Record production and 100% ownership of Harry Winston support strong fiscal 2007 results for Aber



    TORONTO, March 29 /CNW/ - ABER DIAMOND CORPORATION (TSE-ABZ, NASDAQ-ABER)
announces its unaudited fourth quarter and year-end results for the period
ended January 31, 2007.
    Aber's net earnings for the fiscal year ended January 31, 2007 were
$104.3 million with earnings per share of $1.79 (cash earnings per share of
$3.18(1)) as compared to net earnings of $81.3 million and earnings per share
of $1.40 (cash earnings per share of $3.57(1)) for the prior year. The
Company's sales for the year increased by 11% to $558.8 million compared to
$505.2 million for the prior year.
    Commenting on Aber's past year, Chairman and Chief Executive Officer
Robert Gannicott stated, "By concluding the purchase of 100% of Harry Winston,
Aber has brought the knowledge bases of the two most important ends of the
diamond spectrum together in one Diamond Company that delivers improved
pricing both in rough diamond sales from the mine and polished diamond
purchases for the jeweler. The Diavik mine is developing both an underground
mine and a new open pit while our jewelry business continues to open more
salons in prime luxury retail locations. These expansions increase both the
sales volumes and the security of our retail and mining operations, and
therefore our revenue base."
    Thomas O'Neill, President of Aber and Chief Executive Officer of Harry
Winston added, "We are very pleased with the performance of Harry Winston this
past year. The continued introduction of new designs, revitalized and focused
marketing and an expansion into new markets combine to give us confidence that
the underlying business will remain strong and that we will continue to meet
our growth targets."

    
    Fourth Quarter and Annual Highlights
    Financial Highlights (unaudited)
    -------------------------------------------------------------------------
                                      Three      Three     Twelve     Twelve
                                     months     months     months     months
                                      ended      ended      ended      ended
                                    January    January    January    January
                                   31, 2007   31, 2006   31, 2007   31, 2006
    -------------------------------------------------------------------------
    Sales ($ millions)                  154        126        559        505
    -------------------------------------------------------------------------
    Earnings from operations
     ($ millions)                        37         36        147        176
    -------------------------------------------------------------------------
    Net Earnings ($ millions)            27         15        104         81
    -------------------------------------------------------------------------
    Earnings per share ($)             0.47       0.26       1.79       1.40
    -------------------------------------------------------------------------
    Cash Earnings per share ($)(1)     0.77       0.66       3.18       3.57
    -------------------------------------------------------------------------
    (1) Cash earnings per share is not a recognized measure under Canadian
        GAAP and does not have a standardized meaning prescribed by Canadian
        GAAP and is therefore unlikely to be comparable to similar measures
        presented by other issuers. Cash earnings per share is earnings
        before non-cash income tax expense, non-cash foreign exchange gains
        (loss), and depreciation and amortization on a per share basis.


    Production Highlights
    (Aber's 40% share of Diavik Mine production)
    -------------------------------------------------------------------------
                                      Three      Three     Twelve     Twelve
                                     months     months     months     months
                                      ended      ended      ended      ended
                                   December   December   December   December
                                   31, 2006   31, 2005   31, 2006   31, 2005
    -------------------------------------------------------------------------
    Diamond recovered (000s carats)     997        732      3,931      3,309
    -------------------------------------------------------------------------
    Grade (carats/tonne)               4.91       3.68       4.21       3.72
    Operating costs, cash
     ($ millions)                      26.1       20.8       97.2       76.6
    -------------------------------------------------------------------------
    Operating costs per carat,
     cash ($)                            26         28         25         23
    -------------------------------------------------------------------------
    

    "With record net earnings for the year of $104 million, Aber has
continued its growth," stated Alice Murphy, Aber's Chief Financial Officer.
"Tax rate reductions and favorable foreign exchange rates helped to offset the
incremental costs associated with the early closure of the winter road and the
acquisition of the remaining ownership of Harry Winston."
    Sales from the mining segment increased by 6% compared to the prior year.
Earnings from mining operations totalled $144.5 million compared to
$163.9 million for the prior year. Earnings were negatively impacted by
additional costs incurred during the year due to the early closure of the
winter road in early 2006.
    Aber's share of diamonds recovered from the Diavik Mine was 3.9 million
carats for the twelve months ended December 31, 2006, compared to 3.3 million
carats for the 12 months ended December 31, 2005. Underground mining is
currently anticipated to begin in calendar 2008, which will bring underground
reserves into the production schedule.
    As a result of the acquisition of the balance of Harry Winston, working
capital decreased to $164.0 million at January 31, 2007 from $285.7 million at
January 31, 2006.

    Returning Value to Shareholders
    Aber is pleased to declare an eligible quarterly dividend payment of
US$0.25 per share. Shareholders of record at the close of business on April
10, 2007, will be entitled to receive payment of this dividend on April 19,
2007.

    Webcast and Conference Call Details
    Aber will host a conference call and webcast with accompanying
presentation tomorrow, March 30, 2007, at 9:00 AM (EST), accessible on
www.aber.ca.
    Within North America, access to the call is available by dialing 866-770-
7146, participant passcode 55163183. From international locations, call 617-
213-8068 using the same passcode. Please dial into the conference 10 minutes
prior to the start of the call.
    A conference call replay will be available one hour following the call.
To access the replay, dial 888-286-8010 within North America or 617-801-6888
from international locations and enter passcode 86441412.
    The financial information presented in this media release remains
unaudited and subject to additional review and final year-end closing
procedures performed by the Company and the completion of the year-end audit
by its external auditors. Aber expects that its audited financial results will
be finalized in April 2007 and the Company will file its financial statements
with the securities regulators shortly thereafter.

