Kopane Diamond Developments PLC
LSE : KDD

November 25, 2009 02:00 ET

Preliminary Announcement of Results for Year Ended 30 June 2009; Notice of Annual General Meeting

                                                                                                    
                                           Kopane Diamond Developments Plc

                                                    PRESS RELEASE

25 November 2009
                                                          
                                       PRELIMINARY ANNOUNCEMENT OF RESULTS FOR
                              YEAR ENDED 30 JUNE 2009; 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 350,000 carats of diamonds since operations commenced at the end of 2005. 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:

    *   Improvement in grade confidence, based on 141% increase in indicated resource to 38.6 million tonnes,
        potentially increases the depth of a future open pit to 180 metres.

    *   Main Pipe total resource of 90.03 million tonnes, an increase of 19.1% over the interim resource statement
        issued in November 2008.

    *   Gross diamond resource of 29.7 million carats (Kopane attributable 22.3 million) contained in the Main Pipe
        to an average depth of 510 metres, with an estimated in situ value of $2.6 billion based on September 2008 bulk
        sample diamond values.

    *   Large diameter reverse circulation drilling results support an average grade of 33 cpht to at least 510
        metres average depth.

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

    *   Sales of 85,108 carats valued at $3.4 million.

    *   Funding arranged in calendar 2009 of £5.65 million.

Notice of Annual General Meeting

The Annual General Meeting will be held at the offices of FinnCap, at 4 Coleman Street, London EC2R 5TA on 14
December 2009 at 11 am.

The 2009 Annual Report and Accounts, Notice of Annual General Meeting and Form of Proxy have been mailed to
shareholders.

Copies of the 2009 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 Carlyle House, 235-237 Vauxhall Bridge Road, London, SW1V 1EJ.

For further information contact:

Kopane Diamond Developments PLC
Frank Scolaro, Chairman                                          +44 (0) 20 7963 9590
James Cable, Finance Director

Threadneedle Communications
Laurence Read/Beth Harris                                        +44 (0) 207 653 9850

FinnCap
Matthew Robinson/Ed Frisby                                       +44 (0) 20 7600 1658


                                           Kopane Diamond Developments Plc



                                         PRELIMINARY ANNOUNCEMENT OF RESULTS
                                               YEAR ENDED 30 JUNE 2009
                                                          


Chairman's Letter to Shareholders

Dear Shareholders

The year to 30 June 2009 has proved to be an eventful one for Kopane as well as the diamond mining industry.  The
gloomy  economic outlook persisting at the time of the Chairman's letter to you last year resulted in a severe fall
in  prices available for rough diamonds from the third quarter of calendar 2008 and this continued into  the first
quarter of 2009, although since then prices have improved, according to market indications by some 30% to 40%. No
diamond producer has been immune from these macro-economic impacts and Kopane, like many other producers, elected to
suspend production. Our Liqhobong mine was placed on a care and maintenance basis in early December 2008 to preserve
cash resources.

Nevertheless, I am pleased to say that Kopane has had a very successful year in progressing its development of the
Liqhobong project including release of a final resource statement in respect of the Main Pipe at  Liqhobong on 10
September 2009. This has added substantial value to its diamond resource by considerably enhancing the mining
potential of the Pipe to 180 metres below surface and classifying a significant tonnage in the indicated category.
This followed publication in November 2008 of an Interim Resource which substantially increased the indicative value
of the Main Pipe over the 2007 pre-feasibility study estimate.

A total of £5.65 million funding was arranged in calendar 2009 to date through share placements and exercises of
warrants and share options, which has put the Company on a strong footing to enable it to undertake its work
programme in the coming year. Of this amount, £3.15 million was raised through an Equity Swap Agreement so that the
Company will retain much of the economic interest in the shares issued whereby funds are received monthly over 24
months dependant on the Company's share price compared to a benchmark price of 18.67p per share. The Equity Swap
Agreement will allow the Company to secure much of the potential upside arising from near term news flows.

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

The total Main Pipe indicative value is $2.6 billion, with a total resource tonnage of 90.03 million tonnes.

Final resource statement published on 10 September 2009, prepared by ACA Howe International Limited ("Howe") places
38.6 million tonnes (43%) of the resource in the indicated" category.

The above final resource statement followed publication of an interim resource statement on 17 November 2008 by Howe
under strict QA/QC protocols to a DFS standard, which gave a total resource tonnage of 76 million tonnes, up 79 % on
the Pre-Feasibility Study ("PFS") statement published in 2007 of 42 million tonnes.

The gross diamond resource of 29.7 million carats provides an indicative overall Main Pipe value of $2.6 billion
when applying the value generated by the bulk sample extracted in July and August 2008, of $86 per carat. This
valuation was obtained in September 2008 shortly after the commencement of a decline in rough diamond prices.

In  August 2009, a Memorandum of Understanding was agreed with respect to funding a power line to connect the
Liqhobong mine to grid electricity. This represents a significant step forward in constructing a 132 KVA power line
to the mine, a critical component of the Main Pipe project.

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 2009, totalled 56,500 carats, compared with 152,013 carats in the
previous  year. This fall in production is due to the current year representing only 5 months of  production until
suspension of production in early December 2008 and the processing of the Definitive Feasibility Study bulk samples.
In addition we saw an improvement in monthly production due to a substantial improvement in the operational
efficiencies albeit at a lower grade as a greater proportion of ore was sourced from the lower grade Main Pipe.

Diamond sales for 5 months until suspension of production in early December 2008 of 85,108 carats realised $3.4
million, which included the sale of 3 premium yellow diamonds including a 13.32 carat vivid yellow which was
recovered from K5. This stone sold in July 2008 for $466,679 equivalent to $35,136 per carat, which is the highest
price per carat achieved so far. This compares to total sales in the previous financial year of 148,824 carats  with
gross proceeds of $6.9 million.

