Dominion Diamond Corporation Reports Fiscal 2014 Fourth Quarter and Year-End Results

TORONTO, April 2, 2014 /CNW/ - Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the "Company") today announced its Fiscal 2014 Fourth Quarter and Year-End results for the period ended January 31, 2014.

Robert Gannicott, Chairman and Chief Executive Officer stated: "Our early experience at Ekati continues to exceed our expectations while Diavik also outperforms its planned targets. The diamond market has improved, both in pricing and volume of demand, as the important diamond consuming economies, led by the US, maintain momentum."

Corporate

Fiscal 2014 was a year during which the Company transitioned into one of the world's largest pure play diamond mining companies. During this period, the Company completed the sale of the Harry Winston luxury brand segment at an enterprise value of $1 billion (including the assumption of $250 million of pro forma net debt) and the acquisition of the Ekati Diamond Mine from a global mining company for whom diamonds were non longer a core asset. The Company paid a total of $553 million, for its interest in the Ekati Diamond Mine, which included $62 million of cash, $154 million of rough diamond inventory and $165 million of supplies (fuel, cement and other mining supplies).

The Diavik Diamond Mine, which is one of the highest grade diamond mines in the world, continues to deliver excellent results.

The Company's senior management is completely focused on delivering value from the Ekati Diamond Mine, and the benefits of having the senior management team on hand in Yellowknife are already being demonstrated. Grade recovered is ahead of plan, and cash cost of production for the period from April 10, 2013, to January 31, 2014, which were originally forecast at $320 million, came in at $303 million.

At the beginning of calendar year 2016, the capital spending on the pushback at the Misery Main Pipe will be completed and this pipe will come into production; at over 4 carats per tonne at an average price of approximately $105 per carat, Misery Main is one of the richest kimberlite ore bodies in the world.

During this fiscal year the Company has expensed $10.1 million on the Jay Project which involves the development of the largest diamondiferous resource in North America. It has the potential to extend the operating life of the Ekati Diamond Mine in the order of 10 to 20 years beyond the currently scheduled closure in 2019. The development and mining of this kimberlite is the cornerstone of the Company's strategy for building a long-term, sustainable Canadian diamond business.

We are pleased to welcome Fiona Perrot-Humphrey to our board of directors. Dr Perrot-Humphrey has a long history as a mining equity analyst in both South Africa and then London. She is currently a senior advisor to N.M. Rothschild in London.

Diamond Market

The first three months of calendar 2014 has seen an upturn in rough diamond prices of just over 7%. This growth is primarily the result of restocking in the US, the world's largest market for diamond jewelry, following strong demand in the important US holiday season and strong demand in China, the world's second largest consumer of diamond jewelry, in the period running up to Chinese New Year. Evidence suggests that jewelry sales are also increasing in India, another major consumer of diamond jewelry where sales had been weak in the past two years.

Fourth Quarter Summary

  • For the fourth quarter, Ekati recorded sales of $114.0 million, and incurred cash costs of production of $101.3 million. Total cost of sales for Ekati for the fourth quarter were $114.3 million.

  • For the fourth quarter, Diavik recorded sales of $119.2 million, and incurred cash costs of production of $43.3 million. Total cost of sales for Diavik for the fourth quarter were $87.7 million.
  • As at January 31 2014, the Company held cash and cash equivalents of $224.8 million and restricted cash of $113.6 million.

  • Consolidated rough diamond sales from the Company's ownership in the Diavik and Ekati Diamond Mines for the fourth quarter were $233.2 million compared to $110.1 million for the comparable quarter of the prior year. This resulted in an operating profit from continuing operations of $21.0 million, consistent with the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $76.2 million compared to $45.3 million in the comparable quarter of the prior year.

    • Sales from the Diavik Diamond Mine were $119.2 million generating EBITDA of $59.3 million and EBITDA margins of approximately 50% for the fourth quarter.

    • Sales from the Ekati Diamond Mine were $114.0 million generating EBITDA of $24.4 million and EBITDA margins of approximately 21% for the fourth quarter. However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes, which material was excavated during the pre-stripping operations of the Misery Main pipe, for estimated proceeds of $10.8 million. During pre-production, sales of diamonds recovered from the Misery South and Southwest material have been applied as a reduction of mining assets. The Company estimates that the EBITDA margin would have been approximately 26% if the Misery South and Southwest pipes had been in commercial production during the quarter, therefore allowing the sales of carats from such material to be recognized as revenue.
  • Included in the exploration costs of $3.3 million for the quarter was $3.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine.

  • The Company recorded a net foreign exchange loss of $7.9 million during the fourth quarter related to the weakening in the Canadian dollar versus the US dollar. This compared to a gain of $0.1 million in the comparable quarter of the previous year.

  • The Company recorded a net income tax expense of $19.0 million during the fourth quarter which includes $13.5 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the fourth quarter, substantially all of which was non-cash tax expense.  This is compared to a net income tax expense of $7.0 million in the comparable quarter of the previous year with a much less significant impact of foreign exchange.

  • The Company recorded a consolidated net loss from continuing operations of $7.8 million or $(0.09) per share for the quarter compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter in the previous year.

  • At the end of the quarter, the Company held rough diamond inventory with an approximate market value of $205 million, of which $40 million of rough diamond inventory had been held as strategic stock from sale as at January 31.

  • Detailed life of mine plans for both the Ekati Diamond Mine and the Diavik Diamond Mine based on reserves only were published on February 3, 2014.

Annual Results Summary

  • For the period from April 10, 2013 to January 31, 2014, Ekati recorded sales of $399.6 million and incurred cash costs of production of $303.9 million. Total cost of sales for Ekati for the period were $392.9 million

  • For the fiscal year, Diavik recorded sales of $352.3 million and incurred cash costs of production of $162.6 million. Total cost of sales for Diavik for the fiscal year were $257.9 million.
  • Consolidated sales from continuing operations totaled $751.9 million for the year ended January 31, 2014, compared to $345.4 million compared to the prior year resulting in an operating profit of $51.6 million compared to an operating profit of $47.7 million in the prior year.

    • Sales from the Diavik Diamond Mine were $352.3 million generating an EBITDA margin of approximately 49% for the year.

    • Sales from the Ekati Diamond Mine were $399.6 million generating EBITDA of $59.6 million and EBITDA margin of approximately 15% for the period from April 10, 2013 to January 31, 2014. However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes excavated during the pre-stripping operations of the Misery Main pipe for estimated proceeds of $14.3 million. EBITDA was also impacted by the sale of inventory that was recorded at market value as a result of the acquisition of the Ekati Diamond Mine. The Company estimates that the EBITDA margin would have been approximately 27% if the effect of the market value adjustment to inventory made as part of the acquisition of the Ekati Diamond Mine was excluded and the carats sold from material excavated from the Misery South & Southwest pipes were recognized as revenue.

  • Gross margin increased 30% to $101.1 million from $77.8 million in the prior year. Consolidated EBITDA from operations was $191.7 million compared to $127.9 million in the prior year.

  • Exploration expense of $14.6 million was incurred during the year which compares to $1.8 million in the prior year. Included in the exploration costs for fiscal 2014 are $10.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine and $4.5 million of exploration work on the Company's claims in the Northwest Territories.

  • The Company recorded a foreign exchange loss of $8.9 million during the year related to the weakening in the Canadian dollar versus the US dollar. This is compared to a gain of $0.5 million in the prior year.

  • The Company recorded a net income tax expense of $35.5 million during the year which includes $20.7 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the period, substantially all of which was non-cash tax expense.  This is compared to a net income tax expense of $15.3 million in the prior year with a much less significant impact of foreign exchange.

  • Included in the fiscal 2014 financial results are $3.2 million (after tax) of restructuring costs at the Antwerp, Belgium, office as a result of the integration of Dominion Diamond and Ekati's sales teams, $11.4 million (after tax) of Ekati acquisition costs and $10.6 million (after tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine acquisition.

  • The Company recorded a consolidated net loss from continuing operations attributable to shareholders of $23.0 million or $(0.27) per share.

  • The Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share excluding the following:

    • the restructuring costs at the Antwerp, Belgium office;
    • the expenses related to the cancellation of the credit facilities related to the Ekati Acquisition;
    • Ekati Acquisition transaction costs; and
    • the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales.

Diavik Diamond Mine

  • The fourth calendar quarter at the Diavik Diamond Mine saw continued strong performance, producing (on a 100% basis) 2.1 million carats from 0.54 million tonnes of ore processed compared to production of 1.9 million carats from 0.47 million tonnes of ore processed in the comparable quarter of the prior year. This was a result of the improvements in the mining rates as the underground ramp-up progressed throughout the year to full production from all three pipes.

  • During the fourth quarter, the Company sold approximately 1.0 million carats from the Diavik Diamond Mine for a total of $119.2 million for an average price per carat of $114.

  • Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $119 per carat based on the prices achieved in the January 2014 sale.

  • During the year ended January 31, 2014, the Company sold approximately 3.0 million carats from the Diavik Diamond Mine for a total of $352 million for an average price of $118 per carat, compared to 3.2 million carats for an average price per carat of $109 in the comparable period in the prior year.

  • At January 31, 2014, the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million.

  • The Diavik management team continues to focus on maximizing production and lowering costs.

Ekati Diamond Mine

  • The Ekati Diamond Mine is performing well. A series of initiatives has been undertaken aimed at optimizing operations since the Company's senior management team took control.  Mining at the open pit Fox pipe will be completed ahead of schedule.  During the fourth fiscal quarter, approximately 917,500 tonnes of ore (on a 100% basis) was processed yielding approximately 481,000 carats.

  • During the fourth quarter, the Company sold approximately 0.4 million carats for a total of $114.0 million for an average price per carat of $276. Not included in this figure are sales of approximately $10.8 million from carats produced during the processing of satellite material from the Misery South and Southwest satellite pipes.

  • Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $287 based on the prices achieved in the January 2014 sale.

  • At January 31, 2014, the Company had 0.5 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $140 million.

