Aber Diamond Corporation - First Quarter 2008 Results



    TORONTO, June 5 /CNW/ - ABER DIAMOND CORPORATION (TSE-ABZ, NASDAQ-ABER)
announces its first quarter results for the period ended April 30, 2007.
    Commenting on Aber's first quarter results, Chairman and Chief Executive
Officer Robert Gannicott stated,"Operationally this has been one of our
strongest quarters. The Winter Road re-supply delivered the largest number of
loads in its 25 year history. Diamond production set a new first quarter high
despite a seasonally cold winter with recovered grades being 12% above ore
reserve levels. Consolidated operating margins also improved over the prior
year. Harry Winston has continued its solid growth in sales as it delivers on
its planned store openings around the world to serve the growing population of
wealthy consumers."
    Thomas O'Neill, President of Aber and Chief Executive Officer of Harry
Winston added, "In the First Quarter 2008 we continue our solid results with a
double digit increase in sales supported by strengthening gross margins.
Another new salon opened in Tokyo, Japan, while we relocated our store in
Osaka to the prestigious Shinsaibashi area and expanded our store in Taipei,
Taiwan. We now have 14 Harry Winston locations throughout the world. We
continue to execute our growth strategy through new product and innovative
marketing approaches together with expanding our retail store network in prime
locations around the world. We plan to open four additional stores before the
end of the year."
    Chief Financial Officer, Alice Murphy commented that "Strong segment
sales growth of 19% and 17% for mining and retail operations respectively
increased consolidated quarterly earnings from operations compared to the
prior year. Net earnings for the quarter were, however, negatively impacted by
the non-cash, mark-to-market adjustment on future income taxes, resulting from
the 6% strengthening of the Canadian dollar against the US dollar during the
quarter. This $13.6 million mark-to-market charge to earnings compares to a
future income tax recovery of $10.4 million included in our prior year's
results."

    
    First Quarter Highlights

    Financial Highlights
    -------------------------------------------------------------------------
                                           Three         Three        Twelve
                                          months        months        months
                                           ended         ended         ended
                                        April 30,     April 30,   January 31,
                                            2007          2006          2007
    -------------------------------------------------------------------------
    Sales ($ millions)                       141           119           559
    -------------------------------------------------------------------------
    Earnings from operations ($ millions)     36            28           147
    -------------------------------------------------------------------------
    Net Earnings ($ millions)                  3            24           104
    -------------------------------------------------------------------------
    Earnings per share ($)                  0.06          0.41          1.79
    -------------------------------------------------------------------------
    Cash Earnings per share ($)(1)          0.57          0.62          3.18
    -------------------------------------------------------------------------
    (1) Cash earnings per share is not a recognized measure under Canadian
        GAAP and does not have a standardized meaning prescribed by Canadian
        GAAP and is therefore unlikely to be comparable to similar measures
        presented by other issuers. Cash earnings per share is earnings
        before non-cash income tax expense, non-cash foreign exchange gains
        (loss), and depreciation and amortization on a per share basis. See
        "Non-GAAP Performance Measures" in the Company's Management's
        Discussion and Analysis for the three months ended April 30, 2007,
        for a reconciliation of earnings to cash earnings.

    Production Highlights
    (Aber's 40% share of Diavik Mine production)
    -------------------------------------------------------------------------
                                           Three         Three        Twelve
                                          months        months        months
                                           ended         ended         ended
                                        March 31,     March 31,  December 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------
    Diamond recovered (000s carats)        1,034           715         3,931
    -------------------------------------------------------------------------
    Grade (carats/tonne)                    4.97          3.62          4.21
    -------------------------------------------------------------------------
    Operating costs, cash  ($ millions)     25.1          21.6          97.2
    -------------------------------------------------------------------------
    Operating costs per carat, cash ($)       24            30            25
    -------------------------------------------------------------------------
    

    Returning Value to Shareholders

    Aber is pleased to declare an eligible quarterly dividend payment of
US$0.25 per share. Shareholders of record at the close of business on June 29,
2007, will be entitled to receive payment of this dividend on July 13, 2007.

    Annual Meeting of Shareholders

    Aber will hold its Annual Meeting of Shareholders today at 10 AM EST at
the Toronto Board of Trade located at 1 First Canadian Place, Toronto,
Ontario. Interested parties unable to attend may listen to a broadcast of the
meeting and a review of Aber's first quarter results on the internet at
www.aber.ca

    Information in this news release that is not current or historical
factual information may constitute forward-looking information or statements
within the meaning of applicable securities laws. Implicit in this
information, particularly in respect of statements as to future operating
results and economic performance of Aber, and resources and reserves at the
Diavik Mine, are assumptions regarding projected revenue and expense, diamond
prices and mining costs. These assumptions, although considered reasonable by
Aber at the time of preparation, may prove to be incorrect. Readers are
cautioned that actual results are subject to a number of risks and
uncertainties, including risks relating to general economic conditions and
mining operations, and could differ materially from what is currently
expected. The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

    About Aber

    Aber Diamond Corporation is a specialist diamond company focusing on the
mining and retail segments of the diamond industry. The Company supplies rough
diamonds to the global market through its 40% ownership in the Diavik Diamond
Mine and owns one of the world's premier retailers of diamond jewelry, Harry
Winston.


    
                                 Highlights

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

    Aber's net earnings for the quarter were $3.3 million with earnings per
share of $0.06 (cash earnings per share of $0.57(1)) as compared to net
earnings of $23.9 million and earnings per share of $0.41 (cash earnings per
share of $0.62(1)) for the corresponding quarter of the prior year. Net
earnings for the current quarter were negatively impacted by the foreign
exchange adjustment of $13.6 million, not deductible for Canadian tax
purposes, applied to the provision for future income taxes payable, which is
attributable to the 6% strengthening of the Canadian dollar against the US
dollar during the quarter.
    Operationally, this has been one of the strongest quarters in the
Company's history. Consolidated sales for the quarter increased by 19% to
$141.4 million compared to $119.3 million for the prior year and consolidated
gross margin for the quarter increased to 50% from 46% for the prior year.
    Sales from the mining segment increased by 19% compared to the comparable
quarter of the prior year. Earnings from mining operations totalled
$37.1 million compared to $25.8 million for the comparable quarter of the
prior year.
    Sales from the retail segment were 17% higher than the comparable quarter
of the prior year. The loss from retail operations of $1.1 million, as
compared to earnings from operations of $2.4 million for the comparable
quarter of the prior year, was principally impacted by certain
acquisition-related costs of $2.3 million specifically attributable to the
Harry Winston purchase.
    Aber's share of diamonds recovered from the Diavik Mine was 1.0 million
carats for the three months ended March 31, 2007, compared to 0.7 million
carats for the comparable period of the prior year.
    The Company has declared a quarterly dividend of $0.25 per share to be
paid on July 13, 2007 to shareholders of record on June 29, 2007.

    
    -----------------
    (1) Cash earnings per share is not a recognized measure under Canadian
        GAAP and does not have a standardized meaning prescribed by Canadian
        GAAP and is therefore unlikely to be comparable to similar measures
        presented by other issuers. Cash earnings per share is earnings
        before non-cash income tax expense, non-cash foreign exchange gain
        (loss), and depreciation and amortization on a per share basis. See
        "Non-Canadian GAAP Performance Measures" in the Company's
        management's discussion and analysis for the three months ended
        April 30, 2007, for a reconciliation of earnings to cash earnings.



                     Management's Discussion and Analysis
                     ------------------------------------
    (all figures are in United States dollars unless otherwise indicated)
                         Prepared as of June 5, 2007
    

    The following is management's discussion and analysis ("MD&A") of the
results of operations for Aber Diamond Corporation ("Aber", or the "Company")
for the three months ended April 30, 2007, and its financial position as at
April 30, 2007. This MD&A is based on the Company's consolidated financial
statements prepared in accordance with generally accepted accounting
principles in Canada ("Canadian GAAP") and should be read in conjunction with
the unaudited consolidated financial statements and notes thereto for the
three months ended April 30, 2007 and the audited consolidated financial
statements of Aber and notes thereto for the year ended January 31, 2007.
Unless otherwise specified, all financial information is presented in United
States dollars. Unless otherwise indicated, all references to "first quarter"
refer to the three months ended April 30, 2007.
    The following MD&A makes reference to certain non-GAAP measures such as
cash earnings and cash earnings per share to assist in assessing the Company's
financial performance. Non-GAAP measures do not have any standard meaning
prescribed by Canadian GAAP and are therefore unlikely to be comparable to
similar measures presented by other issuers. See "Non-GAAP Performance
Measures".
    Certain comparative figures have been reclassified to the current year's
presentation.