150,600 dry tonnes of kimberlite were mined and processed in the 5 months to early December 2009, compared to
309,480 tonnes in the previous year, representing an increase in the average monthly production rate of 15% over the
previous year. The average cost per tonne mined and processed, in Sterling terms, at £11.8 per tonne was similar  to
£11.1 per tonne incurred in the previous year.

50 million new ordinary shares were placed with Obtala Resources Plc in March 2009 which raised £1.75 million and a
further 27.9 million new ordinary shares were placed in November 2009 with institutional and private investors at
14p per share which raised a further £3.9 million before expenses. Of this amount, £3.15 million is payable over 24
months dependant on the Company's share price compared to a benchmark price of 18.67p per share.

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").

Once again, I would like to thank the Ministry of Natural Resources for the considerable support and cooperation we
have received, particularly in these difficult market conditions. Our partner was fully supportive of the decision
to suspend  production in early December 2008 due to falling diamond prices. In return, LMDC endeavours to operate
the Liqhobong assets with the highest level of responsibility due to all its stakeholders. The Company recovered  a
total of 33,921 tonnes of bulk samples from each of the four facies of the Main Pipe in July and August 2008, which
had been treated by the Satellite Plant. These bulk samples yielded 12,514 carats of rough diamonds, valued
independently by diamantiers at $86/ct in September 2008, equivalent to a total sales value of some $1 million and
are held in the Company's inventory. The Company believes that it is in its best interests to retain these diamonds
in its inventory  for the foreseeable future, at least until diamond prices recover. The diamonds  were recovered
under strict QA/QC conditions and help demonstrate the in-situ value of the Main Pipe kimberlite. The retention of
these diamonds, to allow re-assessment to support the eventual funding of the Main Pipe Project, will be reviewed as
appropriate. Work on the DFS in respect of the processing of some 1,800 tonnes of mini bulk samples, obtained from
the  Large Diameter Drilling ("LDD") programme, through the Company's onsite custom built 5 tonnes per hour Dense
Media Separation plant was completed.

Subsequent analysis of the diamond recovery results from these LDD samples allowed the Company to demonstrate grade
data at depth for each of the four facies and enabled more of the resource to be classified into the higher
definition indicated category. The final resource statement was announced on 10 September 2009. Otherwise, the
remaining DFS activities involve primarily completion of plant and tailings disposal design, infrastructure
requirements and completion of ESIA work.

Other significant DFS work completed in the year under review 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 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.

A LDD  programme  utilising a Prakla RB-40 RC drill rig, comprising a 25 hole programme totalling 4,415 metres of
drilling and recovering some 1,800 tonnes of mini bulk samples. This provided depth continuity data on grade for
each of the facies, enabling us to report a substantial increase in the indicated category of the resource in the
Final Resource Statement issued on 10 September 2009. In comparison to the previously released Interim Resource
Statement, we now find we have a 19.1% larger resource, with a grade of 33 cpht.

The Company announced on 17 November 2008 a substantially increased interim resource statement for the Main Pipe
which, on the modelled diamond valuation, showed an indicative value of the in-situ diamond resource of $2.54
billion, consisting of 76 million tonnes of kimberlite at an average grade of 39.1 carats per hundred tonnes at a
run of mine value of $86 per carat. This is a 213 per cent. increase in the value of the resource against that
published in the Company's Pre-Feasibility Study in July 2007. The Company believes that there is significant upside
potential in the resource value from the impact of the value of large gem and bonanza stones.

The DFS was scheduled to be completed in mid 2009 but there have been delays in its completion, not least as a
result of the substantial increase in the resource which necessitated a rethink of the project's physical and
commercial parameters.

A primary driving force in completing the DFS, which is estimated to cost a further £1.2  million, has been to
provide sufficient information to enable the Company to access debt funding for a substantial part of the capital
cost of constructing new Main Pipe Plant. However, the availability of debt funding in financial markets at present
and for the near term is likely to be severely restricted. Whilst the Company has had some preliminary discussions
with lenders and will pursue this avenue, I believe we should be cautious about relying on project debt finance
under present economic circumstances.

The Company has 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 reviewing
the re-commencement of diamond production at the Satellite Plant 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.

This review will assess the feasibility of operating the Satellite Plant with diesel generated power ahead of
connection to the grid electricity supply planned in the first half of 2011. The Company will also review 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.

The Company announced on 5 October 2009 that, following discussions regarding potential investment in the Main Pipe
Project, an exclusivity agreement, valid for a period of 60 days, had been signed with an established mining company
to allow it to review the project in more detail. The mining company is able to offer the technical, operational and
financial capability to take the Liqhobong Main Pipe to full scale production. The Directors believe that investment
by a mining company with these capabilities could provide an expeditious route to realising full value for the
Company without incurring significant shareholder dilution. Shareholders should note that these discussions may or
may not lead to an agreement.

The Company's funds provide it with flexibility to invest in the facilities at Liqhobong as well as to progress
certain key parts of the DFS, which it believes to be in the shareholders' best interests.

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 a Memorandum of Understanding
between the Company's subsidiary, Liqhobong Mining Development Company, Lesotho Electricity Company, the Government
of the Kingdom of Lesotho 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 Government of the
Kingdom of Lesotho will contribute funds towards the cost of the project and the Government of the Kingdom of
Lesotho 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 have yet to be agreed.

The cost of the powerline project has been estimated by external consulting engineers at R131 million and Kopane's
share is expected to amount to R90 million, although this cost is being re-assessed in the light of the current
environment. The plan is that construction will commence in early 2010, which should allow grid electricity to be
connected to the mine site in the first half of 2011.

The cost of grid electricity represents a substantial saving over diesel generated power. It is estimated that,
based on production levels before suspension of production, diesel fuel was costing approximately $6 per tonne,
compared to a likely grid electricity tariff cost of less than $1 per tonne. Annual cash outgoings to LMDC of paying
for grid power plus the estimated cost of repaying capital and interest on the loans (to be negotiated) will be less
than paying the alternative cost of diesel fuel.