  • During the period from April 10, 2013 to January 31, 2014, the Ekati Diamond Mine produced (on a 100% basis) 1.65 million carats from the processing of approximately 3.4 million tonnes, of which 2.3 million tonnes of ore was sourced from the Fox pipe, approximately 0.4 million tonnes was sourced from Koala Underground, and 0.28 million tonnes was sourced from Koala North. In addition, as at January 31, 2014, the Company had processed approximately 0.25 million tonnes of kimberlite material excavated from the Misery South and Southwest pipes, which achieved an overall grade of 1.4 carats per tonne, as well as 78,000 tonnes of Coarse Ore Rejects which achieved an average grade of 0.4 carats per tonne. These diamond recoveries are not included in the Company's reserves and resources statement and are therefore considered incremental to production

Jay Pipe Development

The Company's work on the Jay Project is proceeding on schedule.  The winter 2014 drilling program is well underway at the Jay pipe and along the proposed dike alignments associated with the project.  To date, 20 sonic drill holes and 16 diamond drill holes have been completed along four potential dike emplacements and geotechnical drilling is underway at the Jay pipe.  The drilling program will extend into late April.

Permitting update

The scoping sessions for the Jay Project were held in January, 2014.  All parties were then asked to comment on a draft Terms of Reference for the project and the Mackenzie Valley Review Board (Board) published a final Terms of Reference and interim draft work plan for the environmental assessment of the Jay pipe on February 21, 2014.  The Company is now working to submit a Developer's Assessment Report to the Board in Q3 2014.  The analytical and hearing phases of the Environmental Review are estimated to take 10-12 months. The Board will then make a recommendation to the Minister with a decision expected in Q3 2015.

Lynx Project

The permitting for the Lynx pipe expansion is entering its final phase. The Company anticipates having all permits in hand well before the planned development of the project in 2015. Ore production is scheduled for 2016.

Administration of Land, Water and Resources in the Northwest Territories

The Government of Canada will be transferring responsibility for managing public land, water and resources in the Northwest Territories to the Government of the Northwest Territories (GNWT) on April 1, 2014. The Company is preparing for this transfer by working with the GNWT to strengthen our working relationship and to ensure the schedule for the Jay review is maintained.

Conference Call and Webcast
Beginning at 8:30AM (ET) on Thursday, April 3rd, the Company will host a conference call for analysts, investors and other interested parties. Listeners may access a live broadcast of the conference call on the Company's web site at www.ddcorp.ca or by dialing 800-706-7741 within North America or 617-614-3471 from international locations and entering passcode 21447206.

An online archive of the broadcast will be available by accessing the Company's web site at www.ddcorp.ca. A telephone replay of the call will be available one hour after the call through 11:00PM (ET), Thursday, April 17th, 2014 by dialing 888-286-8010 within North America or 617-801-6888 from international locations and entering passcode 35806731.

About Dominion Diamond Corporation
Dominion Diamond Corporation is a Canadian diamond mining company with ownership interests in two major producing diamond mines.  Both mines are located in the low political risk environment of the Northwest Territories in Canada.  

The Company operates the Ekati Diamond Mine through its 80 per cent ownership as well as a 58.8% ownership in the surrounding areas containing additional resources, and also owns 40% of the Diavik Diamond Mine. It supplies rough diamonds to the global market through its sorting and selling operations in Canada, Belgium and India and is the world's fourth largest producer of rough diamonds by value.

For more information, please visit www.ddcorp.ca

Highlights

(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED) 

FOURTH QUARTER RESULTS
Dominion Diamond Corporation (the "Company") recorded a consolidated net loss attributable to shareholders of $7.8 million or $(0.09) per share for the quarter, compared to a net profit attributable to shareholders of $14.9 million or $0.18 per share in the fourth quarter of the prior year. Net loss from continuing operations attributable to shareholders (which represents the Diavik and Ekati mining segments) was $7.8 million or $(0.09) per share, compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter of the prior year. Included in net loss from continuing operations was $7.9 million related to a foreign exchange loss compared to a $0.1 million gain related to foreign exchange in the fourth quarter of the prior year, due to the weakening of the Canadian dollar. The net loss from continuing operations for the quarter also included $13.5 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense.  This compares to a $0.2 million of tax expense related to the impact of foreign exchange in the comparable quarter of the prior year.

Consolidated sales from continuing operations were $233.2 million for the quarter, compared to $110.1 million for the comparable quarter of the prior year, resulting in an operating profit of $21.0 million, compared to an operating profit of $21.0 million in the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $76.2 million compared to $45.3 million in the comparable quarter of the prior year.

During the fourth quarter, the Company recorded sales from the Diavik Diamond Mine of $119.2 million compared to $110.1 million in the comparable quarter of the prior year. The Company sold approximately 1.0 million carats from the Diavik Diamond Mine for an average price per carat of $114, compared to 0.8 million carats for an average price per carat of $133 in the comparable quarter of the prior year. The 27% increase in volume of Diavik Diamond Mine carats sold versus the comparable quarter of the prior year resulted primarily from the sale during the fourth quarter of inventory held back from sale in the prior quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India. The 14% decrease in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the fourth quarter of the prior year resulted primarily from a change in the sales mix of product sold, partially offset by an increase in market prices for rough diamonds in the fourth quarter compared to the prior year. The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 26.4% and 50%, respectively, compared to 28.2% and 48%, respectively, in the comparable quarter of the prior year. At January 31, 2014, the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million.

During the fourth quarter, the Ekati Diamond Mine recorded sales of $114.0 million and sold approximately 0.4 million carats for an average price per carat of $276. Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes as this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Ekati Diamond Mine generated gross margins and EBITDA margins of (0.3)% and 21%, respectively. The Company estimates that gross margins and EBITDA margins would have been approximately 7.0% and 26.0%, respectively if the carats sold from material excavated from the Misery South & Southwest kimberlite pipes were recognized as revenue. During pre-production, sales of Misery South and Southwest carats have been applied as a reduction of mining assets. At January 31, 2014, the Company had 0.5 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $140 million.

The Corporate segment, which includes all costs not specifically related to the operations of the Diavik and Ekati mines, recorded selling, general and administrative expenses of $7.9 million, compared to $8.2 million in the comparable quarter of the prior year.

ANNUAL RESULTS
During the year, the Company completed the acquisition of the Ekati Diamond Mine and the sale of Harry Winston, Inc. (the "Luxury Brand Segment") to Swatch Group. The acquisition of the Ekati Diamond Mine (the "Ekati Diamond Mine Acquisition") was completed on April 10, 2013. As a result of the Ekati Diamond Mine Acquisition, the Company acquired an 80% interest in the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as a 58.8% interest in the Buffer Zone, an adjacent area hosting kimberlite pipes with both development and exploration potential. The sale of the Luxury Brand Segment was completed on March 26, 2013 and as a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston".  See "Discontinued Operations". Accordingly, the Company's consolidated results from continuing operations are for the Diavik Diamond Mine and the Ekati Diamond Mine (from April 10th, the date of acquisition by the Company). Continuing operations no longer include the operations of the Luxury Brand Segment and the results of this segment are now treated as discontinued operations for reporting purposes.

The Company recorded a consolidated net profit attributable to shareholders of $479.7 million or $5.64 per share for the year, compared to a consolidated net income attributable to shareholders of $34.7 million or $0.41 per share in the prior year.  Net loss from continuing operations attributable to shareholders was $23.0 million or $(0.27) per share compared to net profit from continuing operations attributable to shareholders of $22.3 million or $0.26 per share in the prior year.  Included in the consolidated net loss attributable to shareholders for the year was $3.2 million (after-tax) of restructuring costs at the Antwerp, Belgium office, $10.6 million (after-tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition and $11.4 million (after-tax) of Ekati acquisition costs. Excluding these items and the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales, the Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share. The net loss from continuing operations for the year also included $20.7 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense.   This compares to a $0.7 million of tax expense related to the impact of foreign exchange in the prior year. Continuing operations includes all costs related to the Company's mining operations, including those previously reported as part of the corporate segment.

Consolidated sales from continuing operations were $751.9 million for the year compared to $345.4 million for the prior year, resulting in an operating profit of $51.6 million compared to an operating profit of $47.7 million in the prior year.  Gross margin increased 30% to $101.1 million from $77.8 million in the prior year.  Consolidated EBITDA from operations was $191.7 million compared to $127.9 million in the prior year.

During the year, the Company recorded sales from the Diavik Diamond Mine of $352.3 million compared to $345.4 million in the prior year.  The Company sold approximately 3.0 million carats from the Diavik Diamond Mine for an average price per carat of $118, compared to 3.2 million carats for an average price per carat of $109 in the prior year.  The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 26.8% and 49%, respectively, compared to 22.5% and 44% in prior year.

During the year, the Company recorded sales from the Ekati Diamond Mine of $399.6 million and sold approximately 1.3 million carats for an average price per carat of $301. Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes, this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Ekati segment generated gross margins and EBITDA margins as a percentage of sales of 1.7% and 15%, respectively. The Company estimates that gross margins and EBITDA margins would have been approximately 8.2% and 27%, respectively if the effect of the market value adjustment to inventory made as part of the Ekati Diamond Mine Acquisition was excluded and the carats sold from material excavated from the Misery South & Southwest kimberlite pipes were recognized as revenue.

The net earnings during the year from discontinued operations of $502.7 million are presented separately in the consolidated income statements, and comparative periods have been adjusted accordingly.

Management's Discussion and Analysis

(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED)

Basis of Presentation
The following is management's discussion and analysis ("MD&A") of the results of operations for Dominion Diamond Corporation for the year ended January 31, 2014, and its financial position as at January 31, 2014. This MD&A is based on the Company's unaudited consolidated financial statements. Unless otherwise specified, all financial information is presented in United States dollars. Unless otherwise indicated, all references to "year" refer to the fiscal year ended January 31, 2014.

Caution Regarding Forward-Looking Information
Certain information included in this MD&A constitutes forward-looking information within the meaning of Canadian and United States securities laws. Forward-looking information can generally be identified by the use of terms such as "may", "will", "should", "could", "expect", "plan", "anticipate", "foresee", "appears", "believe", "intend", "estimate", "predict", "potential", "continue", "objective", "modeled", "hope", "forecast" or other similar expressions concerning matters that are not historical facts. Forward-looking information relates to management's future outlook and anticipated events or results, and can include statements or information regarding plans for mining, development, production and exploration activities at the Company's mineral properties, projected capital expenditure requirements, liquidity and working capital requirements, estimated production from the Ekati Diamond mine and Diavik Diamond Mine, expectations concerning the diamond industry, and expected cost of sales and cash operating costs. Forward-looking information included in this MD&A includes the current production forecast, cost of sales and cash cost of production estimates and planned capital expenditures for the Diavik Diamond Mine and other forward-looking information set out under "Diavik Operations Outlook", and the current production forecast, cost of sales and cash cost of production estimates and planned capital expenditures for the Ekati Diamond Mine and other forward-looking information set out under "Ekati Operations Outlook".