    CAUTION REGARDING FORWARD-LOOKING INFORMATION

    Certain information included herein may constitute forward-looking
information within the meaning of securities laws. In some cases, forward-
looking information can be identified by the use of terms such as "may",
"will", "should", "expect", "plan", "anticipate", "believe", "intend",
"estimate", "predict", "potential", "continue" or other similar expressions
concerning matters that are not historical facts. Forward-looking information
may relate to management's future outlook and anticipated events or results,
and may include statements or information regarding projected capital
expenditure requirements, estimated production from the Diavik Mine in 2007,
plans, timelines and targets for construction, mining, development, production
and exploration activities at the Diavik Mine, future mining and processing at
the Diavik Mine, the Diavik Mine's water licence renewal, the number of
expected rough diamond sales, projected sales growth and new store openings at
Harry Winston, expected gross margin and expense trends in the retail segment,
expected diamond prices and expectations concerning the diamond industry.
    Forward-looking information is based on certain factors and assumptions
regarding, among other things, mining, production, construction and
exploration activities at the Diavik Mine, world economic conditions, the
level of worldwide diamond production, the receipt of necessary regulatory
permits, the expected sales mix at Harry Winston, expected salon openings and
potential improvements in sourcing and purchasing polished diamonds.
Specifically, in making statements concerning Aber's projected share of the
Diavik Mine capital expenditure requirements, Aber has used a Canadian/US
dollar exchange rate of $0.88, and has assumed that construction will continue
on schedule with respect to the A-418 dike and with respect to current
underground mining construction initiatives. In making statements regarding
estimated production at the Diavik Mine, future mining activity and mine plans
and future rough diamond sales, Aber has assumed that mining operations and
exploration activities will proceed in the ordinary course according to
schedule and that the Diavik Mine's water licence will be renewed on expected
terms and conditions. With respect to statements concerning sales growth and
new store openings at Harry Winston, as well as expected gross margin rates
and expense trends, Aber has assumed that current world economic conditions
will not materially change or deteriorate, and that Harry Winston will be able
to realize improvements in sourcing and purchasing of inventory. While Aber
considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect.
    Forward-looking information is subject to certain factors, including
risks and uncertainties, which could cause actual results to differ materially
from what we currently expect. These factors include, among other things, the
uncertain nature of mining activities, risks associated with joint venture
operations, risks associated with the remote location of the Diavik Mine site,
risks associated with regulatory requirements, fluctuations in diamond prices
and changes in world economic conditions, the risk of fluctuations in the
Canadian/US dollar exchange rate, risks relating to the Company's salon
expansion strategy and the risks of competition in the luxury jewelry segment.
    You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While Aber may
elect to, it is under no obligation and does not undertake to update this
information at any particular time, except as required by law.
    Unless otherwise noted, all references to "year" refer to the fiscal year
ended January 31.

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

    CONSOLIDATED FINANCIAL RESULTS
    The following is a summary of the Company's consolidated quarterly
results for the eight quarters ended January 31, 2007 following the basis of
presentation utilized in its Canadian GAAP financial statements:

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

    -------------------------------------------------------------------------
                                       2007       2007       2007       2007

                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                          $154,328   $145,232   $139,962   $119,271
    Cost of sales                    78,559     74,636     68,458     63,845
    -------------------------------------------------------------------------
                                     75,769     70,596     71,504     55,426
    Selling, general and
     administrative expenses         38,590     33,480     27,171     27,295
    -------------------------------------------------------------------------
    Earnings from operations         37,179     37,116     44,333     28,131
    -------------------------------------------------------------------------
    Interest and financing expenses  (6,441)    (5,570)    (4,805)    (4,334)
    Other income
     (expense)                         (111)     1,764      1,805      1,623
    Foreign exchange gain (loss)      9,831     (1,560)     2,619     (2,106)
    -------------------------------------------------------------------------
    Earnings before income taxes     40,458     31,750     43,952     23,314

    Income taxes                     13,169     13,005      9,692     (1,036)
    -------------------------------------------------------------------------
    Earnings before minority
     interest                        27,289     18,745     34,260     24,350
    Minority interest                    (5)       (86)        (5)       471
    -------------------------------------------------------------------------
    Earnings                        $27,294    $18,831    $34,265    $23,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share          $0.47      $0.32      $0.59      $0.41
    Diluted earnings per share        $0.46      $0.32      $0.58      $0.40
    Cash dividends declared per
     share                            $0.25      $0.25      $0.25      $0.25

    Total assets(i)                  $1,288     $1,246     $1,116     $1,111
    Total long-term liabilities(i)     $536       $530       $460       $460

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


                                       2006       2006       2006       2006

                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                          $125,891   $153,512   $115,699   $110,132
    Cost of sales                    52,782     57,641     53,065     59,119
    -------------------------------------------------------------------------
                                     73,109     95,871     62,634     51,013

    Selling, general and
     administrative expenses         36,654     24,189     22,711     23,394
    -------------------------------------------------------------------------
    Earnings from operations         36,455     71,682     39,923     27,619
    -------------------------------------------------------------------------
    Interest and financing
     expenses                        (4,511)    (3,353)    (3,668)    (3,401)
    Other income
     (expense)                        1,767        795        885        886
    Foreign exchange gain (loss)     (5,392)    (4,184)    (2,263)       496
    -------------------------------------------------------------------------
    Earnings before income taxes     28,319     64,940     34,877     25,600

    Income taxes                     10,534     30,775     15,400     12,412
    -------------------------------------------------------------------------
    Earnings before minority
     interest                        17,785     34,165     19,477     13,188
    Minority interest                 2,876        423        457       (394)
    -------------------------------------------------------------------------
    Earnings                        $14,909    $33,742    $19,020    $13,582
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share          $0.26      $0.58      $0.33      $0.23
    Diluted earnings per share        $0.27      $0.57      $0.32      $0.23
    Cash dividends declared per
     share                            $0.25      $0.25      $0.25      $0.15
    Total assets(i)                  $1,044     $1,016       $928       $936
    Total long-term liabilities(i)     $434       $421       $378       $390

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


                                       2007       2006

                                      Total      Total
    ---------------------------------------------------

    Sales                          $558,793   $505,234
    Cost of sales                   285,498    222,607
    ---------------------------------------------------
                                    273,295    282,627
    Selling, general and
     administrative expenses        126,536    106,948
    ---------------------------------------------------
    Earnings from operations        146,759    175,679
    ---------------------------------------------------
    Interest and financing
     expenses                       (21,150)   (14,933)
    Other income
     (expense)                        5,081      4,333
    Foreign exchange gain (loss)      8,784    (11,343)
    ---------------------------------------------------
    Earnings before income taxes    139,474    153,736

    Income taxes                     34,830     69,121
    ---------------------------------------------------
    Earnings before minority
     interest                       104,644     84,615
    Minority interest                   375      3,362
    ---------------------------------------------------
    Earnings                       $104,269    $81,253
    ---------------------------------------------------
    ---------------------------------------------------
    Basic earnings per share          $1.79      $1.40
    Diluted earnings per share        $1.76      $1.39
    Cash dividends declared per
     share                            $0.90      $1.00
    Total assets(i)                  $1,288     $1,044
    Total long-term liabilities(i)     $536       $434