The engineering specifications of the power line, together with environmental impact assessment studies, have been
completed in readiness for an immediate start to the construction once funding is in place. It is planned that the
loan  documentation will be finalised between the parties to allow construction to commence early in 2010, which as
noted above should allow grid electricity to be connected to the mine site in the first half of 2011.

As noted above, 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 30-50% from October 2008 until the first
quarter of calendar 2009; since then market indications are that prices have improved somewhat but not, as yet, to
previously prevailing levels. However, the Company remains confident that the medium and long term outlook for rough
diamond prices is likely to be robust in the face of projected supply shortages.

In addition to placing the operation at Liqhobong on to a care and maintenance footing, the Company has taken other
measures to conserve cash, including a reduction in corporate overheads.

Production at Liqhobong in the 5 months of the financial year prior to suspension of production had been at an
improved rate over the first part of calendar 2008. Following the completion of the bulk sampling programme in
August 2008, production attained record levels. In the period from September 2008 until 1 December 2008 the plant,
on average, attained its target capacity of 30,120 tonnes per month, producing 56,500 carats from predominantly Main
Pipe material. In the 5 month period 150,600 dry tonnes of kimberlite were processed, compared to 309,480 dry tonnes
for the previous financial year, an increase in the monthly production rate of over 15%.

Since production commenced in the second half of 2005 until early December 2008, the Company exported 352,088 carats
of rough diamonds, of which 339,367 carats have been sold for $17 million at an average price of $50.07 per carat.
The Company is retaining in inventory 12,514 carats of rough diamonds, including boart, which were recovered in July
and  August 2008 from the bulk sample programme. These bulk sample stones were valued at $86 per carat in  September
2008.

In the financial year to 30 June 2009, production and sales were in respect of a 5 month period only and therefore
were substantially less than the previous year, 43% in terms of carats sold (85,108 versus 148,824) and 51% in terms
of  revenue (US$3.4 million versus US$6.9 million). Although average sales prices are similar in comparing the two
periods, this is the result of a number of compensating factors. A greater number of boart stones were sold in the 5
month period than the previous 12 month period and the substantially higher sales revenues achieved in the first 2
sales in the 5 month period (due to the inclusion of three high value premium yellow stones, one of which, a 13.32
carat vivid  yellow, sold for $35,136 per carat in July 2008), were offset by the impact of substantially lower
prices achieved for the remaining 3 sales held between October 2008 and January 2009.

The average price per carat achieved depends additionally on the production blend of kimberlite from the higher
grade but lower value Satellite Pipe and the lower grade but higher value Main Pipe and in the 5 month period there
was a significantly greater proportion of Main Pipe stones sold.

Sales were conducted under sealed tender in Antwerp on LMDC's behalf by BHP Billiton under an agreement which  has
since terminated. Although LMDC is not presently marketing diamonds due to the suspension of production, it is well
advanced in selecting a new sales agent and arrangements will be put in place in advance of resumption in sales. It
is intended that new marketing arrangements will enable LMDC to participate in the down-stream value added by
retaining some level of ownership of its premium stones through cutting, polishing and jewellery manufacture.

The market for rough diamonds has been in turmoil over the last 12 months and as shareholders will know,  producers
have reacted quickly to this and there has been a reduction in the supply of diamonds offered for sale. Many of our
buyers are Indian cutters and polishers and the restricted credit available in the financial markets to them and
others has had a material effect on demand. There is evidence of price recovery in the current calendar year after
the dramatic falls in the last part of 2008 but it is impossible to gauge how long market weakness will persist. We
are nevertheless optimistic that prices will recover due to industry fundamentals in the medium and long term which
show a material supply shortage.

Your board is monitoring this situation very closely to determine the best time to resume production at Liqhobong.
As I mentioned earlier, we are also reviewing the feasibility of investing in a major expansion of the existing
Satellite Plant. This is being considered in the light of the planned availability of grid electrical power at the
mine in 2011, which is not only considerably cheaper than diesel generated power but is operationally more
practicable.

Another major factor in a decision to resume production is of course the cost of operating the mine, the majority of
costs being incurred in South African Rand/Lesotho Maloti, compared to US Dollar sales  revenue.  The Rand has
fluctuated considerably over the last two years, with the current rate of approximately R7.7:$, some 13% stronger
than the average rate for the financial year of R8.9:$, which was 22% weaker than the rate of R7.3:$ prevailing in
the year before that. The recent strengthening of the Rand against the Dollar has increased the cost of production
as well as the cost of completing the DFS. On the other hand, project costs of some $100 million estimated in the
PFS in 2007 for construction of new Main Pipe plant, a substantial part of which will be incurred in Rand, were made
at an assumed Rand rate of R7.1;$, so significant dollar equivalent cost reductions are indicated.

The Company was pleased to welcome Obtala Resources Plc as a significant new shareholder, when they subscribed for
50 million new ordinary shares in March 2009, for £1.75 million. The proceeds of this placement have been applied to
progressing the DFS as well as to general working capital requirements.

The Company is also pleased with the overwhelming support shown by shareholders when they granted the Board, at a GM
held on 16 November 2009, authority to place up to 29.4 million new ordinary shares. Since that date, on 17 November
2009 a further 27.9 million shares were placed with institutional and other shareholders to raise £3.9 million
before expenses, subject to the Equity Swap arrangements discussed above. The Company is therefore funded in order
to carry out its plans over the next year.

Since the last annual report, there have been changes to the management of the Company and the composition of the
Board of Directors. In April 2009 Tony Williams resigned as a non-executive director to pursue other interests and,
on your behalf, I would like to thank him for his contribution to the progress of the Company over many years. Tony
was a founder director at the Company's inception in 2000 and was a former Chairman and continues to support the
Company as a significant shareholder.