Forward-looking information is based on certain factors and assumptions described below and elsewhere in this MD&A including, among other things, the current mine plans for each of the Ekati Diamond Mine and the Diavik Diamond Mine; mining, production, construction and exploration activities at the Company's mineral properties; currency exchange rates; and world and US economic conditions. While the Company considers these assumptions to be reasonable based on the information currently available to it, they may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what the Company currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, including risks associated with the inability to control the timing and scope of future capital expenditures, the risk that the operator of the Diavik Diamond Mine may make changes to the mine plan and other risks arising because of the nature of joint venture activities, risks associated with the remote location of and harsh climate at the Company's mineral property sites, risks resulting from the Eurozone financial crisis and macroeconomic uncertainty in other financial markets, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate and cash flow and liquidity risks. Please see page 21 of this MD&A, as well as the Company's current Annual Information Form, available at www.sedar.com and www.sec.gov, respectively, for a discussion of these and other risks and uncertainties involved in the Company's operations. Actual results may vary from the forward-looking information.

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

SUMMARY DISCUSSION
Dominion Diamond Corporation is focused on the mining and marketing of rough diamonds to the global market. The Company supplies rough diamonds to the global market from its operation of the Ekati Diamond Mine (in which it owns a controlling interest) and its 40% ownership interest in the Diavik Diamond Mine. Both mineral properties are located at Lac de Gras in Canada's Northwest Territories.

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

The Company has an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Diavik Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines (2012) Inc. ("DDMI") (60%) and Dominion Diamond Diavik Limited Partnership ("DDDLP") (40%) where DDDLP holds an undivided 40% ownership interest in the assets, liabilities and expenses of the Diavik Diamond Mine. DDMI is the operator of the Diavik Diamond Mine. Both DDMI and DDDLP are headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary of Rio Tinto plc of London, England. The Company receives 40% of the diamond production from the Diavik Diamond Mine.

MARKET COMMENTARY
After an exuberant start to fiscal 2014 the rough diamond market slowed in the second quarter as both tight liquidity and problems with a fluctuating rupee in India dampened market sentiment amongst diamond manufacturers. The diamond market was also impacted by a decrease in retail activity in China, which had propelled the diamond market in fiscal 2013, as political reforms slowed luxury spending.

The market regained its composure in the fourth quarter of fiscal 2014 as more positive demand was evident in the lead up to the traditionally busy year-end holiday season in the US and the Lunar New Year in China. It soon became evident that the world's largest jewelry market, the USA, was in a positive mood and also the lead up to the Chinese New Year was increasingly robust. The mood in the Indian retail market improved as the rupee steadied but it was still a frustrating season there as local economic woes, and a substantial increase in the duty on gold, dampened any enthusiasm for jewelry.

The tightening of liquidity by the banks caused many (mainly India) manufacturers to take a more pragmatic approach to their business; in particular with respect to their stock levels and the length of their supply chain and its impact on cash flow. Whilst this was a painful exercise, it put the business in a far better shape to capitalize on the sound market at the year's end. This assurance has allowed manufacturers to restock with confidence driving a positive start to fiscal 2015.

CONSOLIDATED FINANCIAL RESULTS
The Company's consolidated results from continuing operations relate solely to its mining operations, which include the production, sorting and sale of rough diamonds. The results of the Company's Luxury Brand Segment, which it disposed of on March 26, 2013, are treated as discontinued operations for accounting and reporting purposes and current and prior period results have been recast accordingly.

The following is a summary of the Company's consolidated quarterly results for the eight quarters ended January 31, 2014.  As a result of retrospective adjustments made reflecting the final purchase price allocation of the Ekati Diamond Mine and adjustments for Misery South & Southwest pre-production revenue, the prior quarters have been recast.

(expressed in thousands of United States dollars except per share amounts and where otherwise noted)
(unaudited)
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Sales   $ 233,163 $ 148,138 $ 261,803 $ 108,837 $ 110,111 $ 84,818 $ 61,473 $ 89,009 $ 751,942 $ 345,411 $ 290,114
Cost of sales     202,030   136,221   231,086   81,535   79,038   71,663   46,784   70,099   650,872   267,584   227,951
Gross margin     31,133   11,917   30,717   27,302   31,073   13,155   14,689   18,910   101,070   77,827   62,163
Gross margin (%)     13.4%   8.0%   11.7%   25.1%   28.2%   15.5%   23.9%   21.2%   13.4%   22.5%   21.4%
Selling, general and administrative expenses     10,117   7,408   15,056   16,843   10,086   7,581   5,750   6,739   49,425   30,156   24,589
Operating profit (loss) from continuing operations     21,016   4,509   15,661   10,459   20,987   5,574   8,939   12,171   51,645   47,671   37,574
Finance expenses     (3,553)   (3,136)   (17,921)   (2,742)   (2,382)   (2,308)   (2,151)   (2,242)   (27,351)   (9,083)   (10,787)
Exploration costs     (3,290)   (7,074)   (3,145)   (1,039)   (306)   (673)   (568)   (254)   (14,550)   (1,801)   (1,770)
Finance and other income     491   825   1,032   804   601   60   67   52   3,153   780   462
Foreign exchange gain (loss)     (7,917)   1,122   (2,814)   732   116   (301)   1,048   (370)   (8,879)   493   834
Profit (loss) before income taxes from continuing operations     6,747   (3,754)   (7,187)   8,214   19,016   2,352   7,335   9,357   4,018   38,060   26,313
Income tax expense (recovery)     19,018   2,792   8,655   5,042   6,977   1,583   3,386   3,330   35,505   15,276   9,007
Net profit (loss) from continuing operations   $ (12,271) $ (6,546) $ (15,842) $ 3,172 $ 12,039 $ 769 $ 3,949 $ 6,027 $ (31,487) $ 22,784 $ 17,306
Net profit (loss) from discontinued operations     -   -   -   502,656   2,802   3,245   804   5,583   502,656   12,434   8,137
Net profit (loss)   $ (12,271) $ (6,546) $ (15,842) $ 505,828 $ 14,841 $ 4,014 $ 4,753 $ 11,610 $ 471,169 $ 35,218 $ 25,443
Net profit (loss) from continuing operations attributable to                                              
Shareholders   $ (7,802) $ (4,794) $ (13,884) $ 3,504 $ 12,146 $ 152 $ 3,951 $ 6,027 $ (22,974) $ 22,276 $ 17,317
Non-controlling interest     (4,469)   (1,752)   (1,958)   (332)   (107)   617   (2)   -   (8,513)   508   (11)
Net profit (loss) attributable to                                              
Shareholders   $ (7,802) $ (4,794) $ (13,884) $ 506,160 $ 14,948 $ 3,397 $ 4,755 $ 11,610 $ 479,682 $ 34,710 $ 25,454
Non-controlling interest     (4,469)   (1,752)   (1,958)   (332)   (107)   617   (2)   -   (8,513)   508   (11)
Earnings (loss) per share - continuing operations                                              
    Basic   $ (0.09) $ (0.06) $ (0.16) $ 0.04 $ 0.14 $ 0.00 $ 0.05 $ 0.07 $ (0.27) $ 0.26 $ 0.20
    Diluted   $ (0.09) $ (0.06) $ (0.16) $ 0.04 $ 0.14 $ 0.00 $ 0.05 $ 0.07 $ (0.27) $ 0.26 $ 0.20
Earnings (loss) per share                                              
    Basic   $ (0.09) $ (0.06) $ (0.16) $ 5.96 $ 0.18 $ 0.04 $ 0.06 $ 0.14 $ 5.64 $ 0.41 $ 0.30
    Diluted   $ (0.09) $ (0.06) $ (0.16) $ 5.89 $ 0.18 $ 0.04 $ 0.06 $ 0.14 $ 5.59 $ 0.41 $ 0.30
Cash dividends declared per share   $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Total assets (i)   $ 2,305 $ 2,305 $ 2,299 $ 2,412 $ 1,710 $ 1,733 $ 1,660 $ 1,716 $ 2,305 $ 1,710 $ 1,607
Total long-term liabilities (i)   $ 691 $ 688 $ 694 $ 695 $ 269 $ 682 $ 461 $ 472 $ 691 $ 269 $ 641
Operating profit (loss) from continuing operations   $ 21,016 $ 4,509 $ 15,661 $ 10,459 $ 20,987 $ 5,574 $ 8,939 $ 12,171 $ 51,645 $ 47,671 $ 37,574
Depreciation and amortization (ii)     55,228   31,978   32,644   20,211   24,346   20,588   13,160   22,172   140,061   80,266   78,761
EBITDA from continuing operations (iii)   $ 76,244 $ 36,487 $ 48,305 $ 30,670 $ 45,333 $ 26,162 $ 22,099 $ 34,343 $ 191,706 $ 127,937 $ 116,335
(i)  Total assets and total long-term liabilities are expressed in millions of United States dollars.
(ii)  Depreciation and amortization included in cost of sales and selling, general and administrative expenses.
(iii)  Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See "Non-IFRS Measures" on page 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended January 31, 2013

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a fourth quarter consolidated net loss attributable to shareholders of $7.8 million or $(0.09) per share, compared to a net profit attributable to shareholders of $14.9 million or $0.18 per share in the fourth quarter of the prior year. Net loss from continuing operations attributable to shareholders was $7.8 million or $(0.09) per share, compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter of the prior year. Included in net loss from continuing operations was a $7.9 million related to foreign exchange loss compared to a $0.1 million gain related to foreign exchange in the fourth quarter of the prior year, due to the weakening of the Canadian dollar. The net loss from continuing operations for the quarter also included $13.5 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense.  This compares to a $0.2 million of tax expense related to the impact of foreign exchange in the comparable quarter of the prior year.

Discontinued operations represented $nil of net profit compared to $2.8 million or $0.04 share in the fourth quarter of the prior year.

CONSOLIDATED SALES
Consolidated sales for the fourth quarter totalled $233.2 million, consisting of Diavik rough diamond sales of $119.2 million and Ekati rough diamond sales of $114.0 million. This compares to sales of $110.1 million in the comparable quarter of the prior year (Diavik rough diamond sales of $110.1 million and Ekati rough diamond sales of $nil).