    CAUTION REGARDING FORWARD-LOOKING INFORMATION

    Certain information included in this MD&A may constitute forward-looking
information within the meaning of securities laws. In some cases,
forward-looking information can be identified by the use of terms such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "intend",
"estimate", "predict", "potential", "continue" or other similar expressions
concerning matters that are not historical facts. Forward-looking information
may relate to management's future outlook and anticipated events or results,
and may include statements or information regarding projected capital
expenditure requirements, estimated production from the Diavik Mine in 2007,
plans, timelines and targets for construction, mining, development, production
and exploration activities at the Diavik Mine, future mining and processing at
the Diavik Mine, the Diavik Mine's water licence renewal, the number and
timing of expected rough diamond sales, projected sales growth and new store
openings at Harry Winston, expected gross margin and expense trends in the
retail segment, expected diamond prices and expectations concerning the
diamond industry.
    Forward-looking information is based on certain factors and assumptions
regarding, among other things, mining, production, construction and
exploration activities at the Diavik Mine, world economic conditions, the
level of worldwide diamond production, the receipt of necessary regulatory
permits, the expected sales mix at Harry Winston, expected salon openings and
potential improvements in sourcing and purchasing polished diamonds.
Specifically, in making statements concerning Aber's projected share of the
Diavik Mine capital expenditure requirements, Aber has used a Canadian/US
dollar exchange rate of $0.88, and has assumed that construction will continue
on schedule with respect to the A-418 dike and with respect to current
underground mining construction initiatives. In making statements regarding
estimated production at the Diavik Mine, future mining activity and mine plans
and future rough diamond sales, Aber has assumed that mining operations and
exploration activities will proceed in the ordinary course according to
schedule and that the Diavik Mine's water licence will be renewed on expected
terms and conditions. With respect to statements concerning sales growth and
new store openings at Harry Winston, as well as expected gross margin rates
and expense trends, Aber has assumed that current world economic conditions
will not materially change or deteriorate, and that Harry Winston will be able
to realize improvements in sourcing and purchasing of inventory. While Aber
considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect.
    Forward-looking information is subject to certain factors, including
risks and uncertainties, which could cause actual results to differ materially
from what we currently expect. These factors include, among other things, the
uncertain nature of mining activities, risks associated with joint venture
operations, risks associated with the remote location of the Diavik Mine site,
risks associated with regulatory requirements, fluctuations in diamond prices
and changes in world economic conditions, the risk of fluctuations in the
Canadian/US dollar exchange rate, risks relating to the Company's salon
expansion strategy and the risks of competition in the luxury jewelry segment.
Please see page 15 of this interim report, as well as Aber's annual report,
available at www.sedar.com, for a discussion of these and other risks and
uncertainties involved in Aber's operations.
    You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While Aber may
elect to, it is under no obligation and does not undertake to update this
information at any particular time, except as required by law.

    -------------------------------------------------------------------------

    Summary Discussion

    Aber Diamond Corporation is a specialist diamond company focusing on the
mining and retail segments of the diamond industry. The Company supplies rough
diamonds to the global market from production received from its 40% ownership
interest in the Diavik Diamond Mine (the "Diavik Mine"), located off Lac de
Gras in Canada's Northwest Territories. Aber also owns a 100% interest in
Harry Winston Inc. ("Harry Winston"), the premier fine jewelry and watch
retailer. Aber's mission is to deliver shareholder value through the enhanced
earning power and longevity of the Diavik Mine asset as the cornerstone of a
profitable synergy with the Harry Winston brand. In a changing diamond
market-place, Aber has charted a unique course to continue to build
shareholder value.
    The Company's most significant asset is a 40% interest in the Diavik
group of mineral claims. The Diavik Joint Venture (the "Joint Venture") is an
unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI" -
60%) and Aber Diamond Mines Ltd. (40%) where Aber owns an undivided 40%
interest in the assets, liabilities and expenses. DDMI is the operator of the
Diavik Mine. Both companies are headquartered in Yellowknife, Canada. DDMI is
a wholly owned subsidiary of Rio Tinto plc of London, England, and Aber
Diamond Mines Ltd. is a wholly owned subsidiary of Aber Diamond Corporation of
Toronto, Canada.

    Market Commentary

    The Diamond Market

    Rough diamond prices continue to recover in the first quarter of fiscal
2008 after softening in fiscal 2007. The upward trend is due primarily to an
anticipated decline in world production, with all sectors of the diamond
industry expecting further pressure on supply in the coming year. Higher
prices are evident in all ranges of rough diamonds but remain strongest on the
larger, better-quality white goods.
    The positive movement in polished diamond prices in late calendar 2006,
combined with the ongoing shortage of rough diamonds, has brought renewed
momentum to the diamond market. Prices for better-quality, medium-sized
polished diamonds are now moving upwards, while watch manufacturers are
competing for supply in the smaller size ranges. Prices for the larger,
better-quality polished diamonds continue to rise, a trend that is expected to
carry on in future quarters. A slight softening of demand for the
lower-quality ranges of polished diamonds in the US market has been offset in
part by continuing strong demand from the Indian and Chinese retail sectors.

    The Retail Jewelry Market

    The luxury goods segment of the retail diamond jewelry market, comprising
high-end diamond jewelry and watches, continues to experience steady demand
for its products, with a number of retail jewelers posting solid gains over
the prior year.

    Consolidated Financial Results

    The following is a summary of the Company's consolidated quarterly
results for the eight quarters ended April 30, 2007 following the basis of
presentation utilized in its Canadian GAAP financial statements:

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

                                2008      2007      2007      2007      2007
                                  Q1        Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Sales                   $141,365  $154,328  $145,232  $139,962  $119,271
    Cost of sales             71,132    78,559    74,636    68,458    63,845
    -------------------------------------------------------------------------
                              70,233    75,769    70,596    71,504    55,426
    Selling, general and
     administrative
     expenses                 34,211    38,590    33,480    27,171    27,295
    -------------------------------------------------------------------------
    Earnings from operations  36,022    37,179    37,116    44,333    28,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest and financing
     expenses                 (6,132)   (6,441)   (5,570)   (4,805)   (4,334)
    Other income (expense)       913      (111)    1,764     1,805     1,623
    Foreign exchange gain
     (loss)                  (13,292)    9,831    (1,560)    2,619    (2,106)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                    17,511    40,458    31,750    43,952    23,314
    Income taxes              14,118    13,169    13,005     9,692    (1,036)
    -------------------------------------------------------------------------
    Earnings before minority
     interest                  3,393    27,289    18,745    34,260    24,350
    Minority interest            140        (5)      (86)       (5)      471
    -------------------------------------------------------------------------
    Earnings                $  3,253  $ 27,294  $ 18,831  $ 34,265  $ 23,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per
     share                  $   0.06  $   0.47  $   0.32  $   0.59  $   0.41
    Diluted earnings per
     share                  $   0.05  $   0.46  $   0.32  $   0.58  $   0.40
    Cash dividends declared
     per share              $   0.25  $   0.25  $   0.25  $   0.25  $   0.25
    Total assets(i)         $  1,315  $  1,288  $  1,246  $  1,116  $  1,111
    Total long-term
     liabilities(i)         $    408  $    536  $    530  $    460  $    460
    -------------------------------------------------------------------------


                                                             Three     Three
                                                            Months    Months
                                                             Ended     Ended
                                2006      2006      2006  April 30, April 30,
                                  Q4        Q3        Q2      2007      2006
    -------------------------------------------------------------------------
    Sales                   $125,891  $153,512  $115,699  $141,365  $119,271
    Cost of sales             52,782    57,641    53,065    71,132    63,845
    -------------------------------------------------------------------------
                              73,109    95,871    62,634    70,233    55,426
    Selling, general and
     administrative expenses  36,654    24,189    22,711    34,211    27,295
    -------------------------------------------------------------------------
    Earnings from operations  36,455    71,682    39,923    36,022    28,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest and financing
     expenses                 (4,511)   (3,353)   (3,668)   (6,132)   (4,334)
    Other income (expense)     1,767       795       885       913     1,623
    Foreign exchange gain
     (loss)                   (5,392)   (4,184)   (2,263)  (13,292)   (2,106)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                    28,319    64,940    34,877    17,511    23,314
    Income taxes              10,534    30,775    15,400    14,118    (1,036)
    -------------------------------------------------------------------------
    Earnings before minority
     interest                 17,785    34,165    19,477     3,393    24,350
    Minority interest          2,876       423       457       140       471
    -------------------------------------------------------------------------
    Earnings                $ 14,909  $ 33,742  $ 19,020  $  3,253  $ 23,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per
     share                  $   0.26  $   0.58  $   0.33  $   0.06  $   0.41
    Diluted earnings per
     share                  $   0.27  $   0.57  $   0.32  $   0.05  $   0.40
    Cash dividends declared
      per share             $   0.25  $   0.25  $   0.25  $   0.25  $   0.25
    Total assets(i)         $  1,044  $  1,016  $    928  $  1,315  $  1,111
    Total long-term
     liabilities(i)         $    434  $    421  $    378  $    408  $    460
    -------------------------------------------------------------------------

    (i) Total assets and total long-term liabilities are expressed in
        millions of United States dollars.
    

    The comparability of quarter-over-quarter results is impacted by
seasonality for both the mining and retail segments. Aber expects that the
quarterly results for its mining segment will continue to fluctuate depending
on the seasonality of production at the Diavik Mine, the number of sales
events conducted during the quarter, and the volume, size and quality
distribution of rough diamonds delivered from the Diavik Mine in each quarter.
The quarterly results for the retail segment are also seasonal, with generally
higher sales during the fourth quarter due to the holiday season.

    Three Months Ended April 30, 2007 Compared to Three Months Ended
    April 30, 2006

    Net Earnings

    The first quarter earnings of $3.3 million or $0.06 per share represent a
decrease of $20.6 million or $0.35 per share as compared to the results from
the first quarter of the prior year due in significant part to an unrealized
foreign exchange loss of $13.6 million on future income taxes payable as
discussed under "Income Taxes" on page 7. The Company's cash earnings per
share for the first quarter was $0.57 compared to $0.62 in the first quarter
of the prior year.

    Revenue

    Sales for the first quarter totalled $141.4 million, consisting of rough
diamond sales of $82.8 million and sales from Harry Winston of $58.6 million.
This compares to sales of $119.3 million in the comparable quarter of the
prior year (rough diamond sales of $69.3 million and sales from Harry Winston
of $50.0 million). The Company held two rough diamond sales in both the
current quarter and the comparable quarter of the prior year. Ongoing
quarterly variations in revenues are inherent in Aber's business, resulting
from the seasonality of the mining and retail activities as well as from the
variability of the rough diamond sales schedule.