Tim Read served as Executive Chairman from July 2007 until I joined the Board at the end of March 2009 and I would
like to thank him on your behalf for his excellent work in development of the assets at Liqhobong and in steering
the Company through turbulent times in both the diamond industry and financial markets. Tim continues to serve on
the Board as a non-executive director until the AGM in December 2009 when he will step down due to other
commitments. As a result of the suspension of production in late 2008, Mike Wittet, who had been appointed as Chief
Executive Officer in November 2008, agreed to resume his previous role as a non-executive director and provide
consulting services as required.

In July 2009, FinnCap were appointed as the Company's NOMAD and broker in place of Canaccord Adams Limited, which
had served in this capacity since January 2006. We would like to thank Canaccord Adams Limited for their services
and advice to Kopane.

The Company's Finnish Assets are being operated, financed and developed under a Joint Venture Agreement with Mantle
Diamonds Limited ("JVA"). Under this JVA, Mantle can earn up to a 70% interest in the Finnish assets by expending
US$5 million, including producing a definitive feasibility study on the Lahtojoki property and issuing Kopane with
10 million shares in Mantle, with a pre-IPO value of £2 million. To date, Mantle has spent over £700,000 in respect
of the definitive feasibility study at Lahtojoki.

As last year, the main challenge facing your company's executive management and its board of directors in  the
current  year is to align shareholder value, through the market value of the share price, with the substantial
underlying value of Kopane's assets. As mentioned in this letter, your Company believes it to be in shareholders'
best interests to consider various funding and developmental alternatives which will minimise dilution of share
price.

I joined your Company as Chairman in March 2009 at the time of the investment of Obtala Resources Plc, on  which  I
also serve as Chairman, because I saw in Kopane a Company with excellent assets and tremendous potential for growth
in shareholder value. The Resource Statement announced on 10 September 2009 is further  confirmation  of the 30
million carats of underlying assets. Despite difficult market circumstances, I believe the Company has a great
future as a significant diamond producer.

I would like to pay tribute to the contribution made by the Company's board of directors, staff, consultants and
advisors in a challenging year. As always, thanks is due to our shareholders for their ongoing support as we
endeavour to progress the Company and maximise value.


Frank Scolaro
Chairman

Operational Review

LESOTHO
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, owned 75% by Kopane and 25% by the GoL, 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 and Satellite Pipes for up to  20
years.

Kopane's primary asset is the Main Pipe at Liqhobong which it plans to bring to full value.

THE DEFINITIVE FEASIBILITY STUDY
The DFS has been underway since late 2007 and commenced as a result of the successful PFS which recommended
proceeding to a DFS to determine the full potential of the Main Pipe. The Company has entered into agreements with
industry recognised contractors to deliver a high quality study, with supervision of the geological components by
Howe to ensure that the work is conducted under high QA/QC standards to produce a robust geological resource.

The PFS report included a preliminary resource statement in mid 2007. In the last Annual Report the Company had just
announced an interim resource statement on 17 November 2008 which updated the PFS resource statement and  followed
bulk sampling and core drilling work. This resulted in a re-interpretation of the geological model of the Main Pipe,
to a significantly greater resource of 75.6 million tonnes, 79% greater than previously estimated in the PFS
statement. 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. These carats were valued by diamantiers at $86/ct. in September 2008 and, applying
this  value, the indicative value of the Main Pipe was calculated at $2.6 billion (29.6 million carats at $86 per
carat).

Since then the LDD work has been completed; this involved a 25 hole programme totalling 4,415 metres of drilling
undertaken by Bauer Technologies South Africa (Pty) Limited using a Prakla RB-40 RC drill rig. The subsequent
processing of 1,800 tonnes of the recovered drilling samples through the Company's onsite custom built 5 tonnes per
hour Dense Media Separation plant was also completed under supervision under strict QA/QC conditions by Howe.

Following from this work, detailed diamond and statistical analysis of the results of the samples was undertaken and
this has provided the Company with depth continuity data on the diamond grade for each of the facies to 180 metres
from surface, enabling 43% of the kimberlite to be classified in the indicated category and less in the lower
inferred category. In the diamond industry, the indicated resource category is generally accepted as the highest
resource classification obtainable due to the nature of diamond deposits.

These results mean that the Company is able to demonstrate significantly higher confidence in the recoverable
resource, because the indicated kimberlite category of 38.6 million tonnes alone represent over 10 years of
production at over one million carats per annum (based on a processing rate of 3.5 million tonnes per annum noted in
the Pre-Feasibility Study in 2007), which also better supports project financing alternatives for construction of  a
new processing plant.

In addition, there is a further inferred resource of 51.47 million tonnes of kimberlite down to the 2,040 metre
depth level only, which is an average depth of 510 metres below surface. The mineralisation is open at depth, with
one earlier diamond drill hole remaining in kimberlite to the end of the hole at a depth of 650 metres below
surface. The resource categorization and limits are based on the same parameters used for the 2007 PFS interim
resource estimate, also independently verified by Howe.

As a result of the above work, a final resource statement was published on 10 September 2009 which shows:-

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)

Indicated        38.56           31      12.04               28.92        31      9.03
Inferred         51.47           34      17.66               38.60        34      13.24
Total            90.03           33      29.70               67.52        33      22.27


Notes:  1. Bottom cut off screen size of 1.0mm
        2. Results based on the 3D spatial estimate utilising diamond data collected from 26 LDD holes

Source: ACA Howe International Limited

The Company believes that the revised overall grade estimate of 33 cpht is 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. The analysis of these samples shows virtually no recovery of boart stones and reduced recovery of low
quality (near gem) diamonds, which clearly reflects diamond losses incurred in the reverse circulation LDD drilling
process. In order for the grade and contained diamonds to properly account for the loss of the boart and low quality
diamonds, further  work will be undertaken to account for these differences and assess the impact on the diamond
grade for each of the kimberlite facies and on the overall diamond grade of the Main Pipe kimberlite.