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

CONSOLIDATED COST OF SALES AND GROSS MARGIN
The Company's fourth quarter cost of sales was $202.0 million resulting in a gross margin of 13.4%, compared to a cost of sales of $79.0 million and a gross margin of 28.2% for the comparable quarter of the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED INCOME TAXES
The Company recorded a net income tax expense of $19.0 million during the fourth quarter, compared to a net income tax expense of $7.0 million in the comparable quarter of the prior year. The Company's combined federal and provincial statutory income tax rate for the quarter is 26.5%.  There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate and unrecognized tax benefits. As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the fourth quarter, the Canadian dollar significantly weakened against the US dollar. As a result, the Company recorded an unrealized foreign exchange gain of $14.6 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability. This compares to an unrealized foreign exchange loss of $0.3 million in the comparable quarter of the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the fourth quarter, the Company also recognized a deferred income tax expense of $23.5 million for temporary differences arising from the difference between the historical exchange rate and the current exchange rate translation of foreign currency non-monetary items. This compares to a deferred income tax expense of $0.9 million recognized in the comparable quarter of the prior year. The recorded tax provision during the quarter also included a net income tax expense of $1.3 million relating to foreign exchange differences between income in the currency of the country of origin and US dollars. This compares to net income tax recovery of $1.1 million recognized in the comparable period of the prior year.

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

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The principal components of selling, general and administrative ("SG&A") expenses include expenses for salaries and benefits, professional fees, consulting and travel. The Company incurred SG&A expenses of $10.1 million for the fourth quarter, consistent with the comparable quarter of the prior year. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expense for the fourth quarter was $3.6 million, compared to finance expense of $2.4 million for the comparable quarter of the prior year. The increase was due primarily to accretion expense associated with the future site restoration liability at the Ekati Diamond Mine, which was not present in the comparable quarter of the prior year. Accretion expense was $2.8 million (three months ended January 31, 2013 - $0.6 million) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $3.3 million was incurred during the fourth quarter, compared to $0.3 million in the comparable quarter of the prior year. Included in exploration expense for the fourth quarter is $3.1 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $0.2 million of exploration work on the Company's claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $0.5 million was recorded during the fourth quarter, compared to $0.6 million in the comparable quarter of the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange loss of $7.9 million was recognized during the fourth quarter, compared to a net foreign exchange gain of $0.1 million in the comparable quarter of the prior year, due to the weakening of the Canadian dollar. The Company does not currently have any significant foreign exchange derivative instruments outstanding.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a consolidated net profit attributable to shareholders of $479.7 million or $5.64 per share for the year ended January 31, 2014, compared to a net profit attributable to shareholders of $34.7 million or $0.41 per share in the prior year. Included in this amount is a $502.9 million gain on the sale of the Luxury Brand Segment on March 26, 2013. Net loss from continuing operations attributable to shareholders was $23.0 million or $(0.27) per share, compared to a net profit from continuing operations attributable to shareholders of $22.3 million or $0.26 per share in the prior year. Included in the consolidated net loss attributable to shareholders for the year was $3.2 million (after-tax) of restructuring costs at the Antwerp, Belgium office, $10.6 million (after-tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition and $11.4 million (after-tax) of Ekati acquisition costs. Excluding these items and the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales, the Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share. Discontinued operations represented $502.6 million of net profit or $5.91 per share, compared to $12.4 million or $0.15 per share in prior year.

CONSOLIDATED SALES
Consolidated sales totalled $751.9 million for the year ended January 31, 2014, consisting of Diavik rough diamond sales of $352.3 million and Ekati rough diamond sales of $399.6 million. This compares to sales of $345.4 million in the prior year (Diavik rough diamond sales of $345.4 million and Ekati rough diamond sales of $nil). The Ekati rough diamond sales are for the period from April 10, 2013, which was the date the Ekati Diamond Mine Acquisition was completed, to January 31, 2014.

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

CONSOLIDATED COST OF SALES AND GROSS MARGIN
The Company's cost of sales was $650.9 million for the year ended January 31, 2014, resulting in a gross margin of 13.4%, compared to a cost of sales of $267.6 million and a gross margin of 22.5% for the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED INCOME TAXES
The Company recorded a net income tax expense of $35.5 million during the year ended January 31, 2014, compared to a net income tax expense of $15.3 million in the prior year. The Company's combined federal and provincial statutory income tax rate for the year ended January 31, 2014 is 26.5%. There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate and unrecognized tax benefits. As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the year ended January 31, 2014, the Canadian dollar significantly weakened against the US dollar. The Company recorded an unrealized foreign exchange gain of $24.1 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability during the year ended January 31, 2014. This compares to an unrealized foreign exchange loss of $1.1 million recorded in the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the year ended January 31, 2014, the Company recognized a deferred income tax expense of $40.4 million for temporary differences arising from the difference between the historical exchange rate and the current exchange rate translation of foreign currency non-monetary items. This compares to a deferred income tax expense of $4.4 million recognized in the prior year. The recorded tax provision during the year ended January 31, 2014 included a net income tax expense of $0.7 million relating to foreign exchange differences between income in the currency of the country of origin and the US dollar. This compares to a net income tax recovery of $5.2 million recognized in the prior year.

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

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company incurred SG&A expenses of $49.4 million during the year ended January 31, 2014, compared to $30.2 million in the prior year. The increase from the prior year was primarily due to $11.2 million of transaction costs and $4.9 million of restructuring costs at the Antwerp, Belgium office, related in each case to the Ekati Diamond Mine Acquisition. See "Segmented Analysis" on page 9 for additional information.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expenses were $27.4 million for the year ended January 31, 2014, compared to $9.1 million for the prior year. The increase was due primarily to the expensing of approximately $14.0 million relating to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition. The Company ultimately determined to fund the Ekati Diamond Mine Acquisition by way of cash on hand and did not draw on these credit facilities, which were subsequently cancelled. Also included in consolidated finance expense is an accretion expense of $9.3 million (year ended January 31, 2013 - $2.4 million) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $14.6 million was incurred during the year ended January 31, 2014, compared to $1.8 million in the prior year. Included in exploration expense for the current year is $10.1 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $4.5 million of exploration work on the Company's claims in the Northwest Territories.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $3.2 million was recorded during the year ended January 31, 2014, compared to $0.8 million in the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange loss of $8.9 million was recognized during the year ended January 31, 2014, compared to a net foreign exchange gain of $0.5 million in the prior year. The Company does not currently have any significant foreign exchange derivative instruments outstanding.

Segmented Analysis

The operating segments of the Company include the Diavik Diamond Mine, the Ekati Diamond Mine and the Corporate segment. The Corporate segment captures costs not specifically related to operating the Diavik and Ekati mines.

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

(expressed in thousands of United States dollars)
(unaudited)
        2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
        Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Sales                                                
  North America     $ 511 $ - $ - $ 6,179 $ 4,604 $ 7,697 $ 2,269 $ 7,432 $ 6,690 $ 22,002 $ 15,018
  Europe       112,001   45,088   80,530   61,642   84,346   57,438   50,514   54,370   299,262   246,668   231,722
  India       6,704   7,818   10,737   21,095   21,161   19,683   8,690   27,207   46,355   76,741   43,374
Total sales       119,216   52,906   91,267   88,916   110,111   84,818   61,473   89,009   352,307   345,411   290,114
Cost of sales       87,690   40,018   68,328   61,888   79,038   71,663   46,784   70,099   257,924   267,584   227,951
Gross margin       31,526   12,888   22,939   27,028   31,073   13,155   14,689   18,910   94,383   77,827   62,163
Gross margin (%)       26.4%   24.4%   25.1%   30.4%   28.2%   15.5%   23.9%   21.2%   26.8%   22.5%   21.4%
Selling, general and administrative expenses       1,122   1,123   1,409   1,110   1,860   1,279   1,050   972   4,763   5,161   3,907
Operating profit     $ 30,404 $ 11,765 $ 21,530 $ 25,918 $ 29,213 $ 11,876 $ 13,639 $ 17,938 $ 89,620 $ 72,666 $ 58,256
Depreciation and amortization (i)       28,885   12,434   21,768   19,906   24,042   20,283   12,874   21,876   82,993   79,075   77,529
EBITDA (ii)     $ 59,289 $ 24,199 $ 43,298 $ 45,824 $ 53,255 $ 32,159 $ 26,513 $ 39,814 $ 172,613 $ 151,741 $ 135,785
(i)  Depreciation and amortization included in cost of sales and selling, general and administrative expenses.
(ii)  Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See "Non-IFRS Measures" on page 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended January 31, 2013

DIAVIK SALES
During the fourth quarter, the Company sold approximately 1.0 million carats from the Diavik Diamond Mine for a total of $119.2 million for an average price per carat of $114, compared to 0.8 million carats for a total of $110.1 million for an average price per carat of $133 in the comparable quarter of the prior year. The 27% increase in volume of carats sold versus the comparable quarter of the prior year resulted primarily from the sale during the fourth quarter of inventory held back from sale in the prior quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India. The 14% decrease in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the fourth quarter of the prior year resulted primarily from a change in the sales mix of product sold, partially offset by an increase in market prices for rough diamonds in the fourth quarter compared to the prior year. At January 31, 2014, the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million, compared to 0.5 million carats with an estimated market value of approximately $65 million in the comparable quarter of the prior year.

Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $119 per carat based on the prices achieved in the January 2014 sale.

DIAVIK COST OF SALES AND GROSS MARGIN
The Company's fourth quarter cost of sales for the Diavik Diamond Mine was $87.7 million resulting in a gross margin of 26.4%, compared to a cost of sales of $79.0 million and a gross margin of 28.2% in the comparable quarter of the prior year. Cost of sales for the fourth quarter included $28.9 million of depreciation and amortization, compared to $23.6 million in the comparable quarter of the prior year. The increase in depreciation and amortization is due primarily to the sale during the fourth quarter of inventory held back from sale in the third quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India. The Diavik segment generated gross margins and EBITDA margins of 26.4% and 50%, respectively, compared to 28.2% and 48%, respectively, in the comparable quarter of the prior year. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

A substantial portion of consolidated cost of sales is mining operating costs incurred at the Diavik Diamond Mine. During the fourth quarter, the Diavik cash cost of production was $43.3 million compared to $44.8 million in the comparable quarter of the prior year. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the unit-of-production method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Diavik Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Diavik Diamond Mine's cost of sales disclosed for the three months ended January 31, 2014 and 2013.