    Cost of Sales

    The Company's first quarter cost of sales was $71.1 million compared to
$63.8 million for the comparable quarter of the prior year, with the majority
of increase related to Harry Winston. The Company's cost of sales includes
cash and non-cash costs associated with mining, sorting and retail sales
activities. See "Segmented Analysis" on page 8 for additional information.

    Selling, General and Administrative Expenses

    The principal components of selling, general and administrative ("SG&A")
expenses include expenses for salaries and benefits (including salon
personnel), advertising, professional fees, rent and building related costs.
With the growth of the Company's international selling activities and the
underlying control infrastructure, along with the expansion of its retail
salons, total SG&A expenses have increased over the comparable period of the
prior year.
    SG&A expenses for the first quarter were $34.2 million as compared to
$27.3 million for the comparable quarter of the prior year.
    The increase of $6.9 million from the first quarter of the prior year
included an increase of $1.3 million in advertising and selling expenses, an
increase of $1.2 million in salaries and benefits, an increase of $0.8 million
in amortization, and an increase of $0.7 million in rent and building related
expenses, primarily related to the Harry Winston growth strategy. Also
included was an increase of $0.6 million in other expenses and $0.1 million in
professional fees. Included in the comparable quarter of the prior year was a
reversal of a specific provision against accounts receivable of $2.2 million.
See "Segmented Analysis" on page 8 for additional information.

    Income Taxes

    Aber recorded a tax expense of $14.1 million during the first quarter of
fiscal 2008, compared to a tax recovery of $1.0 million in the comparable
quarter of the previous year. The Company's effective income tax rate for the
quarter, excluding Harry Winston, is 70%, which is based on a statutory income
tax rate of 34% adjusted for the Northwest Territories mining royalty, items
that are not deductible for income tax purposes, impact of foreign exchange,
and earnings subject to tax different than statutory rate.
    The Company's functional and reporting currency is US dollars; however,
the calculation of income tax expense is based on income in the currency of
the country of origin. As such, the Company is continually subject to foreign
exchange fluctuations, particularly as the Canadian dollar moves against the
US dollar. During the first quarter, as the Canadian dollar strengthened
against the US dollar, the Company recorded an unrealized foreign exchange
loss of $13.6 million on the revaluation of the Canadian dollar denominated
future income tax liability, which is not deductible for Canadian income tax
purposes.
    The rate of income tax payable by Harry Winston varies by jurisdiction.
Net operating losses are available in certain jurisdictions to offset future
income taxes payable in such jurisdictions. The net operating losses are
scheduled to expire through 2027.
    The Company has provided a table below summarizing the movement from the
statutory to the effective income tax rate as a percentage of earnings before
taxes:
    
                                                  Three Months  Three Months
                                                         Ended         Ended
                                                      April 30,     April 30,
                                                          2007          2006
    -------------------------------------------------------------------------
    Statutory income tax rate                              34%           37%
    Large Corporations Tax                                  0%            1%
    Stock compensation                                      1%            1%
    Northwest Territories mining royalty (net of
     income tax relief)                                    16%            7%
    Impact on change in future income tax rate              0%         (45)%
    Impact of foreign exchange                             29%            3%
    Earnings subject to tax different than
     statutory rate                                       (5)%          (4)%
    Benefits of losses not previously recognized            5%            0%
    Other items                                             1%          (4)%
    Effective income tax rate                              81%          (4)%
    -------------------------------------------------------------------------
    

    Interest and Financing Expenses

    Interest and financing expenses of $6.1 million were incurred during the
first quarter compared to $4.3 million during the comparable quarter of the
prior year. The increase in interest and financing expenses is due to a
combination of higher debt levels at Harry Winston to finance increased
inventory levels, an increased drawdown of Aber's expanded credit facility
related to the Harry Winston acquisition, and higher interest rates.

    Other Income

    Other income of $0.9 million was recorded during the quarter compared to
$1.6 million in the comparable quarter of the prior year. Other income
includes interest income on the Company's various bank balances.

    Foreign Exchange Gain (Loss)

    A foreign exchange loss of $13.3 million was recognized during the
quarter compared to a loss of $2.1 million in the comparable quarter of the
prior year. The loss primarily related to the revaluation of the Canadian
dollar denominated future income tax liability on the balance sheet of the
Company, which resulted from the strengthening of the Canadian dollar against
the US dollar at quarter end. Aber's ongoing currency exposure relates
primarily to expenses and obligations incurred in Canadian dollars, as well as
to the revaluation of certain Canadian monetary balance sheet amounts. The
Company does not currently have any derivative instruments outstanding.

    Segmented Analysis

    The operating segments of the Company include mining and retail segments.

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

                                2008      2007      2007      2007      2007
                                  Q1        Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Sales                   $ 82,752  $ 81,035  $ 90,754  $ 91,476  $ 69,308
    Cost of sales             40,516    39,413    45,461    43,256    38,749
    -------------------------------------------------------------------------
                              42,236    41,622    45,293    48,220    30,559
    Selling, general and
     administrative expenses   5,087     7,397     4,665     4,373     4,787
    -------------------------------------------------------------------------
    Earnings from
     operations             $ 37,149  $ 34,225  $ 40,628  $ 43,847  $ 25,772
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Three     Three
                                                            Months    Months
                                                             Ended     Ended
                                2006      2006      2006  April 30, April 30,
                                  Q4        Q3        Q2      2007      2006
    -------------------------------------------------------------------------
    Sales                   $ 62,528  $112,243  $ 70,795  $ 82,752  $ 69,308
    Cost of sales             22,780    38,929    29,759    40,516    38,749
    -------------------------------------------------------------------------
                              39,748    73,314    41,036    42,236    30,559
    Selling, general and
     administrative expenses   8,221     4,809     3,991     5,087     4,787
    -------------------------------------------------------------------------
    Earnings from
     operations             $ 31,527  $ 68,505  $ 37,045  $ 37,149  $ 25,772
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The mining segment includes the production and sale of rough diamonds.
    Sales for the quarter totalled $82.8 million compared to $69.3 million in
the comparable quarter of the prior year. The Company held two rough diamond
sales in both the current quarter and the comparable quarter of the prior
year. Aber expects that the quarterly results for its mining segment will
continue to fluctuate depending on the seasonality of production at the Diavik
Mine, the number of sales events conducted during the quarter, and the volume,
size and quality distribution of rough diamonds delivered from the Diavik Mine
in each quarter.
    Cost of sales includes cash operating costs of $26.0 million, non-cash
operating costs of $13.1 million and private production royalties of
$1.4 million. A substantial portion of cost of sales is mining operating
costs, which are incurred at the Joint Venture level. Cost of sales also
includes sorting costs, which consist of Aber's cost of handling and sorting
product in preparation for sales to third parties. Non-cash costs include
amortization and depreciation, the majority of which is recorded using the
unit-of-production method over estimated proven and probable reserves. Private
production royalties are recorded based on actual production during each
accounting period.
    The first quarter gross margin was 51% compared to 44% in the comparable
quarter of the prior year. The mining gross margin is anticipated to fluctuate
between quarters, resulting from variations in the specific mix of product
sold during each quarter. Additionally, the first quarter of the prior year
was negatively impacted by higher costs incurred as a result of the early
closure of the 2006 winter road.
    SG&A expenses for the mining segment have increased by $0.3 million from
the comparable quarter of the prior year.

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

                                2008      2007      2007      2007      2007
                                  Q1        Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Sales                   $ 58,613  $ 73,293  $ 54,478  $ 48,486  $ 49,963
    Cost of sales             30,616    39,146    29,175    25,202    25,096
    -------------------------------------------------------------------------
                              27,997    34,147    25,303    23,284    24,867
    Selling, general and
     administrative expenses  29,124    31,193    28,815    22,798    22,508
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations             $ (1,127) $  2,954  $ (3,512) $    486  $  2,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Three     Three
                                                            Months    Months
                                                             Ended     Ended
                                2006      2006      2006  April 30, April 30,
                                  Q4        Q3        Q2      2007      2006
    -------------------------------------------------------------------------
    Sales                   $ 63,363  $ 41,269  $ 44,904  $ 58,613  $ 49,963
    Cost of sales             30,002    18,712    23,306    30,616    25,096
    -------------------------------------------------------------------------
                              33,361    22,557    21,598    27,997    24,867
    Selling, general and
     administrative expenses  28,433    19,380    18,720    29,124    22,508
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations             $  4,928  $  3,177  $  2,878  $ (1,127) $  2,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The retail segment includes sales from Harry Winston's 14 salons, which
are located in New York, Honolulu, Bal Harbour, Beverly Hills, Las Vegas,
Dallas, Paris, London, Geneva, Tokyo (Ginza, Omotesando and Roppongi), Osaka
and Taipei.
    Sales for the first quarter were $58.6 million compared to $50.0 million
for the comparable quarter of the prior year. The 17% increase in Harry
Winston sales relative to the same quarter of the prior year is primarily
attributed to the opening of three new salons, being Tokyo (Roppongi), London
and Dallas, an improved merchandising mix and the continued strength of the
luxury goods sector. Sales were strong throughout the store network, with the
US increasing by 15% to $24.3 million and international sales rising by 19% to
$34.3 million.
    Cost of sales for Harry Winston for the first quarter was $30.6 million
compared to $25.1 million for the comparable quarter of the prior year. The
gross margin percentage for the year was influenced by the sale of certain
inventory that was on hand at the date of acquisition of Harry Winston by Aber
and was sold at a lower margin than normal. Adjusting for the impact of this
pre-acquisition inventory, gross margin as a percentage of sales for the first
quarter would have been approximately 4% higher.
    With the expansion of the new international salon activity consistent
with the retail growth strategy, SG&A expenses increased to $29.1 million in
the first quarter as compared to $22.5 million in the comparable quarter of
the prior year. The increase of $6.6 million was due to an increase in
salaries and benefits of $1.5 million primarily attributable to new salon
personnel, an increase in advertising and selling expenses of $1.3 million, an
increase in amortization of $0.7 million, an increase in rent and building
related expenses of $0.7 million, and an increase in both other expenses and
professional fees of $0.1 million. Included in the comparable quarter of the
prior year was a reversal of a specific provision against accounts receivable
of $2.2 million. Included in SG&A is amortization expense of $1.9 million for
the three months ended April 30, 2007 compared to $1.2 million in the
comparable quarter of the prior year.