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

    The comparability of quarter-over-quarter results is impacted by
    seasonality for both the mining and retail segments. Aber expects that
    the quarterly results for its mining segment will continue to fluctuate
    depending on the seasonality of production at the Diavik Mine, the number
    of sales events conducted during the quarter, and the volume, size and
    quality distribution of rough diamonds delivered from the Diavik Mine in
    each quarter. The quarterly results for the retail segment are also
    seasonal, with generally higher sales during the fourth quarter due to
    the holiday season. Year Ended January 31, 2007 Compared to Year Ended
    January 31, 2006

    Year Ended January 31, 2007 Compared to Year Ended January 31, 2006

    Net Earnings
    Aber's net earnings for the twelve months ended January 31, 2007 totalled
$104.3 million or $1.79 per share (cash earnings per share of $3.18), compared
to net earnings of $81.3 million or $1.40 per share (cash earnings per share
of $3.57) for the prior year. During the twelve months ended January 31, 2007,
the Company recorded a future income tax recovery of $17.0 million or $0.29
per share as a result of the decrease in Northwest Territories and federal
corporate income tax rates and the elimination of federal surtax.

    Revenue
    Aber recorded sales for the fiscal year ended January 31, 2007 of
$558.8 million compared to sales of $505.2 million for the prior year ended
January 31, 2006. Rough diamond sales accounted for $332.6 million of these
sales compared to $314.1 million for the prior year. The Company completed ten
rough diamond sales during the fiscal year, consistent with the prior year.
Harry Winston sales of $226.2 million accounted for the balance, compared to
$191.2 million for the prior year.

    Cost of Sales
    The Company recorded cost of sales of $285.5 million during the fiscal
year compared to $222.6 million during the prior year. The Company's cost of
sales includes cash and non-cash costs associated with mining, sorting and
retail activities. See "Segmented Analysis" on page 11 for additional
information.

    Selling, General and Administrative Expenses
    The principal components of selling, general and administrative ("SG&A")
expenses include expenses for salaries and benefits (including salon
personnel), advertising, professional fees, rent and building related costs.
With the growth of the Company's international selling activities and the
underlying control infrastructure, along with the expansion of its retail
salons, total SG&A expenses during the fiscal year increased relative to the
prior year, a trend that is expected to continue as the Company expands its
network of retail salons.
    Aber incurred SG&A expenses of $126.5 million for the fiscal year,
compared to $106.9 million incurred for the prior fiscal year. Included in
SG&A expenses for the twelve months ended January 31, 2007 are $21.2 million
for the mining segment as compared to $21.1 million for the prior fiscal year,
and $105.3 million for the retail segment as compared to $85.8 million for the
prior year.
    The increase of $19.6 million in SG&A expenses from the comparable period
of the prior year included an increase of $8.7 million in salaries and
benefits, resulting primarily from deferred compensation expense of
$6.3 million triggered by the acquisition of the remaining portion of Harry
Winston, as well as the hiring of new salon personnel in connection with the
opening of three new salons during the fiscal year. Also included was an
increase of $7.2 million in advertising and selling expenses and $3.7 million
in rent and building related expenses, primarily related to the Harry Winston
growth strategy, $2.7 million in other expenses, and an increase of
$1.7 million in professional fees. These increases were offset by a reversal
in 2007 of a 2006 $2.2 million specific provision against accounts receivable.

    Income Taxes
    Aber recorded a tax expense of $34.8 million during the twelve months
ended January 31, 2007, compared to $69.1 million during the twelve months
ended January 31, 2006. The Company's effective income tax rate for the fiscal
year ended January 31, 2007, excluding Harry Winston, is 25%, which is based
on a statutory income tax rate of 37% adjusted for Large Corporations Tax, the
Northwest Territories mining royalty, items that are not deductible for income
tax purposes, impact on foreign exchange, impact on changes in future income
tax rates, and earnings subject to tax different than the statutory rate.
During the current fiscal year, Aber recorded a future tax recovery of
$17.0 million as a result of the decrease in Northwest Territories and federal
corporate income tax rates and the elimination of federal surtax. The
weakening of the Canadian dollar versus the US dollar from January 31, 2006 to
January 31, 2007 resulted in an unrealized foreign exchange gain of
$7.3 million on the revaluation of the Canadian dollar denominated future
income tax liability. This unrealized foreign exchange gain is not taxable for
Canadian income tax purposes, which contributed to the decrease in the
effective tax rate in the current fiscal year.
    The rate of income tax payable by Harry Winston varies by jurisdiction.
Net operating losses are available in certain jurisdictions to offset future
income taxes payable in such jurisdictions. The net operating losses are
scheduled to expire through 2027.
    The Company has provided a table below summarizing the movement from the
statutory to the effective income tax rate as a percentage of earnings before
taxes:

    
                                                  Year ended      Year ended
                                                  January 31,     January 31,
                                                        2007            2006
    -------------------------------------------------------------------------

    Statutory income tax rate                            37%             40%
    Large Corporations Tax                                0%              1%
    Stock compensation                                    1%              1%
    Resource allowance                                    0%            (1)%
    Northwest Territories mining royalty                  9%             10%
    Impact of foreign exchange                          (3)%              2%
    Impact of changes in future income tax rates       (12)%              0%
    Earnings subject to tax different than
     statutory rate                                     (5)%            (5)%
    Benefits of losses not previously recognized          0%            (2)%
    Other items                                         (2)%            (1)%
    Effective income tax rate                            25%             45%
    -------------------------------------------------------------------------
    

    Interest and Financing Expenses
    Interest and financing expenses of $21.2 million were incurred during the
fiscal year compared to $14.9 million for the prior year. The increase in
interest and financing expenses is due to a combination of higher debt levels
at Harry Winston to finance increased inventory levels, an increased drawdown
of Aber's expanded credit facility related to the Harry Winston acquisition,
and higher interest rates.

    Other Income
    Other income of $5.1 million was recorded during the fiscal year compared
to $4.3 million from the prior year. Other income includes interest earned on
the Company's various bank accounts net of a writeoff on an investment.

    Foreign Exchange Gain (Loss)
    A foreign exchange gain of $8.8 million was recognized during the fiscal
year compared with a loss of $11.3 million recognized during the prior year.
The gain primarily related to the revaluation of the Canadian dollar
denominated future income tax liability on the balance sheet of the Company as
the result of the weakening of the Canadian dollar against the US dollar at
year end. Aber's ongoing currency exposure relates primarily to expenses and
obligations incurred in Canadian dollars, as well as the revaluation of
certain Canadian monetary balance sheet amounts. The Company does not
currently have any derivative instruments outstanding.