(expressed in thousands of United States dollars)           Three months ended
January 31, 2014
    Three months ended
January 31, 2013
Diavik cash cost of production           $ 43,284     $ 44,764
Private royalty             2,287       2,040
Other cash costs             1,270       1,272
Total cash cost of production             46,841       48,076
Depreciation and amortization             24,121       20,182
Total cost of production             70,962       68,258
Adjusted for stock movements             16,725       10,780
Total cost of sales           $ 87,687     $ 79,038

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Diavik Diamond Mine segment during the quarter was $1.1 million, compared to $1.9 million in the comparable quarter of the prior year.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

DIAVIK SALES
During the year ended January 31, 2014, the Company sold approximately 3.0 million carats from the Diavik Diamond Mine for a total of $352.3 million for an average price per carat of $118 compared to 3.2 million carats for a total of $345.4 million for an average price per carat of $109 in the comparable period of the prior year. The 8% increase in the Company's achieved average rough diamond prices and the 6% decrease in volume of carats sold resulted primarily from the sale during the first quarter of the prior year of almost all of the remaining lower priced goods originally held back in inventory by the Company at October 31, 2011 due to an oversupply in the market at that time.

DIAVIK COST OF SALES AND GROSS MARGIN
The Company's cost of sales for the Diavik Diamond Mine for the year ended January 31, 2014, was $257.9 million resulting in a gross margin of 26.8% compared to a cost of sales of $267.6 million and a gross margin of 22.5% in the comparable period of the prior year. Cost of sales for the year ended January 31, 2014 included $83.0 million of depreciation and amortization compared to $79.0 million in the prior year. This segment generated gross margins and EBITDA margins of 26.8% and 49%, respectively, compared to 22.5% and 44%, respectively, in the prior year.

A substantial portion of consolidated cost of sales is mining operating costs, incurred at the Diavik Diamond Mine. During the year ended January 31, 2014, the Diavik cash cost of production was $162.6 million compared to $171.4 million in the comparable period of the prior year. Cost of sales also includes sorting costs, which consist of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the unit-of-production method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Diavik Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Diavik Diamond Mine's cost of sales disclosed for the twelve months ended January 31, 2014 and 2013.

(expressed in thousands of United States dollars)                 2014           2013
Diavik cash cost of production           $     162,648     $     171,442
Private royalty                 6,217           7,399
Other cash costs                 3,988           4,360
Total cash cost of production                 172,853           183,201
Depreciation and amortization                 84,888           70,516
Total cost of production                 257,741           253,717
Adjusted for stock movements                 181           13,868
Total cost of sales           $     257,922     $     267,585

DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Diavik Diamond Mine segment for the year ended January 31, 2014 was $4.8 million, compared to $5.2 million in the comparable period of the prior year.

OPERATIONAL UPDATE
For the 2013 calendar year, the Diavik Diamond Mine performed ahead of target, producing (on a 100% basis) 7.2 million carats from 2.1 million tonnes of ore processed. The fourth quarter of calendar 2013 saw a continuing strong performance from the Diavik Diamond Mine with production (on a 100% basis) of 2.1 million carats from 0.54 million tonnes of ore processed compared to 1.9 million carats from 0.47 million tonnes of ore processed in the comparable quarter of the prior year. This total production does include coarse ore rejects ("COR"), which are not included in the Company's reserves and resource statement and are therefore incremental to production.

Processing volumes in the fourth quarter of calendar 2013 were 16% higher than the prior year's comparable quarter. This was a result of improvements in the mining rates as the underground ramp up progressed throughout the year to full production from all three pipes.

DOMINION DIAMOND DIAVIK LIMITED PARTNERSHIP'S 40% SHARE OF DIAVIK DIAMOND MINE PRODUCTION
(reported on a one-month lag)

For the three months ended December 31, 2013                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
A-154 South   51       220     4.28
A-154 North   69       144     2.10
A-418   94       418     4.46
Coarse Ore Rejects   2       44     -
Total   216       826     3.66(a)
(a) Grade has been adjusted to exclude COR.                  
                   
For the three months ended December 31, 2012                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
A-154 South   67       313     4.66
A-154 North   42       89     2.11
A-418   77       344     4.49
Coarse Ore Rejects   1       14     -
Total   187       760     4.01(a)
(a) Grade has been adjusted to exclude COR.                  
                   
For the year ended December 31, 2013                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
A-154 South   228       976     4.29
A-154 North   288       606     2.11
A-418   326       1,160     3.56
Coarse Ore Rejects   6       155     -
Total   848       2,897     3.26(a)
(a) Grade has been adjusted to exclude COR.                  
                   
For the year ended December 31, 2012                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
A-154 South   166       750     4.52
A-154 North   173       354     2.05
A-418   482       1,732     3.59
Coarse Ore Rejects   2       55     -
Total   823       2,892     3.45(a)

(a) Grade has been adjusted to exclude COR.

Diavik Operations Outlook

PRODUCTION
The mine plan for calendar 2014 foresees Diavik Diamond Mine production (on a 100% basis) of approximately 6.1 million carats from the mining and processing of approximately 1.9 million tonnes of ore.  Mining activities will be exclusively underground with approximately 0.7 million tonnes expected to be sourced from A-154 North, approximately 0.4 million tonnes from A-154 South and approximately 0.8 million tonnes from A-418 kimberlite pipes. In addition to the 6.1 million carats produced from underground mining there will be production from COR and production from the improved recovery of small diamonds. This additional production is not included in the Company's ore reserves, and is therefore incremental. Based on historical recovery rates, the tonnage of this material which is planned to be processed during calendar 2014 would have produced 0.6 million carats from COR and 0.2 million carats from the improved recovery process.

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

Ore type                       February 2014
sales cycle
Average price
per carat
(in US dollars)
A-154 South                     $ 145
A-154 North                       190
A-418                       105
Coarse Ore Rejects                       50

COST OF SALES AND CASH COST OF PRODUCTION
Based on the current mine plan for the Diavik Diamond Mine for calendar 2014, the Company currently expects its 40% share of the cost of sales for the Diavik Diamond Mine in fiscal 2015 to be approximately $280 million (including depreciation and amortization of approximately $100 million). The Company's 40% share of the cash cost of production at the Diavik Diamond Mine for calendar 2014 is expected to be approximately $150 million at an assumed average Canadian/US dollar exchange rate of $1.10.

CAPITAL EXPENDITURES
The Company currently expects Dominion Diamond Diavik Limited Partnership's 40% share of the planned capital expenditures for the Diavik Diamond Mine in fiscal 2015 to be approximately $19 million, assuming an average Canadian/US dollar exchange rate of $1.10. During the fourth quarter, DDDLP's share of capital expenditures was $3.2 million ($26.6 million for the year ended January 31, 2014).

The Company and Rio Tinto plc are currently assessing the rejuvenation of the A-21 project which provides a window of opportunity to extract value of the Diavik Diamond Mine before the end of its mine life. Current work is being completed on dike design and mining methodology with the plan to seek Rio Tinto plc investment committee approval in the fall of 2014.

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

(expressed in thousands of United States dollars)
(unaudited)
        2014     2014   2014     2014       2013       2013       2013       2013   2014       2013
        Q4     Q3   Q2     Q1       Q4       Q3       Q2       Q1   Total       Total
Sales                                                                    
North America     $ 413  $   - -  $   - $     - $     - $     - $     - $ 413 $     -
Europe       111,542     95,232   170,536     19,921       -       -       -       -    397,231        -
India       1,992                  -        -        -        -   1,992       -
Total sales       113,947     95,232   170,536     19,921       -       -       -       -   399,636       -
Cost of sales       114,340     96,202   162,758     19,647       -       -       -       -   392,948       -
Gross margin       (393)     (970)   7,778     274       -       -       -       -   6,688       -
Gross margin (%)       (0.3%)     (1.0%)   4.6%     1.4%       -%       -%       -%       -%   1.7%       -%
Selling, general and administrative expenses       1,120     362   676     520       -       -       -       -   2,678       -
Operating profit (loss)     $ (1,513) $   (1,332) $ 7,102 $   (246) $     - $     - $     - $     - $ 4,010 $     -
Depreciation and amortization (i)       25,892     19,166   10,513     -       -       -       -       -   55,572       -
EBITDA (ii)     $ 24,379 $   17,834 $ 17,615 $   (246) $     - $     - $     - $     - $ 59,582 $     -
(i)  Depreciation and amortization included in cost of sales and selling, general and administrative expenses. All sales of inventory purchased as part of the
Ekati Diamond Mine Acquisition are accounted for as cash cost of sales.
(ii)  Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See "Non-IFRS Measures" on page 20.
(iii)  As a result of retrospective adjustments made reflecting the final purchase price allocation of the Ekati Diamond Mine and the accounting treatment for
Misery South & Southwest pre-production revenue, the prior quarters have been recast.

Three months ended January 31, 2014

EKATI SALES
During the fourth quarter, the Company sold approximately 0.4 million carats from the Ekati Diamond Mine for a total of $114.0 million for an average price per carat of $276. Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes as this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Misery South and Southwest kimberlite pipes have been designated as exploration targets, and are not currently classified as resources. The diamonds that have been recovered to date from this material display similar characteristics to diamonds from the Misery Main kimberlite pipe. During the fourth quarter, the Company sold an estimated 0.2 million carats of production from the Misery South and Southwest kimberlite pipe material for estimated proceeds of $10.8 million. During pre-production, sales of diamonds recovered from the Misery South and Southwest material have been applied as a reduction of mining assets. At January 31, 2014, the Company had 0.5 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $140 million.

EKATI COST OF SALES AND GROSS MARGIN
The Company's cost of sales for the Ekati Diamond Mine during the fourth quarter was $114.3 million, resulting in a gross margin of (0.3)% and an EBITDA margin of 21%. Cost of sales for the fourth quarter was impacted slightly by the sale of inventory that was recorded at market value as a result of the Ekati Diamond Mine Acquisition. The Company estimates the cost of sales would have been approximately $114.2 million during the fourth quarter if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. The Company estimates that gross margins and EBITDA margin would have been (0.2)% and 21%, respectively, if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. At January 31, 2014, the Company had approximately $10 million remaining of inventory acquired as part of the Ekati Diamond Mine Acquisition, the majority of which are made up of production samples. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

Consolidated cost of sales includes mining operating costs incurred at the Ekati Diamond Mine. During the fourth quarter, the Ekati cash cost of production was $101.3 million. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the straight-line method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Ekati Diamond Mine's operations' cost of sales disclosed for the three months ended January 31, 2014.