    Operational Update

    Aber's results of operations include results from its mining operations
and results from Harry Winston.

    Mining Segment
    During the first calendar quarter of 2007, the Diavik Mine produced
2.6 million carats from 0.52 million tonnes of ore sourced entirely from the
A- 154 South kimberlite pipe.
    The seasonably cold winter and improved logistics enabled the Diavik Mine
to complete a successful winter road program this past quarter, with a record
volume of 4,753 loads transported to the Diavik Mine site. An alternate winter
road route was pioneered this year to provide additional future capacity in
the event of an early closure of the primary road.
    Work has commenced on extracting a bulk sample from the A-21 pipe for
diamond valuation. Additionally, work crews continue to remove overburden and
waste rock to prepare the A-418 pipe for open pit mining later in the calendar
year.
    The Diavik Mine continues to work with the Wek'eezhii Land and Water
Board as part of the process leading to renewal of its water licence,
currently expected by late summer 2007.

    
    Aber's 40% Share of Diavik Mine Production (reported on a one-month lag)

                                           Three         Three        Twelve
                                          Months        Months        Months
                                           Ended         Ended         Ended
                                        March 31,     March 31,  December 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------

    Diamonds recovered (000s carats)       1,034           715         3,931
    Grade (carats/tonne)                    4.97          3.62          4.21
    Operating costs, cash ($ millions)      25.1          21.6          97.2
    Operating costs per carat, cash ($)       24            30            25
    -------------------------------------------------------------------------
    

    Cash operating costs for the three months ended March 31, 2007 of
$25.1 million increased by $3.5 million from the comparable period of the
prior year, of which approximately $3.8 million was attributable to an
increase in costs due in part to higher equipment maintenance costs. This was
offset by a slight weakening of the Canadian dollar against the US dollar for
the three-month average ending March 31, 2007 compared to March 31, 2006.

    Retail Segment
    Harry Winston continues to execute its growth strategy through new
product and innovative marketing approaches together with expansion of its
store network in prime locations around the world. A new salon was opened in
Tokyo, Japan dedicated primarily to the sale of watches and men's jewelry
products, and the Osaka, Japan salon was successfully relocated to a new
flagship salon in the Shinsaibashi area. The existing Osaka salon continued to
operate during the transition period and is expected to close in the second
quarter of fiscal 2008. The three new salons opened in fiscal 2007, located in
Dallas, London and Tokyo (Roppongi), have all performed well during the
quarter.

    Liquidity and Capital Resources

    Working Capital
    Working capital decreased to $18.2 million at April 30, 2007 from
$164.0 million at January 31, 2007. As at April 30, 2007, Aber had
unrestricted cash and cash equivalents of $39.5 million and contingency cash
collateral and reserves of $39.2 million required under Aber's debt
arrangements compared to $54.2 million and $51.4 million, respectively, at
January 31, 2007. Included in unrestricted cash and cash equivalents at
April 30, 2007 was $16.4 million held at the Diavik Mine compared to
$30.8 million at January 31, 2007. The decrease in working capital primarily
results from the reclassification of the Harry Winston credit facility from
long-term at January 31, 2007 to current at April 30, 2007. The Harry Winston
$200.0 million credit facility has a maturity date of March 31, 2008 with no
scheduled repayments required before that date.

    Cash Flow from Operations
    During the quarter ended April 30, 2007, Aber generated $14.3 million in
cash from operations, compared to $16.8 million from the comparable quarter of
the previous year. Ongoing quarterly variations in revenues and operating cash
flows are inherent in Aber's business, resulting from the seasonality of the
mining and retail activities as well as the rough diamond sales schedule.
During the quarter, the Company purchased $43.6 million of inventory,
increased accounts payable and accrued liabilities by $26.1 million, increased
accounts receivable by $4.3 million and decreased prepaid expenses by
$1.5 million.

    Financing Activities
    During the quarter, Aber repaid $12.5 million of its $75.0 million senior
secured revolving credit facility and $3.5 million of its $100.0 million
senior secured term loan that was used to finance the remaining acquisition of
Harry Winston. At April 30, 2007, the Company had $92.1 million outstanding on
its senior secured term facilities and $50.0 million outstanding on its senior
secured revolving credit facility.
    As at April 30, 2007, Harry Winston had $136.0 million outstanding on its
$214.4 million credit facilities, which is used to fund salon inventory and
capital expenditure requirements. This represents an increase of $21.2 million
from the amount outstanding at January 31, 2007.
    At April 30, 2007, $23.5 million, $8.9 million and $7.6 million was drawn
under the Company's revolving financing facilities relating to its Belgian
subsidiary, Aber International N.V., its Japanese subsidiary, Harry Winston
Japan, K.K., and its Israeli subsidiary, Aber Diamond Israel 2006 Ltd.,
respectively. At January 31, 2007, $18.4 million, $5.8 million and
$5.6 million was drawn under the Aber International N.V., Harry Winston Japan,
K.K. and Aber Diamond Israel 2006 Ltd. facilities, respectively.
    During the first quarter, the Company made dividend payments of
$14.6 million or $0.25 per share to its shareholders.

    Investing Activities
    During the quarter, the Company purchased capital assets of
$37.6 million, of which $29.0 million were purchased for the mining segment
and $8.6 million for Harry Winston. Also included in deferred mineral property
costs were purchases of $3.8 million made during the quarter.

    Contractual Obligations
    The Company has contractual payment obligations with respect to long-term
debt and, through its participation in the Joint Venture, future site
restoration costs at the Diavik Mine level. Additionally, at the Joint Venture
level, contractual obligations exist with respect to operating purchase
obligations, as administered by DDMI, the operator of the mine. In order to
maintain its 40% ownership interest in the Diavik Mine, the Company is
obligated to fund 40% of the Joint Venture's total expenditures on a monthly
basis. Aber's currently estimated share of the capital expenditures, which are
not reflected in the table below, including sustaining capital for the
calendar years 2007 to 2011, is approximately $240.3 million at a budgeted
Canadian/US exchange rate of $0.88.
    The most significant contractual obligations for the ensuing five-year
period can be summarized as follows:

    
    (expressed in thousands of United States dollars)

    Contractual                   Less than       Year       Year      After
     Obligations           Total     1 year        2-3        4-5    5 years
    -------------------------------------------------------------------------

    Long-term
     debt(i)(a)(b)     $ 286,468  $ 225,149  $  54,519  $   1,236  $   5,564
    Environmental and
     participation
     agreements
     incremental
     commitments(c)       29,348     11,555      3,399      1,699     12,695
    Operating lease
     obligations(d)      112,729     14,157     29,303     19,410     49,859
    Capital lease
     obligations(e)        1,240        438        802          -          -
    -------------------------------------------------------------------------
    Total contractual
     obligations       $ 429,785  $ 251,299  $  88,023  $  22,345  $  68,118
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (i) Excludes deferred financing costs

    (a) Long-term debt presented in the foregoing table includes current and
        long-term portions. The Company may at any time prepay, in whole or
        in part, borrowings under both the $100.0 million term facility and
        the $75.0 million revolving facility, in minimum amounts of
        $5.0 million. Scheduled repayment of the original term facility is
        over ten equal consecutive semi-annual installments of $10.0 million
        that commenced on June 15, 2004. The scheduled repayment of the new
        $100.0 million senior secured term loan that was used to finance the
        acquisition of the balance of Harry Winston is over four equal
        consecutive semi-annual installments of $25.0 million and commenced
        on December 15, 2006. The maximum amount permitted to be drawn under
        the senior secured revolving facility is reduced by $12.5 million
        semi-annually, commencing in September 2006. The Company's first
        mortgage on real property has scheduled principal payments of
        $0.1 million quarterly, and may be prepaid after 2009. On May 31,
        2007, Aber amended its existing credit facility to extend the
        maturity date to December 15, 2009 from December 15, 2008. The
        schedule of required principal repayments has been adjusted to
        reflect the new maturity date.

        Harry Winston amended its $130.0 million credit facility and special
        accommodation facility of $10.0 million effective April 30, 2007 to
        $200.0 million, expiring on March 31, 2008, with no scheduled
        repayments required before that date. Included in the $200.0 million
        credit facility is a special accommodation facility of $10.0 million.
        The amendment extends the special accommodation facility, which was
        to expire on April 30, 2007, to March 31, 2008. Also included in
        long-term debt of Harry Winston is a 30-year loan agreement for
        $14.4 million to finance the construction of a new watch factory in
        Geneva, Switzerland. The bank has a secured interest in the factory
        building.

    (b) Interest on long-term debt is calculated at various fixed and
        floating rates. On an annualized basis, interest payments are
        approximated to be $20.8 million.