    Three Months Ended January 31, 2007 Compared to Three Months Ended
    January 31, 2006

    Net Earnings
    The fourth quarter earnings of $27.3 million or $0.47 per share represent
an increase of $12.4 million or $0.21 per share as compared to the results
from the fourth quarter of the prior year. The Company's cash earnings per
share for the fourth quarter was $0.77 compared to $0.66 in the fourth quarter
of the prior year.

    Revenue
    Sales for the fourth quarter totalled $154.3 million, consisting of rough
diamond sales of $81.0 million and sales from Harry Winston of $73.3 million.
This compares to sales of $125.9 million in the comparable quarter of the
prior year (rough diamond sales of $62.5 million and sales from Harry Winston
of $63.4 million). The Company held three rough diamond sales in the fourth
quarter compared to two in the comparable quarter of the prior year. Ongoing
quarterly variations in revenues are inherent in Aber's business, resulting
from the seasonality of the mining and retail activities as well as from the
variability of the rough diamond sales schedule.

    Cost of Sales
    The Company's fourth quarter cost of sales was $78.6 million compared to
$52.8 million for the comparable quarter of the prior year. The Company's cost
of sales includes cash and non-cash costs associated with mining, sorting and
retail sales activities. See "Segmented Analysis" on page 11 for additional
information.

    Selling, General and Administrative Expenses
    The principal components of SG&A expenses include expenses for salaries
and benefits (including salon personnel), advertising, professional fees, rent
and building related costs. With the growth of the Company's international
selling activities and the underlying control infrastructure, along with the
expansion of its retail salons, total SG&A expenses have increased marginally
over the comparable period of the prior year.
    SG&A expenses for the fourth quarter were $38.6 million as compared to
$36.7 million for the comparable quarter of the prior year.
    The increase of $1.9 million from the fourth quarter of the prior year
included an increase of $2.5 million in advertising and selling expenses and
an increase of $1.1 million in rent and building related expenses, primarily
related to the Harry Winston growth strategy, an increase of $0.7 million in
professional fees and an increase of $0.5 million in other expenses. The
increases were partially offset by a decrease of $0.4 million in capital tax
and a decrease of $0.3 million in salaries and benefits. The fourth quarter of
fiscal 2006 included a specific provision against accounts receivable of
$2.2 million. See "Segmented Analysis" on page 11 for additional information.

    Income Taxes
    Aber recorded a tax expense of $13.2 million during the fourth quarter
compared to $10.5 million in the comparable quarter of the prior year. The
Company's effective income tax rate for the quarter, excluding Harry Winston,
is 31%, which is based on a statutory income tax rate of 37% adjusted for
Large Corporations Tax, the Northwest Territories mining royalty, items that
are not deductible for income tax purposes, impact on foreign exchange, and
earnings subject to tax different than the statutory rate, all as detailed in
the table below.
    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, as the Canadian dollar weakened against
the US dollar, the Company recorded an unrealized foreign exchange gain of
$10.2 million on the revaluation of the Canadian dollar denominated future
income tax liability, which is not taxable for Canadian income tax purposes.
    The rate of income tax payable by Harry Winston varies by jurisdiction.
Net operating losses are available in certain jurisdictions to offset future
income taxes payable in such jurisdictions. The net operating losses are
scheduled to expire through 2027.
    The Company has provided a table below summarizing the movement from the
statutory to the effective income tax rate as a percentage of earnings before
taxes:

    
                                                Three months    Three months
                                                       ended           ended
                                                  January 31,     January 31,
                                                        2007            2006
    -------------------------------------------------------------------------
    Statutory income tax rate                            37%             40%
    Large Corporations Tax                                0%            (1)%
    Stock compensation                                    2%              3%
    Northwest Territories mining royalty                 10%             11%
    Impact of foreign exchange                         (11)%              3%
    Earnings subject to tax different than
     statutory rate                                     (5)%            (5)%
    Benefits of losses not previously recognized          0%           (10)%
    Other items                                           0%            (4)%
    Effective income tax rate                            33%             37%
    -------------------------------------------------------------------------
    

    Interest and Financing Expenses
    Interest and financing expenses of $6.4 million were incurred during the
fourth quarter compared to $4.5 million during the comparable quarter of the
prior year. The increase in interest and financing expenses is due to a
combination of higher debt levels at Harry Winston to finance increased
inventory levels, an increased drawdown of Aber's expanded credit facility
related to the Harry Winston acquisition, and higher interest rates.

    Other Income (Expense)
    Other expense of $0.1 million was recorded during the quarter compared to
other income of $1.8 million in the comparable quarter of the prior year.
Other expense included a write-off of $0.9 million on an investment net of
interest income on the Company's various bank balances.

    Foreign Exchange Gain (Loss)
    A foreign exchange gain of $9.8 million was recognized during the quarter
compared to a loss of $5.4 million in the comparable quarter of the prior
year. The gain primarily related to the revaluation of the Canadian dollar
denominated future income tax liability on the balance sheet of the Company,
which resulted from the weakening of the Canadian dollar against the US dollar
at quarter end. Aber's ongoing currency exposure relates primarily to expenses
and obligations incurred in Canadian dollars, as well as to the revaluation of
certain Canadian monetary balance sheet amounts. The Company does not
currently have any derivative instruments outstanding.

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

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

    -------------------------------------------------------------------------
                                       2007       2007       2007       2007
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                           $81,035    $90,754    $91,476    $69,308
    Cost of sales                    39,413     45,461     43,256     38,749
    -------------------------------------------------------------------------
                                     41,622     45,293     48,220     30,559
    Selling, general and
     administrative expenses          7,397      4,665      4,373      4,787
    -------------------------------------------------------------------------
    Earnings from operations        $34,225    $40,628    $43,847    $25,772
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                       2006       2006       2006       2006
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                           $62,528   $112,243    $70,795    $68,507
    Cost of sales                    22,780     38,929     29,759     37,593
    -------------------------------------------------------------------------
                                     39,748     73,314     41,036     30,914
    Selling, general and
     administrative expenses          8,221      4,809      3,991      4,108
    -------------------------------------------------------------------------
    Earnings from operations        $31,527    $68,505    $37,045    $26,806
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------
                                       2007       2006
                                      Total      Total
    ---------------------------------------------------