(expressed in thousands of United States dollars)           Three months ended
January 31, 2014
Ekati cash cost of production           $ 101,320
Other cash costs including inventory acquisition             1,055
Total cash cost of production             102,375
Depreciation and amortization             29,808
Total cost of production             132,183
Adjusted for stock movements             (17,843)
Total cost of sales           $ 114,340

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Ekati Diamond Mine segment for the quarter were $1.1 million.

Period from April 10, 2013 to January 31, 2014

EKATI SALES
During the period from April 10 to January 31, 2014, the Company sold approximately 1.3 million carats from the Ekati Diamond Mine for a total of $399.6 million for an average price per carat of $301. Excluded from sales recorded in the fiscal year were carats produced and sold from the processing of satellite material from the Misery South & Southwest kimberlite pipes as this material was excavated during the pre-stripping of the Misery South and Southwest kimberlite pipe.  During the period from April 10 to January 31, 2014, the Company sold an estimated 0.2 million carats from the Misery South and Southwest kimberlite pipes for estimated proceeds of $14.3 million.

Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $287 per carat based on the prices achieved in the January 2014 sale.

EKATI COST OF SALES AND GROSS MARGIN
The Company's cost of sales for the Ekati Diamond Mine for the period from April 10 to January 31, 2014, was $392.9 million, resulting in a gross margin of 1.7% and an EBITDA margin of 15%. Cost of sales was impacted by the sale of inventory that was recorded at market value as a result of the Ekati Diamond Mine Acquisition. The Company estimates that the cost of sales would have been approximately $376.7 million during the period if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. The Company estimates that gross margins and EBITDA margins of sales would have been 5.7% and 26%, respectively, if the effect of the market value adjustment made as part of the Ekati Diamond Mine Acquisition was excluded. At January 31, 2014, the Company had approximately $10 million remaining of inventory acquired as part of the Ekati Diamond Mine Acquisition, the majority of which are made up of production samples. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

A substantial portion of consolidated cost of sales is mining operating costs, which are incurred at the Ekati Diamond Mine. During the period from April 10 to January 31, 2014, the Ekati cash cost of production was $303.9 million. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the straight-line method over estimated proven and probable reserves.

The MD&A refers to cash cost of production, a non-IFRS performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table provides a reconciliation of cash cost of production to the Ekati Diamond Mine's operations' cost of sales disclosed for the period April 10 to January 31, 2014.

(expressed in thousands of United States dollars)             April 10, 2013 to
January 31, 2014
Ekati cash cost of production           $ 303,902
Other cash costs             167,794
Total cash cost of production             471,696
Depreciation and amortization             87,767
Total cost of production             559,463
Adjusted for stock movements             (166,515)
Total cost of sales           $ 392,948

EKATI SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Ekati Diamond Mine segment for the period from April 10 to January 31, 2014 were $2.7 million.

OPERATIONAL UPDATE
During the fourth quarter of fiscal 2014, the Ekati Diamond Mine produced (on a 100% basis) 0.5 million carats from the processing of 0.9 million tonnes of ore from the reserves. Activities through the quarter continued to focus on ore production from the Fox open pit, and Koala and Koala North underground pits. The Company also recovered 0.1 million carats from the processing of 0.1 million tonnes of coarse ore rejects, and from satellite material excavated from the Misery South & Southwest kimberlite pipes, this material was excavated during the pre-stripping of the Misery South and Southwest kimberlite pipe. These diamond recoveries were not included in the Company's reserves and resource statement and are therefore incremental to production.

On November 18th, 2013, the Wek'èezhii Land and Water Board ("WLWB") issued a Preliminary Screening Decision Report on the Lynx kimberlite pipe at the Ekati Diamond Mine which determined that the Lynx pipe expansion could proceed with the regulatory process. On November 22, 2013, the WLWB decided to refer the Company's Detailed Project Report on the Jay and Cardinal kimberlite pipes at the Ekati Diamond Mine to the Mackenzie Valley Review Board ("MVRB") for an environmental assessment. The Company expects the process to amend the existing Water License to incorporate the Lynx pipe to be complete by the third quarter of fiscal 2015. In February 2014, the MVRB issued the final Terms of Reference and interim draft work plan for the environmental assessment of the Jay-Cardinal pipes. The Company expects to submit its Developer's Assessment Report for the Jay-Cardinal pipes in the second quarter of fiscal 2015.

During the period from April 10, 2013 to January 31, 2014, the Ekati Diamond Mine produced (on a 100% basis) 1.2 million carats from the processing of 3.0 million tonnes of ore from the reserves. The Company also recovered 0.4 million carats from the processing of 0.4 million tonnes of coarse ore rejects and satellite materials from the Misery South and Southwest kimberlite pipes and from the Koala North underground (inferred resource only).

EKATI DIAMOND MINE PRODUCTION (80% SHARE)

For the three months ended January 31, 2014                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
Koala Phase 5   51       21     0.41
Koala Phase 6   75       87     1.16
Koala North   69       60     0.87
Fox   452       125     0.28
Misery South & Southwest   58       74     1.28
Coarse Ore Rejects   29       18     0.62
Total   734       385     0.62
                   
                   
For the period from April 10, 2013 (date of acquisition) to January 31, 2014                  
Pipe   Ore processed
(000s tonnes)
      Carats
(000s)
    Grade
(carats/tonne)
Koala Phase 5   168       68     0.40
Koala Phase 6   182       239     1.31
Koala North   220       165     0.75
Fox   1,853       560     0.30
Misery South & Southwest   200       269     1.35
Coarse Ore Rejects   63       23     0.37
Total   2,686       1,324     0.49

Ekati Operations Outlook

PRODUCTION
In fiscal 2015, the Ekati Diamond Mine expects to process (on a 100% basis) approximately 2.6 million tonnes from the mineral reserve and produce approximately 0.9 million carats. The Company expects to process approximately 1.7 million tonnes from the Fox pipe (including stockpiles) and approximately 0.9 million tonnes from the Koala underground operations split between Koala phase 5 and phase 6 & 7. As part of the Koala deposit, a small portion of inferred resources is extracted along with the reserves. This material is not included in the current production estimate, but will be processed along with the reserve ore and will be incremental to production. Mineral resources that are not reserves do not have demonstrated economic viability. Additional plant feed to keep the processing plant at capacity for the period will be sourced from satellite material from the Misery South and Southwest kimberlite pipes as well as the stockpile of coarse ore rejects. The Misery South and Southwest satellite bodies as well as the coarse ore rejects are not included in the Company's reserves and resource statement and are therefore considered incremental to production.

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

Ore type                       February 2014
Sales Cycle
Average price
per carat
(in US dollars)
Koala Phase 5                     $ 365
Koala Phase 6                       420
Koala North                       440
Fox                       315
Misery South & Southwest                       80-100
Coarse Ore Rejects                       65-120

COST OF SALES AND CASH COST OF PRODUCTION
Based on the current mine plan for the Ekati Diamond Mine for fiscal 2015, the Company currently expects cost of sales at the Ekati Diamond Mine (on a 100% basis) in fiscal 2015 to be approximately $520 million (including depreciation and amortization of approximately $125 million). The cash cost of production at the Ekati Diamond Mine for fiscal 2015 is expected to be approximately $340 million (on a 100% basis) at an assumed average Canadian/US dollar exchange rate of $1.10.

CAPITAL EXPENDITURES
The planned capital expenditures for the Core Zone at the Ekati Diamond Mine for fiscal 2015 (on a 100% basis) are expected to be approximately $180 million at an assumed average Canadian/US dollar exchange rate of $1.10. The planned capital expenditures include approximately $95 million for the continued development of the Misery Pipe, consisting largely of mining costs to access ore release, and approximately $50 million towards the development of the Pigeon Pipe. During the fourth quarter, the Ekati Diamond Mine incurred capital expenditures of $30.2 million ($95.6 million for the period from April 10, 2013 to January 31, 2014).

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

(expressed in thousands of United States dollars)
(unaudited)
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Sales   $ $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cost of sales     -   -   -   -   -   -   -   -   -   -   -
Gross margin     -   -   -   -   -   -   -   -   -   -   -
Gross margin (%)     -%   -%   -%   -%   -%   -%   -%   -%   %   -%   -%
Selling, general and administrative expenses     7,875   5,924   12,971   15,213   8,227   6,302   4,700   5,767   41,981   24,996   20,679
Operating loss   $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (5,767) $ (41,981) $ (24,996) $ (20,679)
Depreciation and amortization (i)     451   378   363   305   304   306   286   296   1,496   1,191   1,231
EBITDA (ii)   $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (5,471) $ (40,485) $ (23,805) $ (19,448)
(i)  Depreciation and amortization included in cost of sales and selling, general and administrative expenses.
(ii)  Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See "Non-IFRS Measures" on page 20.

Three Months Ended January 31, 2014, Compared to Three Months Ended January 31, 2013

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Corporate segment during the quarter decreased by $0.4 million from the comparable quarter of the prior year.

Year Ended January 31, 2014, Compared to Year Ended January 31, 2013

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Corporate segment during the year ended January 31, 2014 increased by $17.0 million from the prior year. The increase from the prior year was primarily due to $11.2 million of transaction costs and $4.9 million of restructuring costs at the Antwerp, Belgium office, related in each case to the Ekati Diamond Mine Acquisition.

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

Liquidity and Capital Resources

Working Capital
As at January 31, 2014, the Company had unrestricted cash and cash equivalents of $224.8 million and restricted cash of $113.6 million compared to $104.3 million and $nil at January 31, 2013. The restricted cash is used to support letters of credit to the Government of Canada of CDN $127 million in support of the reclamation obligations for the Ekati Diamond Mine. During the year ended January 31, 2014, the Company reported cash flow from operations of $166.3 million compared to $105.1 million in the prior year.

As at January 31, 2014, the Company had 1.0 million carats of rough diamond inventory with an estimated market value of approximately $205 million, of which approximately $45 million represented inventory available for sale, with the remaining $160 million being sorted.