    (c) The Joint Venture, under environmental and other agreements, must
        provide funding for the Environmental Monitoring Advisory Board.
        These agreements also state the Joint Venture must provide security
        deposits for the performance by the Joint Venture of its reclamation
        and abandonment obligations under all environmental laws and
        regulations. The Joint Venture has fulfilled its obligations for the
        security deposits by posting letters of credit of which Aber's share
        as at April 30, 2007 was $52.5 million. The requirement to post
        security for the reclamation and abandonment obligations may be
        reduced to the extent of amounts spent by the Joint Venture on those
        activities. The Joint Venture has also signed participation
        agreements with various native groups. These agreements are expected
        to contribute to the social, economic and cultural well-being of area
        Aboriginal bands. The letter of credit in the amount of $52.5 million
        satisfies that part of the respective contractual obligations
        included in the table above. The actual cash outlay for the Joint
        Venture's obligations under these agreements is not anticipated to
        occur until later in the life of the Diavik Mine.

    (d) Operating lease obligations represent future minimum annual rentals
        under non-cancellable operating leases for Harry Winston salons and
        office space. Harry Winston's New York salon lease expires on
        December 17, 2010 with an option to renew.

    (e) Capital lease obligations represent future minimum annual rentals
        under non-cancellable capital leases for Harry Winston exhibit space.
    

    Outlook

    The Diavik Mine is projecting to deliver approximately 10 million carats
of diamond production during calendar 2007. Although most of this is expected
to come from the A-154 South pipe, contributions are also expected from the A-
154 North and A-418 pipes.
    Bulk sampling of the A-21 kimberlite pipe and underground testing of the
kimberlite pipes continues. Upon completion, results of these initiatives are
expected to be incorporated into a revised mine plan and an updated mineral
reserve and mineral resource statement.
    Aber is expecting to hold three rough diamond sales in the second
quarter, three in the third quarter and two in the fourth quarter of fiscal
2008.
    New salons are scheduled to be opened in Chicago, Beijing, Nagoya (Japan)
and Hong Kong during the remainder of the year. In addition, the Harry Winston
watch factory located in Geneva will consolidate its operations and relocate
to a new, larger dedicated facility, currently under construction, by the
third quarter of fiscal 2008.

    Other Disclosures

    Non-Canadian GAAP Performance Measures
    References to "cash earnings" are earnings before non-cash income tax
expense, non-cash foreign exchange gain (loss), and depreciation and
amortization. Management believes that the inclusion of cash earnings enables
investors to better understand the impact of certain non-cash items on Aber's
financial results and as such provides a useful supplemental measure in
evaluating the performance of Aber. Cash earnings is not, however, a measure
recognized by Canadian GAAP and does not have a standardized meaning under
Canadian GAAP. Management cautions investors that cash earnings should not be
construed as an alternative to earnings (as determined in accordance with
Canadian GAAP) as an indicator of Aber's performance, or cash flows from
operating, investing and financing activities as a measure of the Company's
liquidity and cash flows. Aber's method of calculating cash earnings may
differ from the methods used by other companies. Therefore, cash earnings may
not be comparable to similar measures presented by other companies. See below
for a reconciliation of earnings to cash earnings.

    
    Reconciliation of Earnings to Cash Earnings
    (expressed in thousands of United States dollars,
    except per share amounts) (unaudited)

                            2008       2007       2007       2007       2007
                              Q1         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------
    Earnings           $   3,253  $  27,294  $  18,831  $  34,265  $  23,879
    Non-cash income
     tax (recovery)       (3,194)     9,932      9,057      5,016     (3,938)
    Non-cash foreign
     exchange loss
     (gain)               13,461    (10,220)     1,576     (1,943)     2,970
    Depreciation and
     amortization         19,603     17,999     19,441     17,926     13,362
    -------------------------------------------------------------------------
    Cash earnings      $  33,123  $  45,005  $  48,905  $  55,264  $  36,273
    -------------------------------------------------------------------------
    Cash earnings
     per share         $    0.57  $    0.77  $    0.84  $    0.95  $    0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                            Three      Three
                                                           Months     Months
                                                            Ended      Ended
                            2006       2006       2006   April 30,  April 30,
                              Q4         Q3         Q2       2007       2006
    -------------------------------------------------------------------------
    Earnings           $  14,909  $  33,742  $  19,020  $   3,253  $  23,879
    Non-cash income
     tax (recovery)       10,412     31,264     12,788     (3,194)    (3,938)
    Non-cash foreign
     exchange loss
     (gain)                5,201      3,656      3,618     13,461      2,970
    Depreciation and
     amortization          7,697     16,662     17,472     19,603     13,362
    -------------------------------------------------------------------------
    Cash earnings      $  38,219  $  85,324  $  52,898  $  33,123  $  36,273
    -------------------------------------------------------------------------
    Cash earnings
     per share         $    0.66  $    1.47  $    0.91  $    0.57  $    0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Related Parties

    Transactions with related parties for the three months ended April 30,
2007 include $0.4 million of rent ($0.4 million for the three months ended
April 30, 2006) relating to the New York salon, payable to a Harry Winston
employee.

    Critical Accounting Estimates

    Management is often required to make judgments, assumptions and estimates
in the application of Canadian GAAP that have a significant impact on the
financial results of the Company. Certain policies are more significant than
others and are, therefore, considered critical accounting policies. Accounting
policies are considered critical if they rely on a substantial amount of
judgment (use of estimates) in their application or if they result from a
choice between accounting alternatives and that choice has a material impact
on the Company's reported results or financial position. Excluding adoption of
the new standards for financial instruments described below, there have been
no changes to the Company's critical accounting policies or estimates from
those disclosed in the Company's MD&A for its fiscal year ended January 31,
2007.

    Changes in Accounting Policies

    Financial Instruments, Hedges and Comprehensive Income
    On February 1, 2007, the Company adopted three new accounting standards
issued by the Canadian Institute of Chartered Accountants ("CICA") on
financial instruments, hedges and comprehensive income that require investment
securities and hedging derivatives to be accounted for at fair value. These
standards are substantially harmonized with US GAAP.
    The adoption of these new accounting standards has not had a material
impact on the financial position of the Company. For a description of new
standards and the impact on the Company's financial statements, please see
note 2 to the consolidated financials statements on page 24 of this report.

    Risks and Uncertainties

    Aber is subject to a number of risks and uncertainties as a result of its
operations, including without limitation the following risks:

    Nature of Mining
    The operation of the Diavik Mine is subject to risks inherent in the
mining industry, including variations in grade and other geological
differences, unexpected problems associated with required water retention
dikes, water quality, surface or underground conditions, processing problems,
mechanical equipment performance, accidents, labour disputes, risks relating
to the physical security of the diamonds, force majeure risks and natural
disasters. Such risks could result in personal injury or fatality; damage to
or destruction of mining properties, processing facilities or equipment;
environmental damage; delays or reductions in mining production; monetary
losses; and possible legal liability. Hazards, such as unusual or unexpected
rock formations, rock bursts, pressures, flooding or other conditions may be
encountered in the drilling and removal of ore.
    The Diavik Mine, because of its remote northern location and access only
by winter road or by air, is subject to special climate and transportation
risks. These risks include the inability to operate or to operate efficiently
during periods of extreme cold, the unavailability of materials and equipment,
and increased transportation costs due to the late opening and/or early
closure of the winter road. Such factors can add to the cost of mine
development, production and operation, thereby affecting the Company's
profitability.

    Nature of Joint Arrangement with DDMI
    Aber owns an undivided 40% interest in the assets, liabilities and
expenses of the Diavik Mine and the Diavik group of mineral claims. The Diavik
Mine and the exploration and development of the Diavik group of mineral claims
is a joint arrangement between DDMI (60%) and Aber Diamond Mines Ltd. (40%),
and is subject to the risks normally associated with the conduct of joint
ventures and similar joint arrangements. These risks include the inability to
exert influence over strategic decisions made in respect of the Diavik Mine
and the Diavik group of mineral claims. By virtue of DDMI's 60% interest in
the Diavik Mine, it has a controlling vote in virtually all Joint Venture
management decisions respecting the development and operation of the Diavik
Mine and the development of the Diavik group of mineral claims. Accordingly,
DDMI is able to determine the timing and scope of future project capital
expenditures, and therefore is able to impose capital expenditure requirements
on the Company that the Company may not have sufficient cash to meet. A
failure by the Company to meet capital expenditure requirements imposed by
DDMI could result in the Company's interest in the Diavik Mine and the Diavik
group of mineral claims being diluted.

    Diamond Prices and Demand for Diamonds
    The profitability of Aber is dependent upon production from the Diavik
Mine and on the results of the operations of Harry Winston. Each in turn is
dependent in significant part upon the worldwide demand for and price of
diamonds. Diamond prices fluctuate and are affected by numerous factors beyond
the control of the Company, including worldwide economic trends, particularly
in the US, Japan, China and India, worldwide levels of diamond discovery and
production and the level of demand for, and discretionary spending on, luxury
goods such as diamonds and jewelry. Low or negative growth in the worldwide
economy or the occurrence of terrorist activities creating disruptions in
economic growth could result in decreased demand for luxury goods such as
diamonds and jewelry, thereby negatively affecting the price of diamonds and
jewelry. Similarly, a substantial increase in the worldwide level of diamond
production could also negatively affect the price of diamonds. In each case,
such developments could materially adversely affect Aber's results of
operations.