    Sales                          $332,573   $314,073
    Cost of sales                   166,879    129,061
    ---------------------------------------------------
                                    165,694    185,012
    Selling, general and
     administrative expenses         21,222     21,129
    ---------------------------------------------------
    Earnings from operations       $144,472   $163,883
    ---------------------------------------------------
    ---------------------------------------------------
    

    The mining segment includes the production and sale of rough diamonds.
    Sales for the quarter totalled $81.0 million compared to $62.5 million in
the comparable quarter of the prior year. The Company held three rough diamond
sales in the fourth quarter compared to two in the comparable quarter of the
prior year. Aber expects that the quarterly results for its mining segment
will continue to fluctuate depending on the seasonality of production at the
Diavik Mine, the number of sales events conducted during the quarter, and the
volume, size and quality distribution of rough diamonds delivered from the
Diavik Mine in each quarter.
    Cost of sales includes cash operating costs of $24.9 million, non-cash
operating costs of $12.9 million and private production royalties of
$1.6 million. A substantial portion of cost of sales is mining operating
costs, which are incurred at the Joint Venture level. Cost of sales also
includes sorting costs, which consist of Aber's cost of handling and sorting
product in preparation for sales to third parties. Non-cash costs include
amortization and depreciation, the majority of which is recorded using the
unit-of-production method over estimated proven and probable reserves. Private
production royalties are recorded based on actual production during each
accounting period.
    The fourth quarter gross margin was 51% compared to 64% in the comparable
quarter of the prior year. The mining gross margin is anticipated to fluctuate
between quarters, resulting from variations in the specific mix of product
sold during each quarter. Additionally, the current quarter was negatively
impacted by higher costs incurred as a result of the early closure of the 2006
winter road.
    SG&A expenses for the mining segment have decreased by $0.8 million from
the comparable quarter of prior year. The decrease in SG&A expenses resulted
from a decrease of $0.6 million in salaries and benefits, primarily related to
lower bonus remuneration and stock-based compensation costs, a decrease of
$0.4 million in capital tax expense and a decrease of $0.3 million in other
expenses, offset by an increase in professional fees of $0.3 million and an
increase in building related expenses of $0.2 million.

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

    -------------------------------------------------------------------------
                                       2007       2007       2007       2007
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                           $73,293    $54,478    $48,486    $49,963
    Cost of sales                    39,146     29,175     25,202     25,096
    -------------------------------------------------------------------------
                                     34,147     25,303     23,284     24,867
    Selling, general and
     administrative expenses         31,193     28,815     22,798     22,508
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations                      $2,954    $(3,512)      $486     $2,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                       2006       2006       2006       2006
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Sales                           $63,363    $41,269    $44,904    $41,625
    Cost of sales                    30,002     18,712     23,306     21,526
    -------------------------------------------------------------------------
                                     33,361     22,557     21,598     20,099
    Selling, general and
     administrative expenses         28,433     19,380     18,720     19,286
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations                      $4,928     $3,177     $2,878       $813
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------
                                       2007       2006
                                      Total      Total
    ---------------------------------------------------

    Sales                          $226,220   $191,161
    Cost of sales                   118,619     93,546
    ---------------------------------------------------
                                    107,601     97,615
    Selling, general and
     administrative expenses        105,314     85,819
    ---------------------------------------------------
    Earnings (loss) from
     operations                      $2,287    $11,796
    ---------------------------------------------------
    ---------------------------------------------------
    

    The retail segment includes sales from Harry Winston's 13 salons, which
are located in New York, Honolulu, Bal Harbour, Beverly Hills, Las Vegas,
Dallas, Paris, London, Geneva, Tokyo (Ginza and Omotesando), Osaka and Taipei.
Aber now owns 100% of Harry Winston after acquiring the remaining 47.17% on
September 29, 2006.
    Sales for the fourth quarter were $73.3 million compared to $63.4 million
for the comparable quarter of the prior year. The 16% increase in Harry
Winston sales relative to the same quarter of the prior year is primarily
attributed to the opening of three new salons, being Omotesando, London and
Dallas, an improved merchandising mix and the continued strength of the luxury
goods sector.
    Cost of sales for Harry Winston for the fourth quarter was $39.1 million
compared to $30.0 million for the comparable quarter of the prior year. The
gross margin percentage for the year was influenced by the sale of certain
inventory that was on hand at the date of acquisition of Harry Winston by Aber
and was sold at a lower margin than normal. Adjusting for the impact of this
pre-acquisition inventory, gross margin as a percentage of sales for the
fourth quarter would have been approximately 5% higher.
    With the expansion of the new international salon activity consistent
with the retail growth strategy, SG&A expenses increased to $31.2 million in
the fourth quarter as compared to $28.4 million in the comparable quarter of
the prior year. This increase was primarily due to an increase in advertising
and selling expenses of $2.5 million, an increase in other expenses of
$0.9 million, an increase in rent and building related expenses of
$0.9 million, an increase in salaries and benefits of $0.4 million, and an
increase in professional fees of $0.3 million. The fourth quarter of fiscal
2006 included a specific provision against accounts receivable of
$2.2 million.

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

    Mining Segment
    Annual production reached a record 9.8 million carats for the calendar
year ended December 31, 2006. This represents an increase of 18% over the
prior year and was due to operational efficiencies in both the mine and
processing plant as well as higher grade ore throughput for part of the year.
The increase in diamond production was achieved despite a shortened winter
road shipping season in early 2006.
    During the fourth calendar quarter of 2006, the Diavik Mine produced 2.50
million carats from 0.51 million tonnes of higher grade ore sourced from both
the A-154 South (80%) and A-154 North (20%) kimberlite pipes.
    Overburden removal from the A-418 open pit has commenced. Kimberlite
production from this pit, originally scheduled for calendar year 2008, is now
expected to begin in late 2007.
    The feasibility study for the underground mining of the Diavik Mine
orebodies is nearing completion. Mining tests using continuous mining
equipment were successfully completed in A-418 while the production scale
headings continued to advance to the A-154 South and North sections of the
underground development. A separate decline to extract a bulk sample from the
A-21 pipe has reached the kimberlite. The sample is expected to be mined and
processed by mid-May. This in turn is expected to allow the adoption of a new
mine plan incorporating A-21 and the underground mining of the other pipes by
July 2007.
    The Diavik Mine continues to work with the Wek'eezhii Land and Water
Board as part of the process leading to renewal of its water licence,
currently expected by late summer 2007.

