Interim financial  statements  at  31
December 2007 were prepared under IFRSs. Previously the Company prepared financial statements in accordance with  UK
Generally Accepted Accounting Principals ("UK GAAP"). At 30 June 2008 financial statements include comparatives  for
2007,  the  Group's date of transition to IFRS was 1 July 2006 and the 2007 comparatives are restated  according  to

Basis of consolidation and accounting for goodwill

(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.

(iii) 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.

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 payments
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.

Adoption of International Financial Reporting Standards
The  financial  statements  are  prepared  in  accordance  with  International  Financial  Reporting  Standards  and
interpretations  in  force  at  the reporting date. The Group has not adopted any standards  or  interpretations  in
advance of the required implementation dates. It is not expected that adoption of standards or interpretations which
have  been  issued by the Accounting Standards Board, but have not been adopted will have a material impact  on  the
financial statements.  During the year the Group applied IFRS 7 (Financial instruments: disclosure) and the  capital
management disclosures of IAS 1 (revised) (Presentation of financial statements) for the first time.
There was no other effect from the adoption of these standards.

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
* Fixtures and fittings 25% on reducing balance
* Computer equipment 25% on reducing balance

The residual value, if not insignificant, is reassessed annually. The company has reviewed the remaining useful life
of the Mining assets and has extended the write-off period until 30 June 2012.

(c) 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 30 June 2008 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) Share capital
Incremental  costs directly attributable to issue of common shares and share options are recognised as  a  deduction
from equity.

Loss Per Share
Basic loss per share
The calculation of basic loss per share at 30 June 2008 was based on the loss attributable to common shareholders of
£4,659,000  (2007: £7,212,000) and a weighted average number of common shares outstanding during the year  ended  30
June 2008 of 113,385,589 (2007: 84,367,325).

Diluted loss per share
The  potential increase in ordinary shares from the exercise of any of the warrants or share options would be  anti-
dilutive  as the Company has a net loss. These potential ordinary shares are therefore excluded from the calculation
and the diluted loss per share figure reported is the same as the basic earnings per share.

Contact Information

  • Kopane Diamond Developments PLC