    Currency Risk
    Currency fluctuations may affect the Company's financial performance.
Diamonds are sold throughout the world based principally on the US dollar
price, and although the Company reports its financial results in US dollars, a
majority of the costs and expenses of the Diavik Mine, which are borne 40% by
the Company, are incurred in Canadian dollars. Further, the Company has a
significant future income tax liability that has been incurred and will be
payable in Canadian dollars. Aber's currency exposure relates primarily to
expenses and obligations incurred by it in Canadian dollars and, secondarily,
to revenues of Harry Winston in currencies other than the US dollar. The
appreciation of the Canadian dollar against the US dollar, and the
depreciation of such other currencies against the US dollar, therefore, will
increase the expenses of the Diavik Mine and the amount of the Company's
Canadian dollar liabilities relative to the revenue Aber will receive from
diamond sales, and will decrease the US dollar revenues received by Harry
Winston. From time to time, the Company may use a limited number of derivative
financial instruments to manage its foreign currency exposure.

    Licences and Permits
    The operation of the Diavik Mine and exploration on the Diavik property
require licences and permits from the Canadian government. The Diavik Mine
Type "A" Water Licence granted by the Mackenzie Valley Land and Water Board
expires on August 31, 2007. While Aber anticipates that DDMI, which is also
the operator of the Diavik Mine, will be able to renew the licence, there can
be no guarantee that DDMI will be able to renew this licence or obtain or
maintain all other necessary licences and permits that may be required to
maintain the operation of the Diavik Mine or to further explore and develop
the Diavik property.

    Regulatory and Environmental Risks
    The operation of the Diavik Mine, exploration activities at the Diavik
Project and the manufacturing of jewelry are subject to various laws and
regulations governing the protection of the environment, exploration,
development, production, taxes, labour standards, occupational health, waste
disposal, mine safety, manufacturing safety and other matters. New laws and
regulations, amendments to existing laws and regulations, or more stringent
implementation or changes in enforcement policies under existing laws and
regulations could have a material adverse impact on the Company by increasing
costs and/or causing a reduction in levels of production from the Diavik Mine.
    Mining and manufacturing are subject to potential risks and liabilities
associated with pollution of the environment and the disposal of waste
products occurring as a result of mining and manufacturing operations. To the
extent that Aber or Harry Winston is subject to uninsured environmental
liabilities, the payment of such liabilities could have a material adverse
effect on the Company.

    Resource and Reserve Estimates
    The Company's figures for mineral resources and ore reserves on the
Diavik group of mineral claims are estimates, and no assurance can be given
that the anticipated carats will be recovered. The estimation of reserves is a
subjective process. Forecasts are based on engineering data, projected future
rates of production and the timing of future expenditures, all of which are
subject to numerous uncertainties and various interpretations. Aber expects
that its estimates of reserves will change to reflect updated information.
Reserve estimates may be revised upward or downward based on the results of
future drilling, testing or production levels. In addition, market
fluctuations in the price of diamonds or increases in the costs to recover
diamonds from the Diavik Mine may render the mining of ore reserves
uneconomical.
    Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Due to the uncertainty that may attach to inferred mineral
resources, there is no assurance that mineral resources at the Diavik property
will be upgraded to proven and probable ore reserves.

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

    Fuel Costs
    The Diavik Mine's expected fuel needs are purchased annually in late
winter and transported to the mine site by way of the winter road. These costs
will increase if transportation by air freight is required due to a shortened
"winter road season" or unexpectedly high fuel usage.
    The cost of the fuel purchased is based on the then prevailing price and
expensed into operating costs on a usage basis. The Diavik Mine currently has
no hedges for its anticipated 2007 fuel consumption.

    Reliance on Skilled Employees
    Production at the Diavik Mine is dependent upon the efforts of certain
skilled employees of DDMI. The loss of these employees or the inability of
DDMI to attract and retain additional skilled employees may adversely affect
the level of diamond production from the Diavik Mine. Currently, there is
significant competition for skilled workers in remote northern operations due
to the significant number of large-scale construction projects ongoing and
planned in Canada's north, including the various construction projects
relating to the development of the oil sands in Northern Alberta.
    Aber's success at marketing diamonds and in operating the business of
Harry Winston is dependent on the services of key executives and skilled
employees, as well as the continuance of key relationships with certain third
parties, such as diamantaires. The loss of these persons or the Company's
inability to attract and retain additional skilled employees or to establish
and maintain relationships with required third parties may adversely affect
its business and future operations in marketing diamonds and in operating
Harry Winston.

    Expansion of the Existing Salon Network
    A key component of the Company's Harry Winston strategy is the expansion
of its existing salon network. This strategy requires the Company to make
ongoing capital expenditures to build and open new salons, to refurbish
existing salons from time to time, and to incur additional operating expenses
in order to operate the new salons. To date, much of this expansion has been
financed through borrowings by Harry Winston. There can be no assurance that
the expansion of Harry Winston's salon network will prove successful in
increasing annual sales or earnings from the retail segment, and the increased
debt levels resulting from this expansion could negatively impact Aber's
results from operations in the absence of increased sales and earnings.

    Competition in the Luxury Jewelry Segment
    Aber, through its ownership of Harry Winston, is exposed to competition
in the retail diamond market from other luxury goods, diamond and jewelry
retailers. The ability of Harry Winston to successfully compete with such
luxury goods, diamond and jewelry retailers is dependent upon a number of
factors, including the ability of Harry Winston to source high-end polished
diamonds and protect and promote its distinctive brand name and reputation. If
Harry Winston is unable to successfully compete in the luxury jewelry segment,
then Aber's results of operations will be adversely affected.

    
    Outstanding Share Information

    As at April 30, 2007
    -------------------------------------------------------------------------
    Authorized                                                     Unlimited
    -------------------------------------------------------------------------
    Issued and outstanding shares                                 58,362,198
    Fully diluted                                                 58,991,348
    Weighted average outstanding shares                           58,362,128
    Options outstanding                                            1,629,220
    -------------------------------------------------------------------------
    

    Additional Information

    Additional information relating to the Company, including the Company's
most recently filed annual information form, can be found on SEDAR at
www.sedar.com, and is also available on the Company's website at www.aber.ca.


    
                         Consolidated Balance Sheets
                         ---------------------------

              (expressed in thousands of United States dollars)

                                                      April 30,
                                                          2007    January 31,
                                                    (unaudited)         2007
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents (note 4)          $     39,528  $     54,174
      Cash collateral and cash reserves (note 4)        39,189        51,448
      Accounts receivable                               17,600        13,297
      Inventory and supplies (note 5)                  317,318       273,736
      Advances and prepaid expenses                     19,774        21,275
    -------------------------------------------------------------------------
                                                       433,409       413,930
    Deferred mineral property costs                    184,637       188,058
    Capital assets                                     412,584       384,532
    Intangible assets, net                             133,897       134,320
    Goodwill                                            97,207        98,142
    Other assets                                        17,509        18,187
    Future income tax asset                             36,110        50,745
    -------------------------------------------------------------------------
                                                  $  1,315,353  $  1,287,914
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $    150,018  $    124,747
      Bank advances                                     40,047        29,776
      Current portion of long-term debt                225,149        95,434
    -------------------------------------------------------------------------
                                                       415,214       249,957
    Long-term debt                                      60,460       185,446
    Future income tax liability                        328,358       333,498
    Other long-term liability                            1,087             -
    Future site restoration costs                       17,402        17,200
    Minority interest                                      225            85

    Shareholders' equity:
      Share capital (note 7)                           305,208       305,165
      Contributed surplus                               15,107        14,922
      Retained earnings (note 3)                       154,285       165,625
      Accumulated other comprehensive income            18,007        16,016
    -------------------------------------------------------------------------
                                                       492,607       501,728
    Commitments and guarantees (note 8)
    -------------------------------------------------------------------------
                                                  $  1,315,353  $  1,287,914
    -------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.



                     Consolidated Statements of Earnings
                     -----------------------------------

              (expressed in thousands of United States dollars,
                    except per share amounts) (unaudited)

                                                      April 30,     April 30,
    For the quarter ended                                 2007          2006
    -------------------------------------------------------------------------
    Sales                                         $    141,365  $    119,271
    Cost of sales                                       71,132        63,845
    -------------------------------------------------------------------------
                                                        70,233        55,426
    Selling, general and administrative expenses        34,211        27,295
    -------------------------------------------------------------------------
    Earnings from operations                            36,022        28,131
    -------------------------------------------------------------------------
    Interest and financing expenses                     (6,132)       (4,334)
    Other income                                           913         1,623
    Foreign exchange loss                              (13,292)       (2,106)
    -------------------------------------------------------------------------
    Earnings before income taxes                        17,511        23,314
    Income tax expense - Current                        17,440         2,902
    Income tax recovery - Future                        (3,322)       (3,938)
    -------------------------------------------------------------------------
    Earnings before minority interest                    3,393        24,350
    Minority interest                                      140           471
    -------------------------------------------------------------------------
    Net earnings                                  $      3,253  $     23,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
      Basic                                       $       0.06  $       0.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted                                     $       0.05  $       0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding   58,362,128    58,161,486
    -------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.



               Consolidated Statements of Comprehensive Income
               -----------------------------------------------

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

                                                      April 30,     April 30,
    For the quarter ended                                 2007          2006
    -------------------------------------------------------------------------
    Net earnings                                  $      3,253  $     23,879
    Other comprehensive income
      Net gain on translation of net
       foreign operations                                1,991           894
    -------------------------------------------------------------------------
    Total comprehensive income                    $      5,244  $     24,773
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.