The new resource statement updates the interim statement published in November 2008. The $86 per carat run of mine
valuation does not include the positive 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, believed  to
be fragments from a 100+ carat stone, which totalled approximately 78 carats and had a total value of $1.43 million
and by the sale in July 2008 of three premium stones, totalling approximately 27 carats, for $0.63 million. All of
these premium stones were sourced from the K5 facies. In addition, in 2008 Kopane has seen the occurrence in the
Main Pipe of several large pieces of polycrystalline boart of over 100 carats each, including one of 263 carats.
This is consistent with the report of Howe in respect of the PFS, in mid 2007, which identified stone value, along
with ore grade, as one of the potential areas of upside for the economics of the Main Pipe project.

The Company is therefore confident that the Main Pipe will yield further large stones, although the proportion of
which will be of gem quality is unclear. The Company is reviewing the feasibility of a further significant bulk
sample from the areas of the Main Pipe which have already produced large stones.

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 was scheduled to be completed in mid 2009 but there were delays, in completing the LDD and processing the
1,800 tonnes of samples, which resulted in the resource statement being finalised three months later than
anticipated, with the subsequent knock-on effect on other work, such as plant and tailings design. The significantly
larger  resource than originally estimated is also a factor in the work programme. In the meantime, the Rand has
strengthened against both the US$ and Sterling and this has exacerbated further costs required to complete the
study. Certain key work on the DFS is continuing, such as work in connection with the environment and social impact
of  the project but, as discussed in the Chairman's letter to shareholders, the Company is re-evaluating with its
advisors the benefit of spending shareholders' funds to complete all aspects of the DFS ahead of other more
immediate revenue generating alternatives.

The size of the Main Pipe kimberlite of 90 million tonnes is substantially more than the PFS resource statement.
Consequently, a material factor under review is the size of the ultimate processing plant required to enable the
Company to recover the full potential of rough diamonds in the most economic way. The PFS modelled resource
indicated a mine life of approximately 16 years at a production rate of 3.5 million tonnes per annum. However, the
larger kimberlite means that the company must assess the optimum combination of a longer mine life and a higher
processing rate, subject to finalisation of plant and tailings design.

The Company's internal financial models show a robust net present value of the project; clearly the  Company  will
endeavour to develop the mine to provide the greatest shareholder value, taking into account the timing and
availability of funds needed to construct plant with a significantly higher processing capability. These
considerations encompass expanding the existing Satellite Plant in the short term.

CAPACITY, PRODUCTION AND SALES
The Satellite  Plant, which has a name-plate capacity of 60 tonnes per hour ("tph"), commenced production in late
2005. Commercial Production, as defined under the Licence Agreement with the GoL as a rate of 40 tph, was reached in
July 2006 and LMDC was awarded an extension of its mining licence in January 2007 to encompass mining from the Main
Pipe, for a period of 10 years with a further 10 years at LMDC's option.

In 2007/8, a total of 150,600 dry tonnes were treated in the Plant producing 56,500 carats, covering a 5 month
period only. This compares with equivalent figures of 309,480 dry tonnes and 152,013 carats in the previous year.
Production in both periods has been affected by the planned interruptions to production due to preparation for and
conduct of the programme of bulk sampling of the individual facies, as required for the DFS. The grade of the feed
declined to 37.5 cpht from 49.1 cpht in the previous year, as a greater proportion of the feed was sourced from the
lower grade, but higher diamond value, Main Pipe and was further distorted by bulk sampling. Following completion of
the  bulk sampling programme in August 2008, the Plant was operating at greater efficiency, running mainly Main Pipe
kimberlite, with a blend of harder Satellite Pipe feed to optimise recoveries and product-ion increased to reach
nameplate capacity by October 2008.

However, the Plant's relatively small capacity of approximately 450,000 tonnes per annum did not provide any
significant scope for achieving economies of scale to enable there to be sufficient cost reductions to offset the
substantial fall in rough diamond prices. The rough diamond market fell very sharply in late 2008 and the Company
reacted very quickly, reaching the hard decision, in spite of operations having been running well in the previous
months, to suspend production at 1 December 2008.

Overall since commencement of production in the second half of 2005 until early December 2008, the Company has
recovered some 352,000 carats of rough diamonds, of which 339,000 have been sold, including low grade industrial or
boart stones, at an average price of $50 per carat. Sales revenues are affected substantially be the incidence of
premium stones which have a marked impact on prices achieved.

In the financial year to 30 June 2009, although overall sales fell because of the reduced 5 month period of
production, there was an increase in sales over the approximate comparative H1 period in 2007/8 of approximately 10%
in terms of revenue and 47% in terms of carats (although this is distorted by a sale of boart stones in December
2008 of 16,749 carats). The above table shows the dramatic impact of the fall in prices in sales from October 2008,
which offset the strong prices achieved in the two sales prior to that, including the excellent sale in July 2008 at
$99.35/ct which included 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 to the above sales in the year, 12,514 carats of stones were recovered in July and August 2008 under the
DFS bulk sample programme and are retained in inventory. As noted elsewhere, a valuation of $86 per carat was
received by independent diamantiers in September 2008.