    
    Aber's 40% Share of Diavik Mine Production

                                      Three      Three     Twelve     Twelve
                                     months     months     months     months
                                      ended      ended      ended      ended
                                   December   December   December   December
                                   31, 2006   31, 2005   31, 2006   31, 2005
    -------------------------------------------------------------------------

    Diamonds recovered
     (000s carats)                      997        732      3,931      3,309
    Grade (carats/tonne)               4.91       3.68       4.21       3.72
    Operating costs, cash
     ($ millions)                      26.1       20.8       97.2       76.6
    Operating costs per carat,
     cash ($)                            26         28         25         23
    -------------------------------------------------------------------------
    

    Cash operating costs for the three months ended December 31, 2006 of
$26.1 million increased by $5.3 million from the comparable period of the
prior year, of which approximately $4.9 million was attributable to an
increase in costs due in part to the early closure of the 2006 winter road.
    For the twelve months ended December 31, 2006, cash operating costs of
$97.2 million increased by $20.6 million from the prior year, of which
$16.2 million was attributed to an increase in costs due in part to the early
closure of the 2006 winter road, with the balance largely attributable to the
strengthening of the Canadian dollar against the US dollar during this period.

    Retail Segment
    Harry Winston once again performed well during the fourth quarter with
robust revenue growth over the comparable quarter of the prior year and strong
underlying gross margins. Strong holiday sales in traditional Harry Winston
products as well as new collections introduced in the current year were both
major contributors to the results.
    For the fiscal year, Harry Winston met underlying targets, posting strong
double-digit growth in sales and maintaining healthy gross margins. Sales in
Harry Winston's core markets of the US and Far East continued to perform well,
with the stores opened late in fiscal 2006 contributing to the strong results.
    A refined marketing effort that focused more heavily on the traditional
Harry Winston product mix and the exclusivity of the brand proved successful
in attracting Harry Winston's customers. New salon openings in fiscal 2007
included London, Tokyo and Dallas. All new salons boasted Harry Winston's new
salon concept, launched with the renovated Beverly Hills store in fiscal 2006
and based on the designs of Thierry Despont. The concept creates an elegant
setting for Harry Winston jewelry and watches that provides a luxury-focused
atmosphere for customers and reinforces Harry Winston's exclusivity.

    Liquidity and Capital Resources

    Working Capital
    Working capital decreased to $164.0 million at January 31, 2007 from
$285.7 million at January 31, 2006. As at January 31, 2007, Aber had
unrestricted cash and cash equivalents of $54.2 million and contingency cash
collateral and reserves of $51.4 million compared to $148.1 million and
$14.3 million, respectively, at January 31, 2006. Included in unrestricted
cash and cash equivalents at January 31, 2007 was $30.8 million held at the
Diavik Mine compared to $10.5 million at January 31, 2006. On September 29,
2006, the Company acquired the remaining portion of Harry Winston for a
purchase price of $157.2 million, of which $57.2 million was financed by cash
from operations.

    Cash Flow from Operations
    For the year ended January 31, 2007, Aber generated $177.6 million in
cash from operations, compared to $161.8 million in the prior year. Ongoing
quarterly variations in revenues and operating cash flows are inherent in
Aber's business, resulting from the seasonality of the mining and retail
activities as well as the rough diamond sales schedule. During the fiscal
year, the Company purchased $53.8 million of inventory, increased accounts
payable and accrued liabilities by $36.2 million, decreased prepaid expenses
by $6.2 million and decreased accounts receivable by $1.1 million.

    Financing Activities
    During the current year, Aber amended its existing credit facility to
include a new senior secured term loan of $100.0 million. The entire amount of
the new term loan was used to finance the acquisition of the remaining portion
of Harry Winston. During the fiscal year, the Company made mandatory
repayments of $20.0 million on its $100.0 million senior secured term
facility, $25.0 million on the $100.0 million new senior secured term loan
used for the Harry Winston acquisition and $12.5 million on its $75.0 million
senior secured revolving credit facility. At January 31, 2007, the Company had
$95.6 million outstanding on its senior secured term facilities and
$62.5 million outstanding on its senior secured revolving credit facility.
    As at January 31, 2007, Harry Winston had $114.8 million outstanding on
its $130.0 million credit facility, which is used to fund salon inventory and
capital expenditure requirements. This represents an increase of $52.3 million
from the amount outstanding at January 31, 2006.
    At January 31, 2007, $18.4 million, $5.8 million and $5.6 million was
drawn under the Company's revolving financing facilities relating to its
Belgian subsidiary, Aber International N.V., its Japanese subsidiary, Harry
Winston Japan K.K., and its Israeli subsidiary, Aber Diamond Israel 2006 Ltd.,
respectively. At January 31, 2006, $4.8 million and $5.1 million was drawn
under the Aber International N.V. and Harry Winston Japan K.K. facilities,
respectively.
    During the fiscal year, the Company made dividend payments of
$58.3 million or $1.00 per share to its shareholders.

    Investing Activities
    In September, the Company acquired the remaining 47.17% of Harry Winston
that it did not previously own from the minority shareholders for
$157.2 million, of which $100.0 million was financed from a new senior secured
term loan and $57.2 million was paid from cash on hand.
    Included in deferred mineral property costs are purchases of
$16.8 million during the fiscal year. The Company also purchased capital
assets of $119.9 million, of which $100.3 million were purchased for the
mining segment and $19.6 million for Harry Winston.

    Outlook

    During the coming year the Diavik Mine is projected to deliver
approximately 10 million carats of diamond production. Although most of this
is expected to come from the A-154 South pipe, contributions are also expected
from the A-154 North and A-418 pipes.
    Normal winter weather conditions in early 2007, combined with operational
improvements, have delivered the most productive winter road campaign to date.
    Bulk sample results from the A-21 kimberlite pipe and results from
underground testing of the A-154 South, A-154 North and A-418 kimberlite pipes
are expected mid-year. These are currently expected to be incorporated into a
revised mine plan and an updated mineral reserve and mineral resource
statement by the third calendar quarter of 2007.
    The planned rough diamond sales cycle in the upcoming year is expected to
be two in the first quarter, three in the second, three in the third and two
in the fourth.
    Expansion of the salon network and the introduction of one-of-a-kind,
high-end diamond jewelry remain at the core of Harry Winston's strategy for
the upcoming year. The relocation of the salon in Osaka, Japan to a flagship
location, a new men's jewelry and watch boutique in Tokyo as well as planned
new salons in Chicago and Beijing, are expected to reinforce Harry Winston's
position in these important markets and support continued annual sales growth.
    Current year gains in Harry Winston's underlying gross margin are
expected to be maintained as the Company continues to refine the product mix,
to improve sourcing, purchasing and manufacturing, and to leverage the
established infrastructure over a growing sales base.