                    Consolidated Statements of Changes in
                    -------------------------------------
                            Shareholders' Equity
                            --------------------

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

                                                      April 30,     April 30,
    For the quarter ended                                 2007          2006
                                                                   (Restated)
                                                                     (note 3)
    -------------------------------------------------------------------------
    Common shares
    Balance at beginning of period                $    305,165  $    298,985
    Issued during the period                                43           740
    -------------------------------------------------------------------------
    Balance at end of period                           305,208       299,725
    -------------------------------------------------------------------------
    Contributed surplus
    Balance at beginning of period                      14,922        16,934
    Stock option expense                                   185           441
    -------------------------------------------------------------------------
    Balance at end of period                            15,107        17,375
    -------------------------------------------------------------------------
    Retained earnings
    Balance at beginning of period                     165,625       119,630
    Net income                                           3,253        23,879
    Dividends paid                                     (14,593)      (14,548)
    -------------------------------------------------------------------------
    Balance at end of period                           154,285       128,961
    -------------------------------------------------------------------------
    Accumulated other comprehensive income
    Balance at beginning of period                      16,016        16,344
    Other comprehensive income                           1,991           894
    -------------------------------------------------------------------------
    Balance at end of period                            18,007        17,238
    -------------------------------------------------------------------------
    Total shareholders' equity                    $    492,607  $    463,299
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.



                    Consolidated Statements of Cash Flows
                    -------------------------------------

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

                                                      April 30,     April 30,
    For the quarter ended                                 2007          2006
    -------------------------------------------------------------------------
    Operating:
    Net earnings                                  $      3,253  $     23,879
    Items not involving cash:
      Amortization and accretion                        19,603        13,362
      Future income taxes                               (3,194)       (3,938)
      Stock-based compensation                           1,282           441
      Foreign exchange loss                             13,461         2,970
    Minority interest                                      140           471
    Change in non-cash operating working capital       (20,219)      (20,419)
    -------------------------------------------------------------------------
                                                        14,326        16,766
    -------------------------------------------------------------------------
    Financing:
    Repayment of long-term debt                         (3,626)         (100)
    Increase in revolving credit                        19,011        42,643
    Dividends paid                                     (14,593)      (14,548)
    Issue of common shares                                  34           740
    Cash advance from minority shareholder                   -         1,096
    -------------------------------------------------------------------------
                                                           826        29,831
    -------------------------------------------------------------------------
    Investing:
    Cash collateral and cash reserve                    12,259       (12,505)
    Deferred mineral property costs                     (3,782)       (2,374)
    Capital assets                                     (37,566)      (22,144)
    Other assets                                        (1,091)          (98)
    -------------------------------------------------------------------------
                                                       (30,180)      (37,121)
    -------------------------------------------------------------------------
    Foreign exchange effect on cash balances               382         1,582
    Increase in cash and cash equivalents              (14,646)       11,058
    Cash and cash equivalents, beginning of period      54,174       148,116
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period      $     39,528  $    159,174
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Change in non-cash operating working capital:
    Accounts receivable                                 (4,285)       (1,397)
    Advances and prepaid expenses                        1,512         3,014
    Inventory and supplies                             (43,582)      (25,790)
    Accounts payable and accrued liabilities            26,136         3,754
    -------------------------------------------------------------------------
                                                  $    (20,219) $    (20,419)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash flow information:
    Cash taxes paid                               $        736  $      1,720
    Cash interest paid                            $      5,743  $      2,924
    -------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.



                 Notes to Consolidated Financial Statements
                 ------------------------------------------

                   April 30, 2007 with comparative figures
           (tabular amounts in thousands of United States dollars,
                         except as otherwise noted)

    NOTE 1:
    Nature of Operations

    Aber Diamond Corporation (the "Company" or "Aber") is a specialist
    diamond company focusing on the mining and retail segments of the diamond
    industry.

    The Company's most significant asset is a 40% ownership interest in the
    Diavik group of mineral claims. The Diavik Joint Venture (the "Joint
    Venture") is an unincorporated joint arrangement between Diavik Diamond
    Mines Inc. ("DDMI") (60%) and Aber Diamond Mines Ltd. (40%). DDMI is the
    operator of the Diavik Diamond Mine (the "Diavik Mine"). Both companies
    are headquartered in Yellowknife, Canada. DDMI is a wholly owned
    subsidiary of Rio Tinto plc of London, England, and Aber Diamond Mines
    Ltd. is a wholly owned subsidiary of Aber Diamond Corporation of Toronto,
    Canada. The Diavik Mine is located 300 kilometres northeast of
    Yellowknife in the Northwest Territories. Aber records its proportionate
    interest in the assets, liabilities and expenses of the Joint Venture in
    the Company's financial statements with a one-month lag.

    During fiscal 2007, Aber acquired the remaining 47.17% interest in Harry
    Winston Inc. ("Harry Winston") that it did not previously own. The
    results of Harry Winston, located in New York City, US, are consolidated
    in the financial statements of the Company.

    NOTE 2:
    Significant Accounting Policies

    The interim consolidated financial statements are prepared by management
    in accordance with accounting principles generally accepted in Canada.
    The interim consolidated financial statements include the accounts of the
    Company and all of its subsidiaries as well as its proportionate interest
    in the assets, liabilities and expenses of joint arrangements.
    Intercompany transactions and balances have been eliminated.

    The interim consolidated financial statements should be read in
    conjunction with the consolidated financial statements and the notes
    thereto in the Company's annual report for the year ended January 31,
    2007, since these financial statements do not include all disclosures
    required by Canadian generally accepted accounting principles. Excluding
    adoption of the new standards for financial instruments described below,
    these statements have been prepared following the same accounting
    policies and methods of computation as the consolidated financial
    statements for the year ended January 31, 2007.

    Changes in Accounting Policy

    On February 1, 2007, the Company adopted three new accounting standards
    issued by the Canadian Institute of Chartered Accountants ("CICA") on
    financial instruments, hedges and comprehensive income that require
    investment securities and hedging derivatives to be accounted for at fair
    value. These standards are substantially harmonized with US GAAP.

    Financial Instruments

    This new standard requires the Company to revalue certain of its
    financial assets and liabilities, including derivatives designated in
    qualifying hedging relationships and embedded derivatives in certain
    contracts, at fair value on the initial date of implementation and at
    each subsequent financial reporting date.

    The adoption of this new standard has not had a material impact on the
    financial position of the Company. Under the new standard, the Company
    has elected to add transaction costs related to its non-revolving
    long-term debt to the carrying amount of the debt, which has resulted in
    the following adjustments to the consolidated balance sheet on
    February 1, 2007:

                                                      As at February 1, 2007
                                                          Increase/(Decrease)
    -------------------------------------------------------------------------
    Assets
    Other assets                                                $       (859)

    Liabilities and Shareholders' Equity
    Long-term debt                                              $       (859)
    Cumulative translation adjustment                                (16,016)
    Accumulated other comprehensive income                            16,016
    -------------------------------------------------------------------------
    This standard has had no material impact on the consolidated statement of
    earnings. Prior periods have not been restated.

    This standard also requires the Company to classify financial assets and
    liabilities according to their characteristics and management's choices
    and intentions related thereto for the purposes of ongoing measurement.
    Subsequent measurement for these assets and liabilities is based on
    either fair value or amortized cost using the effective interest method,
    depending upon their classification. In accordance with the new standard,
    the Company's financial assets and liabilities are generally classified
    and measured as follows:

    Asset/Liability                Category                   Measurement

    Cash and cash equivalents      Held for trading           Fair value
    Cash collateral and cash
     reserves                      Held for trading           Fair value
    Accounts receivable            Loans and receivables      Amortized cost
    Accounts payable and
     accrued liabilities           Held for trading           Fair value
    Bank advances                  Held for trading           Fair value
    Long-term debt                 Other liabilities          Amortized cost

    Hedges

    This new standard contains new rules for reporting fair value and cash
    flow hedges. The Company has no hedges and therefore this new standard
    has had no impact on the Company's consolidated financial statements.

    Comprehensive Income

    This new standard requires the Company to present a new consolidated
    statement of comprehensive income to detail income items impacting
    accumulated other comprehensive income, which is reported as part of
    shareholders' equity. This statement has been included above the
    consolidated statement of changes in shareholders' equity.

    NOTE 3:
    Restatement

    The Company has determined that the $7.0 million received from Tiffany in
    fiscal 2005 to remove certain restrictions on the resale of Aber shares
    owned by Tiffany should be treated as a capital transaction rather than
    included in other income. The impact of this correction is to reduce
    fiscal 2005 other income by $7.0 million, or $0.12 per share (basic and
    fully diluted), and to create contributed surplus of $7.0 million.
    Accordingly, other income, net income and earnings per share for the year
    ended January 31, 2005 are restated to $2.6 million, $46.1 million,
    $0.80 basic earnings per share and $0.78 fully diluted earnings per
    share, respectively. Originally this amount was classified as an
    operating activity rather than a financing activity in the consolidated
    statement of cash flows. Accordingly, cash provided by operating
    activities in fiscal 2005 would decrease to $143.4 million and cash used
    in financing activities would decrease to $54.0 million. Retained
    earnings at the beginning of fiscal 2006 have been restated to reflect
    the above.

    NOTE 4:
    Cash Resources

                                                      April 30,   January 31,
                                                          2007          2007
    -------------------------------------------------------------------------
    Diavik Joint Venture                          $     16,353  $     30,776
    Cash and cash equivalents                           23,175        23,398
    -------------------------------------------------------------------------
    Total cash and cash equivalents                     39,528        54,174
    Cash collateral and cash reserves                   39,189        51,448
    -------------------------------------------------------------------------
    Total cash resources                          $     78,717  $    105,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NOTE 5:
    Inventory and Supplies

                                                      April 30,   January 31,
                                                          2007          2007
    -------------------------------------------------------------------------
    Rough diamond inventory                       $     26,115  $     17,648
    Merchandise inventory                              243,692       228,157
    Supplies inventory                                  47,511        27,931
    -------------------------------------------------------------------------
    Total inventory and supplies                  $    317,318  $    273,736
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NOTE 6:
    Diavik Joint Venture

    The following represents Aber's 40% proportionate interest in the Joint
    Venture as at March 31, 2007 and December 31, 2006.