Working capital increased to $572.1 million at January 31, 2014 from $361.5 million at January 31, 2013. During the year, the Company increased accounts receivable from continuing operations by $2.5 million, decreased other current assets from continuing operations by $2.9 million, decreased inventory and supplies from continuing operations by $9.8 million, decreased trade and other payables from continuing operations by $5.2 million and increased employee benefit plans from continuing operations by $1.4 million.

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

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

Financing Activities
On May 31, 2013, the Company repaid its senior secured revolving credit facility with Standard Chartered Bank and cancelled this facility.

In connection with the Ekati Diamond Mine Acquisition, the Company arranged new secured credit facilities with The Royal Bank of Canada and Standard Chartered Bank consisting of a $400 million term loan, a $100 million revolving credit facility and a $140 million letter of credit facility (expandable to $265 million in aggregate). The Ekati Diamond Mine Acquisition was completed on April 10, 2013.  The Company ultimately determined to fund the Ekati Diamond Mine Acquisition by way of cash on hand and did not draw on these new facilities. The new facilities were subsequently cancelled in fiscal 2014.

As at January 31, 2014, $nil and $nil was outstanding under the Company's revolving financing facility relating to its Belgian subsidiary, Dominion Diamond International NV, and its Indian subsidiary, Dominion Diamond (India) Private Limited, respectively, compared to $nil and $1.1 million at January 31, 2013.

Investing Activities
During the fiscal year, the Company purchased property, plant and equipment of $122.3 million for its continuing operations, of which $26.6 million was purchased for the Diavik Diamond Mine and $95.7 million for the Ekati Diamond Mine.

Contractual Obligations
The Company has contractual payment obligations with respect to interest-bearing loans and borrowings and, through its participation in the Diavik Joint Venture and the Ekati Diamond Mine, future site restoration costs at both the Ekati and Diavik Diamond Mine level. Additionally, at the Diavik Joint Venture level, contractual obligations exist with respect to operating purchase obligations, as administered by DDMI, the operator of the mine. In order to maintain its 40% ownership interest in the Diavik Diamond Mine, DDDLP is obligated to fund 40% of the Diavik Joint Venture's total expenditures on a monthly basis. Not reflected in the table below are currently estimated capital expenditures for the calendar years 2014 to 2018 of approximately $78 million in the aggregate assuming a Canadian/US average exchange rate of $1.10 for each of the five years, representing DDDLP's current projected share of the currently planned capital expenditures (excluding the A-21 pipe) at the Diavik Diamond Mine. Also not reflected in the table below are currently estimated capital expenditures for the fiscal years 2015 to 2019 of approximately $404 million in the aggregate assuming a Canadian/US average exchange rate of $1.10 for each of the five years, representing the current planned capital expenditures (excluding Jay-Cardinal pipes) at the Ekati Diamond Mine. The most significant contractual obligations for the ensuing five-year period can be summarized as follows:

CONTRACTUAL OBLIGATIONS               Less than     Year       Year     After
(expressed in thousands of United States dollars)         Total     1 year     2-3       4-5     5 years
Interest-bearing loans and borrowings (a)(b)       $ 5,297   $ 1,140   $ 2,271   $   1,886   $ -
Environmental and participation agreements incremental commitments (c)         197,359     190,775     2,325       4,259     -
Operating lease obligations (d)         12,975     7,385     5,590       -     -
Total contractual obligations       $ 215,631   $ 199,300   $ 10,186   $   6,145   $ -

(a) (i) Interest-bearing loans and borrowings presented in the foregoing table include current and long-term portions. The Company does
not have any credit facilities.
   
  (ii) The Company has available a $45.0 million revolving financing facility (utilization in either US dollars or Euros) with Antwerp Diamond
Bank for inventory and receivables funding in connection with marketing activities through its Belgian subsidiary, Dominion Diamond
International NV, and its Indian subsidiary, Dominion Diamond (India) Private Limited. Borrowings under the Belgian facility bear interest
at the bank's base rate plus 1.5%. Borrowings under the Indian facility bear an interest rate of 14.25%. At January 31, 2014, $nil was
outstanding under this facility relating to Dominion Diamond International NV and Dominion Diamond (India) Private Limited. The facility
is guaranteed by Dominion Diamond Corporation.
   
  (iii) The Company's first mortgage on real property has scheduled principal payments of approximately $0.2 million quarterly, may be
prepaid at any time, and matures on September 1, 2018. On January 31, 2014, $4.3 million was outstanding on the mortgage payable.
   
(b)  Interest on loans and borrowings is calculated at various fixed and floating rates. Projected interest payments on the current debt
outstanding were based on interest rates in effect at January 31, 2014, and have been included under interest-bearing loans and
borrowings in the table above. Interest payments for the next 12 months are approximated to be $0.3 million.
   
(c)  Both the Diavik Joint Venture and the Ekati Diamond Mine, under environmental and other agreements, must provide funding for the
Environmental Monitoring Advisory Board, and the Independent Environmental Monitoring Agency, respectively. These agreements
also state that the mines must provide security deposits for the performance of their reclamation and abandonment obligations under
all environmental laws and regulations. The operator of the Diavik Joint Venture has fulfilled such obligations for the security deposits by
posting letters of credit, of which DDDLP's share as at January 31, 2014 was $58 million based on its 40% ownership interest in the
Diavik Diamond Mine. There can be no assurance that the operator will continue its practice of posting letters of credit in fulfillment of this
obligation, in which event DDDLP would be required to post its proportionate share of such security directly, which would result in additional
constraints on liquidity. The requirement to post security for the reclamation and abandonment obligations may be reduced to the extent of
amounts spent by the Diavik Joint Venture on those activities. In June 2013, the WLWB adjusted the total reclamation liability for the Ekati
Diamond Mine (inclusive of Sable property) to reflect the revised Interim Closure and Reclamation Plan, and this liability is currently set at
CDN $264 million. The Company has posted letters of credit of CDN $127 million with the Government of Canada supported by restricted
cash in support of the reclamation obligations for the Ekati Diamond Mine, and has provided a proposal to the Government of the
Northwest Territories and the Government of Canada on an appropriate form of security. Both the Diavik and Ekati Diamond Mines have
also signed participation agreements with various native groups. These agreements are expected to contribute to the social, economic
and cultural well-being of area Aboriginal bands. The actual cash outlay for obligations of the Diavik Joint Venture under these agreements
is not anticipated to occur until later in the life of the mine. The actual cash outlay in respect of the Ekati Diamond Mine under these
agreements includes annual payments and special project payments during the operation of the Ekati Diamond Mine.
   
(d)  Operating lease obligations represent future minimum annual rentals under non-cancellable operating leases at the Ekati Diamond Mine.

Non-IFRS Measures
In addition to discussing earnings measures in accordance with IFRS, the MD&A provides the following non-IFRS measures, which are also used by management to monitor and evaluate the performance of the Company.

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

EBITDA and EBITDA Margin
The term EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-GAAP financial measure, which is defined as sales minus cost of sales and selling, general and administrative expenses, meaning it represents operating profit before depreciation and amortization.  EBITDA margin is calculated using EBITDA over total sales for the period.

Management believes that EBITDA and EBITDA margin are important indicators commonly reported and widely used by investors and analysts as an indicator of the Company's operating performance and ability to incur and service debt and as a valuation metric. EBITDA margin is defined as the ratio obtained by dividing EBITDA by sales and is a measurement for cash margins. The intent of EBITDA and EBITDA margin is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning under IFRS. These measures should not be considered in isolation or as substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate EBITDA and EBITDA margins differently.

CONSOLIDATED                                              
                                               
(expressed in thousands of United States dollars)
(unaudited)
                                             
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Operating profit (loss) from continuing operations   $ 20,016 $ 4,509 $ 15,661 $ 10,459 $ 20,987 $ 5,574 $ 8,939 $ 12,171 $ 51,645 $ 47,671 $ 37,574
Depreciation and amortization     55,228   31,978   32,644   20,211   24,346   20,588   13,160   22,172   140,061   80,266   78,761
EBITDA from continuing operations   $ 75,244 $ 36,487 $ 48,305 $ 30,670 $ 45,333 $ 26,162 $ 22,099 $ 34,343 $ 191,706 $ 127,937 $ 116,335
                                               
                                               
DIAVIK DIAMOND MINE SEGMENT                                              
                                               
(expressed in thousands of United States dollars)
(unaudited)
                                             
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Operating profit   $ 30,404 $ 11,765 $ 21,530 $ 25,918 $ 29,213 $ 11,876 $ 13,639 $ 17,938 $ 89,619 $ 72,666 $ 58,256
Depreciation and amortization     28,885   12,434   21,768   19,906   24,042   20,283   12,874   21,876   82,993   79,075   77,529
EBITDA   $ 59,289 $ 24,199 $ 43,298 $ 45,824 $ 53,255 $ 32,159 $ 26,513 $ 39,814 $ 172,612 $ 151,741 $ 135,785
                                               
                                               
EKATI DIAMOND MINE SEGMENT                                              
                                               
(expressed in thousands of United States dollars)
(unaudited)
                                             
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Operating profit (loss)   $ (1,513) $ (1,332) $ 7,102 $ (246) $ - $ - $ - $ - $ 4,010 $ - $ -
Depreciation and amortization     25,892   19,166   10,513   -   -   -   -   -   55,572   -   -
EBITDA   $ 24,379 $ 17,834 $ 17,615 $ (246) $ - $ - $ - $ - $ 59,582 $ - $ -
                                               
                                               
CORPORATE SEGMENT                                              
                                               
(expressed in thousands of United States dollars)
(unaudited)
                                             
      2014   2014   2014   2014   2013   2013   2013   2013   2014   2013   2012
      Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1   Total   Total   Total
Operating profit (loss)   $ (7,875) $ (5,924) $ (12,971) $ (15,213) $ (8,227) $ (6,302) $ (4,700) $ (5,767) $ (41,981) $ (24,996) $ (20,679)
Depreciation and amortization     451   378   363   305   304   306   286   296   1,496   1,191   1,231
EBITDA   $ (7,424) $ (5,546) $ (12,608) $ (14,908) $ (7,923) $ (5,996) $ (4,414) $ (5,471) $ (40,485) $ (23,805) $ (19,448)

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

Nature of Mining
The Company's mining operations are subject to risks inherent in the mining industry, including variations in grade and other geological differences, unexpected problems associated with required water retention dikes, water quality, surface and underground conditions, processing problems, equipment performance, accidents, labour disputes, risks relating to the physical security of the diamonds, force majeure risks and natural disasters. Particularly with underground mining operations, inherent risks include variations in rock structure and strength as it impacts on mining method selection and performance, de-watering and water handling requirements, achieving the required crushed rock-fill strengths, and unexpected local ground conditions. Hazards, such as unusual or unexpected rock formations, rock bursts, pressures, collapses, flooding or other conditions, may be encountered during mining. Such risks could result in personal injury or fatality; damage to or destruction of mining properties, processing facilities or equipment; environmental damage; delays, suspensions or permanent reductions in mining production; monetary losses; and possible legal liability.