    Other Disclosures

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

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

    -------------------------------------------------------------------------
                                       2007       2007       2007       2007
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Earnings                        $27,294    $18,831    $34,265    $23,879

    Non-cash income tax               9,932      9,057      5,016     (3,938)
    Non-cash foreign exchange
     loss (gain)                    (10,220)     1,576     (1,943)     2,970
    Depreciation and amortization    17,999     19,441     17,926     13,362
    Cash earnings                   $45,005    $48,905    $55,264    $36,273
    -------------------------------------------------------------------------
    Cash earnings per share           $0.77      $0.84      $0.95      $0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                       2006       2006       2006       2006
                                         Q4         Q3         Q2         Q1
    -------------------------------------------------------------------------

    Earnings                        $14,909    $33,742    $19,020    $13,582

    Non-cash income tax              10,412     31,264     12,788      5,320
    Non-cash foreign exchange
     loss (gain)                      5,201      3,656      3,618     (1,896)
    Depreciation and amortization     7,697     16,662     17,472     13,685
    Cash earnings                   $38,219    $85,324    $52,898    $30,691
    -------------------------------------------------------------------------
    Cash earnings per share           $0.66      $1.47      $0.91      $0.53
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------
                                       2007       2006
                                      Total      Total
    ---------------------------------------------------

    Earnings                       $104,269    $81,253

    Non-cash income tax              20,067     59,784
    Non-cash foreign exchange
     loss (gain)                     (7,617)    10,579
    Depreciation and amortization    68,728     55,516
    Cash earnings                  $184,447   $207,132
    ---------------------------------------------------
    Cash earnings per share           $3.18      $3.57
    ---------------------------------------------------
    ---------------------------------------------------


    Outstanding Share Information

    As at January 31, 2007
    Authorized                                                     Unlimited
    Issued and outstanding shares                                 58,360,755
    Fully diluted(i)                                              59,276,073
    Weighted average outstanding shares                           58,257,449
    Options outstanding                                            1,631,163

    (i) Fully diluted shares outstanding under the treasury stock method.



    CONSOLIDATED BALANCE SHEETS
    (expressed in thousands of United States dollars)(unaudited)

    As at January 31,                                   2007            2006
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash and cash equivalents                   $   54,174      $  148,116
      Cash collateral and cash reserves               51,448          14,276
      Accounts receivable                             13,297          14,917
      Inventory and supplies                         273,736         202,571
      Advances and prepaid expenses                   21,275          27,437
    -------------------------------------------------------------------------
                                                     413,930         407,317
    Deferred mineral property costs                  188,058         196,367
    Capital assets                                   384,532         301,735
    Intangible assets, net                           134,320          42,922
    Goodwill                                          98,142          41,966
    Deferred charges and other assets                 18,187          22,681
    Future income tax asset                           50,745          30,625
    -------------------------------------------------------------------------
                                                  $1,287,914      $1,043,613
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities    $  124,747      $   83,822
      Bank advances                                   29,776           9,882
      Current portion of long-term debt               95,434          27,915
    -------------------------------------------------------------------------
                                                     249,957         121,619
    Long-term debt                                   185,446         157,344
    Future income tax liability                      333,498         256,426
    Other long-term liability                              -           4,929
    Future site restoration costs                     17,200          15,316
    Minority interest                                     85          36,086

    Shareholders' equity:                            501,728         451,893

    -------------------------------------------------------------------------
                                                  $1,287,914      $1,043,613
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF EARNINGS
    (expressed in thousands of United States dollars, except per share
    amounts)(unaudited)

    Years ended January 31,                             2007            2006
    -------------------------------------------------------------------------

    Sales                                         $  558,793      $  505,234
    Cost of sales                                    285,498         222,607
    -------------------------------------------------------------------------
                                                     273,295         282,627
    Selling, general and administrative expenses     126,536         106,948
    -------------------------------------------------------------------------
    Earnings from operations                         146,759         175,679
    -------------------------------------------------------------------------
    Interest and financing expenses                  (21,150)        (14,933)
    Other income                                       5,081           4,333
    Foreign exchange gain (loss)                       8,784         (11,343)
    -------------------------------------------------------------------------
    Earnings before income taxes                     139,474         153,736
    Income taxes - Current                            14,763           9,337
    Income taxes - Future                             20,067          59,784
    -------------------------------------------------------------------------
    Earnings before minority interest                104,644          84,615
    Minority interest                                    375           3,362
    -------------------------------------------------------------------------
    Net earnings                                  $  104,269      $   81,253
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
      Basic                                       $     1.79      $     1.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Fully diluted                               $     1.76      $     1.39
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of shares
     outstanding                                  58,257,449      57,957,201
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (expressed in thousands of United States dollars)(unaudited)

    For the year ended January 31,                      2007            2006
    -------------------------------------------------------------------------

    Cash provided by (used in):
    Operating
    Net earnings                                  $  104,269      $   81,253
    Items not involving cash:
      Amortization and accretion                      68,728          55,517
      Future income taxes                             20,067          58,894
      Stock-based compensation                         1,250           2,545
      Foreign exchange                                (7,617)         10,579
    Loss on write-off of investment                      909               -
    Minority interest                                    352           3,296
    Loss on sale of other assets                           -             161
    Change in non-cash operating
     working capital                                 (10,393)        (50,421)
    -------------------------------------------------------------------------
                                                     177,565         161,824
    -------------------------------------------------------------------------
    Financing
    Increase/(decrease) in long-term debt             51,062         (36,203)
    Increase in revolving credit                      64,716          86,120
    Deferred financing                                     -            (321)
    Dividends paid                                   (58,274)        (52,180)
    Issue of common shares                             2,918           5,752
    Purchase of subordinated convertible debt              -          (6,808)
    Cash advance from minority shareholder                 -           8,067
    Common shares purchased for cancellation               -          (4,660)
    -------------------------------------------------------------------------
                                                      60,422            (233)
    -------------------------------------------------------------------------
    Investing
    Cash collateral and cash reserve                 (37,172)           (490)
    Deferred mineral property costs                  (16,834)        (34,850)
    Capital assets                                  (119,904)        (52,673)
    Deferred charges                                    (171)         (1,815)
    Purchase of Harry Winston                       (158,150)              -
    Repayment of promissory note                           -         (51,059)
    -------------------------------------------------------------------------
                                                    (332,231)       (140,887)
    -------------------------------------------------------------------------
    Foreign exchange effect on cash balances             302           3,816