                                                      April 30,   January 31,
                                                          2007          2007
    -------------------------------------------------------------------------
    Current assets                                $     87,176  $     66,037
    Long-term assets                                   495,155       477,753
    Current liabilities                                 39,457        35,671
    Long-term liabilities and participant's account    542,874       508,119
    -------------------------------------------------------------------------


                                                      April 30,     April 30,
    Three months ended:                                   2007          2006
    -------------------------------------------------------------------------
    Net expense                                         40,101        33,757
    Cash flows resulting from operating activities     (44,042)       (6,711)
    Cash flows resulting from financing activities      64,272        52,069
    Cash flows resulting from investing activities     (29,622)      (18,412)
    -------------------------------------------------------------------------

    The Company is contingently liable for the other participant's portion of
    the liabilities of the Joint Venture and to the extent the Company's
    participating interest has increased because of the failure of the other
    participant to make a cash contribution when required, the Company would
    have access to an increased portion of the assets of the Joint Venture to
    settle these liabilities.

    NOTE 7:
    Share Capital

    (a) Authorized
        Unlimited common shares without par value.

    (b) Issued
                                              Number of Shares        Amount
        ---------------------------------------------------------------------
        Balance, January 31, 2007                   58,360,755  $    305,165
        Shares issued for:
          Exercise of options                            1,443            43
        ---------------------------------------------------------------------
        Balance, April 30, 2007                     58,362,198  $    305,208
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (c) RSU and DSU Plans
                                                             Number of Units
        ---------------------------------------------------------------------
        Balance, January 31, 2007                                    233,539
        Awards during the period (net):
          RSU                                                          6,053
          DSU                                                         11,335
        ---------------------------------------------------------------------
        Balance, April 30, 2007                                      250,927
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                  Three Months  Three Months
                                                         Ended         Ended
                                                      April 30,     April 30,
        Expense for the period:                           2007          2006
        ---------------------------------------------------------------------
        RSU                                       $        165  $        386
        DSU                                                (73)          136
        ---------------------------------------------------------------------
                                                  $         92  $        522
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the period, the Company granted 6,053 Restricted Share Units
        ("RSUs") (net of decreases) and 11,335 Deferred Share Units ("DSUs")
        under an employee and director incentive compensation program,
        respectively. The RSU and DSU Plans are full value phantom shares
        that mirror the value of Aber's publicly traded common shares.

        Grants under the RSU Plan are on a discretionary basis to employees
        of the Company subject to Board of Director approval. Each RSU grant
        vests on the third anniversary of the grant date, subject to special
        rules for death and disability. The Company anticipates paying out
        cash on maturity of RSUs and DSUs.

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

        The expenses related to the RSUs and DSUs are accrued based on the
        price of Aber's common shares at the end of the period and on the
        probability of vesting. This expense is recognized on a straight-line
        basis over the term of the grant.

    NOTE 8:
    Commitments and Guarantees

    (a) Environmental Agreement
        Through negotiations of environmental and other agreements, the Joint
        Venture must provide funding for the Environmental Monitoring
        Advisory Board. Aber's share of this funding requirement was
        $0.2 million for calendar 2007. Further funding will be required in
        future years; however, specific amounts have not yet been determined.
        These agreements also state the Joint Venture must provide security
        deposits for the performance by the Joint Venture of its reclamation
        and abandonment obligations under all environmental laws and
        regulations. Aber's share of the Joint Venture's letters of credit
        outstanding with respect to the environmental agreements as at
        April 30, 2007 was $52.5 million. The agreement specifically provides
        that these funding requirements will be reduced by amounts incurred
        by the Joint Venture on reclamation and abandonment activities.

    (b) Participation Agreements
        The Joint Venture has signed participation agreements with various
        native groups. These agreements are expected to contribute to the
        social, economic and cultural well-being of the Aboriginal bands. The
        agreements are each for an initial term of twelve years and shall be
        automatically renewed on terms to be agreed for successive periods of
        six years thereafter until termination. The agreements terminate in
        the event the mine permanently ceases to operate.

    (c) Commitments
        Commitments include the cumulative maximum funding commitments
        secured by letters of credit of the Joint Venture's environmental and
        participation agreements at Aber's 40% share, before any reduction of
        future reclamation activities, and future minimum annual rentals
        under non-cancellable operating and capital leases for retail salons
        and corporate office space, and are as follows:

        2008                                                    $     68,284
        2009                                                          80,551
        2010                                                          81,743
        2011                                                          79,963
        2012                                                          77,755
        Thereafter                                                   132,897
        ---------------------------------------------------------------------

    NOTE 9:
    Employee Benefit Plans

                                                  Three Months  Three Months
                                                         Ended         Ended
                                                      April 30,     April 30,
    Expenses for the period:                              2007          2006
    -------------------------------------------------------------------------
    Defined benefit pension plan at Harry Winston $          6  $         30
    Defined contribution plan at Harry Winston             210            90
    Defined contribution plan at the Diavik Mine           163           178
    -------------------------------------------------------------------------
                                                  $        379  $        298
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NOTE 10:
    Related Parties

    Transactions with related parties for the three months ended April 30,
    2007 include $0.4 million ($0.4 million for the three months ended
    April 30, 2006) of rent relating to the New York salon, payable to a
    Harry Winston employee.

    NOTE 11:
    Subsequent Event

    On May 31, 2007, Aber amended its existing credit facility to extend the
    maturity date to December 15, 2009 from December 15, 2008. The schedule
    of required principal repayments has been adjusted to reflect the new
    maturity date.

    NOTE 12:
    Segmented Information

    The Company operates in two segments within the diamond industry, mining
    and retail, for the three months ended April 30, 2007.

    The mining segment consists of the Company's rough diamond business. This
    business includes the 40% interest in the Diavik group of mineral claims
    and the sale of rough diamonds in the market-place.

    The retail segment consists of the Company's ownership in Harry Winston.
    This segment consists of the marketing of fine jewelry and watches on a
    worldwide basis.

    For the three months ended
     April 30, 2007                       Mining        Retail         Total
    -------------------------------------------------------------------------
    Revenue
      Canada                        $     82,752  $          -  $     82,752
      United States                            -        24,341        24,341
      Europe                                   -        22,347        22,347
      Asia                                     -        11,925        11,925
    Cost of sales                         40,516        30,616        71,132
    -------------------------------------------------------------------------
                                          42,236        27,997        70,233
    Selling, general and
     administrative expenses               5,087        29,124        34,211
    -------------------------------------------------------------------------
    Earnings (loss) from operations       37,149        (1,127)       36,022
    -------------------------------------------------------------------------
    Interest and financing expenses       (3,675)       (2,457)       (6,132)
    Other income                             766           147           913
    Foreign exchange gain (loss)         (13,311)           19       (13,292)
    -------------------------------------------------------------------------
    Segmented earnings (loss)
     before income taxes            $     20,929  $     (3,418) $     17,511
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segmented assets as at
     April 30, 2007
      Canada                        $    735,349  $          -  $    735,349
      United States                            -       464,003       464,003
      Other foreign countries              5,542       110,459       116,001
    -------------------------------------------------------------------------
                                    $    740,891  $    574,462  $  1,315,353
    -------------------------------------------------------------------------
    Goodwill as at April 30, 2007   $          -  $     97,207  $     97,207
    Capital expenditures            $     29,010  $      8,556  $     37,566
    Other significant non-cash
     items:
      Income tax recovery           $     (2,683) $       (639) $     (3,322)
    -------------------------------------------------------------------------


    For the three months ended
     April 30, 2006                       Mining        Retail         Total
    -------------------------------------------------------------------------
    Revenue
      Canada                        $     69,308  $          -  $     69,308
      United States                            -        21,148        21,148
      Europe                                   -        16,459        16,459
      Asia                                     -        12,356        12,356
    Cost of sales                         38,749        25,096        63,845
    -------------------------------------------------------------------------
                                          30,559        24,867        55,426
    Selling, general and
     administrative expenses               4,787        22,508        27,295
    -------------------------------------------------------------------------
    Earnings from operations              25,772         2,359        28,131
    -------------------------------------------------------------------------
    Interest and financing expenses       (2,797)       (1,537)       (4,334)
    Other income                           1,602            21         1,623
    Foreign exchange gain (loss)          (2,247)          141        (2,106)
    -------------------------------------------------------------------------
    Segmented earnings before
     income taxes                   $     22,330  $        984  $     23,314
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segmented assets as at
     April 30, 2006
      Canada                        $    755,561  $          -  $    755,561
      United States                            -       271,878       271,878
      Other foreign countries             18,727        64,544        83,271
    -------------------------------------------------------------------------
                                    $    774,288  $    336,422  $  1,110,710
    -------------------------------------------------------------------------
    Goodwill as at April 30, 2006   $          -  $     41,966  $     41,966
    Capital expenditures            $     19,458  $      2,686  $     22,144
    Other significant non-cash
     items:
      Income tax recovery           $     (3,835) $       (103) $     (3,938)
    -------------------------------------------------------------------------

    Sales to one customer in the mining segment totalled $4.6 million for the
    three months ended April 30, 2007 ($5.7 million for the three months
    ended April 30, 2006).
    

    %SEDAR: 00003786E




For further information:

For further information: Robert A. Gannicott, Chairman and Chief
Executive Officer, (416) 362-2237; Investor Relations, (416) 362-2237 (ext.
244)

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Dominion Diamond Corporation

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