Sales in the financial year were as follows:

Date                        Carats Sold              Revenue $               $/ct
18/07/2008                  17,020.44                1,690,931               99.35
22/08/2008                  14,489.71                783,426                 54.07
31/10/2008                  8,993.92                 261,539                 29.08
05/12/2008                  15,478.49                334,664                 21.62
05/12/2008 (Boart)          16,748.61                6,197                   0.37
12/01/2009                  12,377.06                326,199                 26.36
Total incl. Boart           85,108.23                3,402,956               39.98
Total excl. Boart           68,359.62                3,396,759               49.69

Expected Number of Stones Recovered from Resource Estimate Tonnage

Tonnes          33.401          6.398           29.776          20.451          90.026
Size            K2 Facies       K4 Facies       K5 Facies       K6 Facies       TOTAL
> 200 cts       34              3               69              19              125
100 - 200 cts   75              8               170             50              303
50 - 100 cts    278             33              587             186             1,084
20 - 50 cts     1,673           239             3,422           1,178           6,512
10 - 20 cts     4,273           705             8,533           3,144           16,655
5 - 10 cts      21,426          4,117           41,685          16,527          83,755
1- 5 cts        558,603         146,245         961,064         473,995         2,139,907
Total stones    586,362         151,350         1,015,530       495,099         2,248,341

The above table shows the modelled number of stones of 1 carat and above.

From the above table, the Company's internal model (not independently verified) indicates that there are likely  to
be approximately 2.2 million stones of 1 carat or higher (approximately 8 million carats). The valuation of bonanza
stones is difficult to predict. Kopane estimates the weighted average value of diamonds of one carat and above will
be in the range of $300 - 400 per carat for run of mine production (including boart stones). A major factor in
determining value is the proportion of boart stones and it is estimated that this will vary from approximately 10%
for run of mine, which accords with production to date, to 95% boart for stones of over 10 carats.

Apart from one small sale of rough diamonds in Johannesburg in 2005, all sales of Liqhobong diamonds, over 23
tenders, were made in Antwerp by BHP Billiton. The sales agreement terminated upon completion of the final sale in
January 2009 and, as noted in the Chairman's letter to shareholders, LMDC is well advanced in the selection of a new
agent and arrangements will be put in place in advance of a sales resumption. The Company is reviewing the best way
to maximise its revenues taking into account the significant impact of premium stones as a proportion of sales
revenues and is considering the best way to benefit from retaining an interest in the eventual sale of these high
value cut and polished diamonds. Sales of Liqhobong stones in the financial year once again attracted interest from
regular buyers, despite difficult market conditions from the forth quarter of calendar 2008.

The table below summarises sales made since commencement of production.

Total Sales     (inc boart)     No of sales     Carats          $                $/ct
2008/9          To Jan. 2009    5               85,108          3,402,955        39.98
2007/8          H2              5               90,896          3,829,431        42.13
                H1              5               57,928          3,103,010        53.57
2006/7          H2              2               30,025          3,157,226        105.15
                H1              4               47,287          2,282,157        48.26
2005/6          H2              2               25,387          1,126,250        44.36
                H1              1               2,736           89,414           32.68
Total                           24              339,367         16,990,443       50.07

This table shows the growth in carats sold and sales revenues achieved since 2005. Sales revenues have been in line
with general market conditions for rough diamonds which increased steadily until the third quarter of calendar 2008.
The numbers shown opposite are somewhat distorted by the sale of special premium diamonds sold from time to time and
boart stones which are accumulated for several months before sale.

Before placement of the mine onto a care and maintenance basis, the Liqhobong project employed 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. Currently, a small
number of maintenance, security and support staff are employed. The Company remains in close contact with former
personnel who have operating experience at the mine and anticipates that it will be able to react quickly to a
resumption in production. The level of operator experience and training 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.

POWER
Power for the Satellite Plant mining operations is currently provided by diesel generators but the spiralling  cost
of diesel and the much greater power requirements of the Main Pipe necessitates that Liqhobong will have to access
grid power. Accordingly, the Company has completed engineering and environmental studies with independent
contractors, in liaison with the Lesotho Electricity Company, with the aim of providing grid power to Liqhobong.

A Memorandum of Understanding was signed on 17 August 2009 between the Company's subsidiary, Liqhobong  Mining
Development Company, Lesotho Electricity Company, the Government of the Kingdom of Lesotho and Standard Lesotho
Bank, in respect of funding of the construction of an electrical power line to the Company's mine at Liqhobong. The
MOU contemplates that funds will be lent by the bank to the LEC to fund the construction of the power line from
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 have yet to be agreed. The cost of the project has been estimated at R131
million and Kopane's share is expected to amount to R90 million. The plan is that construction will commence in
early 2010, which should allow grid electricity to be connected to the mine site in the first half of 2011. The cost
of grid electricity represents a substantial saving over diesel generated power. It is estimated that, based on
Liqhobong's current operational capacity, diesel fuel costs approximately $6 per tonne, compared to a tariff cost of
under $1 per tonne. Annual cash outgoings to LMDC of paying for grid power plus the cost of repaying capital and
interest on the loans (to be negotiated) will be less than paying the alternative cost of diesel fuel.

LMDC's Satellite Pipe Plant at Liqhobong has a capacity of 450,000 tpa, powered by diesel fuel which is trucked to
site. The supply of grid electricity to provide power to run the process plant and  related infrastructure is
estimated to require approximately 1.7 mva. LMDC is evaluating increasing the  size of the existing  plant to
approximately 750,000 tpa as an interim measure before the construction and operation of a much larger plant to
process kimberlite from the Main Pipe. This new Main Pipe plant may be phased in on a modular basis to have an
eventual capacity of 3.5 million tonnes per annum or higher.

FINLAND
The Company's Finnish Assets are being operated, financed and developed under a Joint Venture Agreement ("JVA") with
Mantle Diamonds Limited. Mantle is a privately-owned UK company with diamond exploration interests in Canada, the
DRC, Lesotho as well as Finland.