The Company's mineral properties, because of their remote northern location and access only by winter road or by air, are subject to special climate and transportation risks. These risks include the inability to operate or to operate efficiently during periods of extreme cold, the unavailability of materials and equipment, and increased transportation costs due to the late opening and/or early closure of the winter road. Such factors can add to the cost of mine development, production and operation and/or impair production and mining activities, thereby affecting the Company's profitability.

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

Diamond Prices and Demand for Diamonds
The profitability of the Company is dependent upon the Company's mineral properties and the worldwide demand for and price of diamonds. Diamond prices fluctuate and are affected by numerous factors beyond the control of the Company, including worldwide economic trends, worldwide levels of diamond discovery and production, and the level of demand for, and discretionary spending on, luxury goods such as diamonds. Low or negative growth in the worldwide economy, renewed or additional credit market disruptions, natural disasters or the occurrence of terrorist attacks or similar activities creating disruptions in economic growth could result in decreased demand for luxury goods such as diamonds, thereby negatively affecting the price of diamonds. Similarly, a substantial increase in the worldwide level of diamond production or the release of stocks held back during recent periods of lower demand could also negatively affect the price of diamonds. In each case, such developments could have a material adverse effect on the Company's results of operations.

Cash Flow and Liquidity
The Company's liquidity requirements fluctuate from quarter to quarter and year to year depending on, among other factors, the seasonality of production at the Company's mineral properties, the seasonality of mine operating expenses, exploration expenses, capital expenditure programs, the number of rough diamond sales events conducted during the quarter, and the volume, size and quality distribution of rough diamonds delivered from the Company's mineral properties and sold by the Company in each quarter. The Company's principal working capital needs include investments in inventory, prepaid expenses and other current assets, and accounts payable and income taxes payable. There can be no assurance that the Company will be able to meet each or all of its liquidity requirements. A failure by the Company to meet its liquidity requirements could result in the Company failing to meet its planned development objectives, or in the Company being in default of a contractual obligation, each of which could have a material adverse effect on the Company's business prospects or financial condition.

Economic Environment
The Company's financial results are tied to the global economic conditions and their impact on levels of consumer confidence and consumer spending. The global markets have experienced the impact of a significant US and international economic downturn since autumn 2008. A return to a recession or weak recovery, due to recent disruptions in financial markets in the US, the Eurozone or elsewhere, budget policy issues in the US and political upheavals in the Middle East, could cause the Company to experience revenue declines due to deteriorated consumer confidence and spending, and a decrease in the availability of credit, which could have a material adverse effect on the Company's business prospects or financial condition. The credit facilities essential to the diamond polishing industry are largely underwritten by European banks that are currently under stress. The withdrawal or reduction of such facilities could also have a material adverse effect on the Company's business prospects or financial condition. The Company monitors economic developments in the markets in which it operates and uses this information in its continuous strategic and operational planning in an effort to adjust its business in response to changing economic conditions.

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

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

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

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

The environmental agreements relating to the Diavik Diamond Mine and the Ekati Diamond Mine require that security be provided to cover estimated reclamation and remediation costs. The operator of the Diavik Joint Venture has fulfilled such obligations for the security deposits by posting letters of credit, of which DDDLP's share as at January 31, 2014 was $58 million based on its 40% ownership interest in the Diavik Diamond Mine. There can be no assurance that the operator will continue its practice of posting letters of credit in fulfillment of this obligation, in which event DDDLP would be required to post its proportionate share of such security directly, which would result in additional constraints on liquidity. In June 2013, the WLWB adjusted the total reclamation liability for the Ekati Diamond Mine (inclusive of the Sable property) to reflect the revised Interim Closure and Reclamation Plan, and this liability is currently set at CDN $264 million. The Company has as at January 31, 2014 posted letters of credit of CDN $127 million with the Government of Canada supported by restricted cash in support of the reclamation obligations for the Ekati Diamond Mine, and has provided a proposal to the Government of the Northwest Territories and the Government of Canada on an appropriate form of security. As reclamation and remediation cost estimates are updated and revised, the Company expects that it will be required to post additional security for those obligations, which could result in additional constraints on liquidity.

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

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

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

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

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

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

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

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

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

DISCLOSURE CONTROLS AND PROCEDURES
The Company has designed a system of disclosure controls and procedures to provide reasonable assurance that material information relating to Dominion Diamond Corporation, including its consolidated subsidiaries, is made known to management of the Company by others within those entities, particularly during the period in which the Company's annual filings are being prepared.  In designing and evaluating the disclosure controls and procedures, the management of the Company recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  The management of Dominion Diamond Corporation was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  The results of the inherent limitations in all control systems means no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

The management of Dominion Diamond Corporation has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by the Annual Report.  Based on that evaluation, management has concluded that these disclosure controls and procedures, as defined in Canada by Multilateral Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings, and in the United States by Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), are effective as of January 31, 2014, to ensure that information required to be disclosed in reports that the Company will file or submit under Canada securities legislation and the Exchange Act is recorded, processed, summarized and reported within the time periods specified in those rules and forms.

INTERNAL CONTROL OVER FINANCIAL REPORTING
The certifying officers of the Company have designed a system of internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS and the requirements of the US Securities and Exchange Commission, as applicable.  Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, including its consolidated subsidiaries.

Management has evaluated the effectiveness of internal control over financial reporting using the framework and criteria established in  Internal Control - Integrated Framework (1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management has concluded that internal control over financial reporting was effective as of January 31, 2014.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the fourth quarter of fiscal 2014, there were no changes in the Company's disclosure controls and procedures or internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's disclosure controls and procedures or internal control over financial reporting.

Limitation on Scope of Design
Management has limited the scope of design of its disclosure controls and procedures and internal controls over financial reporting to exclude controls, policies and procedures of entities acquired as part of the Ekati Diamond Mine Acquisition as permitted under NI 52-109 and the Exchange Act.

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

As at January 31, 2014            
Current assets           447,465
Long-term assets           923,209
Current liabilities           72,839
Long-term liabilities           722,400
             
For the year ended January 31, 2014            
Revenue           399,636
Net loss           (40,820)

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

Significant Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and contingent liabilities at the date of the consolidated financial statements, and the reported amounts of sales and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is as follows:

a.  Significant Judgments in Applying Accounting Policies

Recovery of deferred tax assets
Judgment is required in determining whether deferred tax assets are recognized in the consolidated balance sheet. Deferred tax assets, including those arising from unused tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted income from operations and the application of existing tax laws in each jurisdiction. To the extent that future taxable income differs significantly from estimates, the ability of the Company to realize the deferred tax assets recorded at the consolidated balance sheet date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Company operates could limit the ability of the Company to obtain tax deductions in future periods.

Commitments and contingencies
The Company has conducted its operations in the ordinary course of business in accordance with its understanding and interpretation of applicable tax legislation in the countries where the Company has operations. The relevant tax authorities could have a different interpretation of those tax laws that could lead to contingencies or additional liabilities for the Company. The Company believes that its tax filing positions as at the balance sheet date are appropriate and supportable. Should the ultimate tax liability materially differ from the provision, the Company's effective tax rate and its profit or loss could be affected positively or negatively in the period in which the matters are resolved.

b.  Significant Estimates and Assumptions in Applying Accounting Policies

Mineral reserves, mineral properties and exploration costs
The estimation of mineral reserves is a subjective process. The Company estimates its mineral reserves based on information compiled by an appropriately qualified person. Forecasts are based on engineering data, projected future rates of production and the timing of future expenditures, all of which are subject to numerous uncertainties and various interpretations. The Company expects that its estimates of reserves will change to reflect updated information. Reserve estimates can be revised upward or downward based on the results of future drilling, testing or production levels, and diamond prices. Changes in reserve estimates may impact the carrying value of exploration and evaluation assets, mineral properties, property, plant and equipment, mine rehabilitation and site restoration provisions, recognition of deferred tax assets, and depreciation charges. Estimates and assumptions about future events and circumstances are also used to determine whether economically viable reserves exist that can lead to commercial development of an ore body.

Estimated mineral reserves are used in determining the depreciation of mine-specific assets. This results in a depreciation charge proportional to the depletion of the anticipated remaining life of mine production. A units-of-production depreciation method is applied, and depending on the asset, is based on carats of diamonds recovered during the period relative to the estimated proven and probable reserves of the ore deposit being mined or to the total ore deposit. Changes in estimates are accounted for prospectively.

Impairment of long-lived assets
The Company assesses each cash-generating unit at least annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value of an asset less costs to sell and its value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Financial results as determined by actual events could differ from those estimated.

Mine rehabilitation and site restoration provision
Provision for the cost of site closure and reclamation is recognized at the time that the environmental disturbance occurs.  When the extent of disturbance increases over the life of the operation, the provision is increased accordingly. Costs included in the provision encompass all restoration and rehabilitation activity expected to occur progressively over the life of the operation and at the time of closure.  Routine operating costs that may impact the ultimate restoration and rehabilitation activities, such as waste material handling conducted as an integral part of a mining or production process, are not included in the provision.  Costs arising from unforeseen circumstances, such as contamination caused by unplanned discharges, are recognized as an expense and liability when the event gives rise to an obligation which is probable and capable of reliable estimation.

The site closure and reclamation provision is measured at the expected value of future cash flows and is discounted to its present value.  Significant judgments and estimates are involved in forming expectations of future site closure and reclamation activities and the amount and timing of the associated cash flows.  Those expectations are formed based on existing environmental and regulatory requirements.  The Ekati Diamond Mine rehabilitation and site restoration provision is prepared by management at the Ekati Diamond Mine.

The Diavik Diamond Mine rehabilitation and site restoration provisions have been provided by management of the Diavik Diamond Mine and are based on internal estimates. Assumptions, based on the current economic environment, have been made which DDMI management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly by management of the Diavik Diamond Mine to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future costs for