Under this JVA,  Mantle can earn up to a 70% interest in the Finnish assets by expending US$5 million, including
producing a definitive feasibility study on the Lahtojoki property and issuing Kopane with 10 million shares in
Mantle, with a pre-IPO value of £2 million. To date, Mantle has spent over £700,000 in respect of the definitive
feasibility study at Lahtojoki and work in the period included the following:

    *   Positive internal scoping study completed

    *   Drill indicated grade of 35ct/100t confirmed by independent study

    *   Perimeter 'definition' drilling completed comprising 11 shallow angled holes totalling 495m around the
        pipe to provide a better outline of the kimberlite beneath the till cover

    *   Detailed pit design generated following geotechnical and pit mining consultancy studies by Golder
        Associates and AMC Consultants

    *   Environmental approval received to commence earthmoving operations which will expose the eastern limb
        of the pipe for large diameter drilling (LDD)

    *   Agreement subsequently signed with Hartikainen Oy and 60,000 m3 of overburden till has been stripped

Mantle plans to collect approximately 6,000 tonnes of representative kimberlite sample from surface trenching and  a
large diameter Kelly Bar Bauer drill rig at some stage in the future.

The Company owns 3.4 million shares in Mantle, which have an attributed value of £334,000. Under the terms  of  the
JVA, the Company was, subject to certain conditions, due a cash payment by Mantle of £667,000 in August 2009; Mantle
has requested deferment or other settlement of this obligation, which is under discussion with them.

DIAMOND DEMAND AND PRICES
Rough diamond prices in the year under review experienced considerable turmoil. Having doubled from 2002 until
September 2008, the market suffered a severe correction due to the world economic situation and falls of
approximately 50% were suffered in late 2008 to early 2009.

Several producers, including Kopane, lowered or suspended production which has reduced supply to the market.

In calendar 2009 to date prices have picked up from the bottom by some 30-40% but at the time of writing the
sustainability of this recovery and the timing of further increases are subject to market debate.

The summer period is generally quiet in the diamond trade and in 2009 slow global demand has seen less cutting  and
polishing activity in mid year. The third or fourth quarters of calendar 2009 will be critical and demand conditions
will show whether the rise in rough diamond prices since the first quarter have been justified.

There has been a significant reduction in retail diamond inventories in the first half of 2009, although on the
supply side Russian producer Alrosa returned to the market in July 2009. The value of rough diamond sights held  by
market leader De Beers for the whole of 2009 could be half of the previous year. For seasonal reasons, rough diamond
demand is greater in the first half of a year.

According to market analysts, the key to a sustained recovery in rough diamond sales is a return of confidence  in
the major jewellery diamond buying economies, in particular the US where over 40% of all diamond jewellery sales
take place. While China and the Gulf states are still reporting good diamond jewellery off-take, they are not yet
large enough to offset the soft US market. China and the Gulf each account for approximately 8% of global diamond
demand at present, and India 7%. It will probably be another three to five years before they match the US in terms
of size. Until then, the US will be the single most important component of sales and until economic growth and
employment recover strongly, jewellery sales growth will likely remain under some pressure. Hence there is caution
on a sustained pick-up in rough diamond prices until into 2010. However, there is a medium and long term supply
shortage.

Similar to our view last year, Kopane believes in the longer term that supply shortages will create a bullish rough
diamond market.

FINANCIAL
The consolidated net loss after taxation in respect of the year ended 30 June 2009 amounted to £4.5  million  (loss
per share 2.5p) compared to the consolidated net loss after taxation for 2008 of £4.7 million (loss per share 4.1p).
Production was suspended in December 2008 as a result of falling rough diamond prices and as a result, sales of
diamonds were lower with a corresponding reduction in mining, processing and employee costs. Other expenses were
reduced significantly in the year from £1.8m to £1.3m and depreciation was lower by £0.5 million compared to the
previous year resulting from writing off the mining assets over a longer period. An impairment loss of £0.4m was
recognised through the income statement on investments held by the Group (2008: nil).

There  were  5 diamond sales in the year to 30 June 2009 totalling 85,108 carats generating revenue of £1.9  million
(2008:  £3.4 million). The Group's only other income in the year arose from bank deposit interest which amounted  to
£42,000 (2008: £93,000), the decrease being due to lower interest rates during the year.

The net assets of the Group amounted to approximately £14.2 million at the year end (2008: £15.0  million) which
included fixed assets of £3.3 million (2008: £3.2 million).

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 2009 were approximately £6.2 million (2008: £2.7 million), the increase being due to expenditure
in Lesotho of £3.0 million and a gain on exchange of £0.4 million. Inventories of £0.5 million (2008: £0.7 million)
represent rough diamonds  recovered during the feasibility study. Cash at 30 June 2009 amounted to £0.9 million
(2008: £4.7 million).

CORPORATE AND SOCIAL RESPONSIBILITY
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.

PRINCIPAL RISKS AND UNCERTAINTIES
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
guaranteed. The Group is exposed to the impact of changes to environmental legislation on its operations.

PRELIMINARY STATEMENT OF RESULTS

This preliminary statement was approved by the Board of Directors on 18 November 2009 and has been agreed by the
auditors. It does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006.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 498(2)
or (3) of the Companies Act 2006.

Consolidated income statement
                                                                            Year                Year
                                                                            ended               ended
                                                                            30 June             30 June
                                                                            2009                2008
                                                            
                                                                              £'000               £'000

Revenue                                                                       1,925               3,422
Changes in inventories                                                         (253)                134
Mining and processing costs                                                  (2,367)             (3,432)
Employee benefit expense                                                     (1,711)             (2,398)
Depreciation expense                                                           (582)             (1,073)
Impairment of investments and deferred income                                  (359)                  -
Gain on disposal of interest in subsidiary undertaking                            -                 325
Gain on exchange                                                                140                 114
Other expenses                                                               (1,334)             (1,815)

Operating loss                                                               (4,541)             (4,723)
Investment income                                                                42                  93
Share of loss in joint venture                                                  (18)                (29)

Loss for the period                                                          (4,517)             (4,659)

Basic and diluted loss per share (Pence)                                       2.5p                4.1p


All amounts reflected above relate to continuing operations.


Consolidated balance sheet
                                                                            Group               Group
                                                                            as at               as at
                                                                            30 June             30 June
                                                                            2009                2008
                                                      
                                                                            £'000               £'000
Assets

Property, plant & equipment                                                   3,321               3,179
Intangible assets                                                             6,173               2,728
Investments in joint venture entity                                           1,669               1,171
Available for sale investments                                                  333                 667
Trade and other receivables due after more                                    2,584               2,583
than one year

Total non-current assets                                                     14,080              10,328

Inventories                                                                     474                 727
Trade and other receivables - due within one year                                61                 217
Cash and cash equivalents                                                       869               4,729

Total current assets                                                          1,404               5,673

Total assets                                                                 15,484              16,001

Equity
Issued share capital                                                          8,981               8,481
Share premium                                                                26,111              24,933
Merger reserve                                                                3,242               3,242
Share-based payments                                                          1,301                 987
Foreign exchange translation reserve                                            868                (879)
Accumulated loss                                                            (26,271)            (21,754)
Total equity                                                                 14,232              15,010

Trade and other payables                                                      1,196                 953

Total current liabilities                                                     1,196                 953

Non current provisions                                                           56                  38

Total liabilities                                                             1,252                 991

Total equity and liabilities                                                 15,484              16,001



Consolidated statement of cash flows
                                                                            Year                Year
                                                                            ended               ended
                                                                            30 June             30 June
                                                                            2009                2008
                                                                            £'000               £'000

Cash flows from operating activities
Operating loss for the period                                                (4,541)             (4,723)
Adjustments for:
Depreciation                                                                    582               1,073
Exchange difference                                                             388                (272)
Equity-settled share-based payment transactions                                 314                 398
Impairment of investments and deferred income                                   359                   -
Profit on disposal of interest in subsidiary                                      -                (325)

                                                                             (2,898)             (3,849)

Decrease/(increase) in trade and other receivables                              145                (128)
Decrease/(increase) in inventories                                              289                (189)
Increase in provisions for liabilities and charges                               18                  13
Increase in trade and other payables                                            104                 199

Net cash used in operating activities                                        (2,342)             (3,954)

Cash flows from investing activities
Interest received                                                                42                  93
Acquisition of intangibles                                                   (3,039)             (1,242)
Acquisition of property, plant and equipment                                   (199)               (252)

Net cash used in investing activities                                        (3,196)             (1,401)

Cash flows from financing activities
Proceeds from issue of share capital                                          1,750               6,030
Payment of transaction costs                                                    (72)               (370)

Net cash from financing activities                                            1,678               5,660

Net (decrease)/increase in cash and cash equivalents                         (3,860)                305
Cash and cash equivalents at 1 July 2008                                      4,729               4,424

Cash and cash equivalents at 30 June 2009                                       869               4,729



Consolidated statement of changes in shareholders' equity


                                                                   Share     Foreign
                                                                   Based     exchange
                                        Share   Share      Merger  payment   translation   Accumulated
                                        capital premium    reserve reserve   reserve       earnings    Total
                                        £'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                         -        -         -     -          -           (4,517)   (4,517)
Foreign exchange gain                       -        -         -     -      1,747                -     1,747

Total recognised loss for the year          -        -         -     -      1,747           (4,517)   (2,770)
Shares issued for cash                    500    1,250         -     -          -                -     1,750
Share issue costs                           -      (72)        -     -          -                -       (72)
Share based payments                        -        -         -   314          -                -       314

Balance at 30 June 2009                 8,981   26,111     3,242 1,301        868          (26,271)   14,232

1. NATURE OF OPERATIONS AND GOING CONCERN
The Group owns diamond interests in Lesotho and Finland. In Lesotho, kimberlite continued to be recovered from the
Satellite and Main Pipes and processed through the Company's Satellite Plant, until December 2008 when it was
suspended as the result of falls in the market price of rough diamonds.

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$5million
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 30 June 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.

In March 2009 the Group raised £1.75 million in cash by the issuing of 50 million ordinary shares, to provide funds
for progression of the DFS and for general working capital resources. At 17 November 2009 the company raised a
further £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 the basis that the benchmark price is achieved, the Group will have sufficient funds to meet its planned
expenditure, although further funds will be required to re-start production and invest in a significant expansion of
production. Given the stage of development of the Main Pipe project  and the positive resource information
announced, the directors believe that the Company will have the ability to access additional funds to meet further
expenditure required to develop its assets and therefore the financial statements have been prepared on the going
concern basis.

2. ACCOUNTING POLICIES
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 2006 applicable to those companies reporting under IFRS.

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. Sales of rough diamonds recovered from the Main Pipe
are included in revenue rather than treated as a deduction from Main Pipe exploration costs.

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 International Accounting Standards Board, but have not been adopted will have a
material impact on the financial statements, other than in relation to IAS 1 (Presentation of financial statements)
and IFRS 8 (Operating Segments) which will lead to presentation and disclosure amendments.

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                              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 has reviewed the remaining useful
life of the Mining assets and considers it appropriate to extend the 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, trade and
other payables and available for sale investments.

Non-derivative financial instruments are recognised initially at fair value plus any directly attributable
transaction costs.  Subsequent to initial recognition, non-derivative financial instruments are measured as
described below. At 30 June 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.

Available-For-Sale Financial Assets

Available-for-sale financial assets, comprising of equity securities, are non-derivatives and are included in non-
current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale (other than
impairment losses and foreign exchange gains and losses which are recognised in the income statement) are recognised
in equity. Upon sale of a security classified as available-for-sale, the cumulative gain or loss previously
recognised in equity is recognised in the income statement.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group
of financial assets is impaired. Measurement is assessed by reference to the fair value of the financial asset or
group of financial assets.

(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 2009 was based on the loss attributable to common shareholders of
£4,517,000 (2008: £4,659,000) and a weighted average number of common shares outstanding during the year ended 30
June 2009 of 182,111,283 (2008: 113,385,589).

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