    Increase/(decrease) in cash and cash
     equivalents                                     (93,942)         24,520
    Cash and cash equivalents, beginning of year     148,116         123,596
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year        $   54,174      $  148,116
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Change in non-cash operating working capital
    Accounts receivable                                1,058           3,363
    Advances and prepaid expenses                      6,157         (16,244)
    Inventory and supplies                           (53,807)        (63,644)
    Accounts payable and accrued liabilities          36,199          26,104
    -------------------------------------------------------------------------
                                                  $  (10,393)     $  (50,421)
    -------------------------------------------------------------------------
    Supplemental cash flow information
    Cash taxes paid                               $   11,780      $    7,209
    Cash interest paid                            $   18,746      $   12,846
    -------------------------------------------------------------------------


    NOTES

    Years ended January 31, 2007 and 2006 (tabular amounts in thousands of
United States dollars, except as otherwise noted) (unaudited)

    Note 1:
    Nature of Operations

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

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

    Note 2:
    Acquisition

    On September 29, 2006, the Company acquired the remaining 47.17%
    ownership of Harry Winston for $157.2 million, paid in cash on the
    acquisition date.

    The allocation of the purchase price to the fair values of assets
    acquired and liabilities assumed is set forth in the table below and
    continues to be refined. The valuation of intangible assets has been
    completed by a third party valuator. Purchase price amounts give rise to
    future income tax liabilities that have been recorded in the same year in
    which the intangible assets are separately identified.

    Cash                                                           $   2,433
    Accounts receivable                                                4,909
    Inventory                                                        107,690
    Intangibles                                                       92,414
    Goodwill                                                          57,230
    Other assets                                                      31,835
    Accounts payable and accrued liabilities                         (18,728)
    Bank loan                                                        (54,653)
    Other liabilities                                                (64,980)
    -------------------------------------------------------------------------
                                                                   $ 158,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash paid at acquisition                                       $ 157,150
    Acquisition and other costs                                        1,000
    -------------------------------------------------------------------------
                                                                   $ 158,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 3:
    Inventory and Supplies
                                                          2007          2006
    -------------------------------------------------------------------------

    Rough diamond inventory                          $  17,648     $  21,612
    Merchandise inventory                              228,157       164,691
    Supplies inventory                                  27,931        16,268
    -------------------------------------------------------------------------
    Total inventory and supplies                     $ 273,736     $ 202,571
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 4:
    Capital Assets

                                                                        2007
    -------------------------------------------------------------------------
                                                                         Net
                                                   Accumulated          book
                                           Cost   amortization         value
    -------------------------------------------------------------------------

    Diavik equipment and leaseholds(a) $ 422,419     $ 101,912     $ 320,507
    Furniture, equipment and other(b)     20,193         9,530        10,663
    Real property - land and
     building(c)                          64,691        11,329        53,362
    -------------------------------------------------------------------------
                                       $ 507,303     $ 122,771     $ 384,532
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                        2006
    -------------------------------------------------------------------------
                                                                         Net
                                                   Accumulated          book
                                            Cost  amortization         value
    -------------------------------------------------------------------------

    Diavik equipment and leaseholds(a) $ 337,020     $  85,655     $ 251,365
    Furniture, equipment and other(b)     14,900         7,126         7,774
    Real property - land and
     building(c)                          50,654         8,058        42,596
    -------------------------------------------------------------------------
                                       $ 402,574     $ 100,839     $ 301,735
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Diavik equipment and leaseholds are project related assets at the
        Joint Venture level.

    (b) Furniture, equipment and other includes equipment located at the
        Company's diamond sorting facility and at Harry Winston's salons.

    (c) Real property is comprised of land and a building that houses the
        corporate activities of the Company and various leasehold
        improvements to Harry Winston's salons and corporate offices.


    Note 5:
    Intangible Assets

                                              Accumulated
                        Amortization              amortiz-    2007      2006
                              period      Cost      ation      net       net
    -------------------------------------------------------------------------

    Trademark        indefinite life  $112,995  $      -  $112,995  $ 33,850
    Drawings         indefinite life    12,365         -    12,365     5,200
    Wholesale
     distribution
     network              120 months     5,575      (812)    4,763     2,042
    Store leases    65 to 105 months     5,639    (1,442)    4,197     1,830
    -------------------------------------------------------------------------
    Intangible
     assets                           $136,574  $ (2,254) $134,320  $ 42,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization expense for 2007 was $1.0 million (2006 - $0.7 million).


    Note 6:
    Long-Term Debt and Bank Advances

                                                          2007          2006
    -------------------------------------------------------------------------

    Credit facility(a)                               $ 158,140     $ 114,160
    Harry Winston credit facilities(b)                 114,782        62,460
    First mortgage on real property                      7,958         8,639
    -------------------------------------------------------------------------
    Total long-term debt                               280,880       185,259
    -------------------------------------------------------------------------
    Less current portion                               (95,434)      (27,915)
    -------------------------------------------------------------------------
                                                     $ 185,446     $ 157,344
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)  Long-Term Debt
    (a)  Credit Facility
         During the fiscal year, Aber amended its existing credit facility to
         include a new senior secured term loan of $100.0 million. The entire
         amount of the new term facility was used to finance the acquisition
         of the remaining portion of Harry Winston. As the result of the new
         senior secured term loan, the Company's credit agreement now
         includes two $100.0 million senior secured term facilities and a
         $75.0 million senior secured revolving facility. The facilities have
         underlying interest rates, which at the option of the Company are
         either LIBOR plus a spread of 1.25% to 2.375%, or US Base Rate plus
         a spread of 0.25% to 1.375%. The two senior secured term facilities
         have a final maturity date of December 15, 2008 and the senior
         secured revolving facility has a final maturity date of March 15,
         2009. The senior secured revolving facility has a standby fee on
         undrawn amounts up to 1.5%, dependent on certain financial ratios,
         payable quarterly. The Company is required to comply with certain
         financial and non-financial covenants. Under the facilities, the
         Company is required to establish a debt reserve account of
         $25.0 million and an amount equal to the estimated operating
         expenses, maintenance capital expenditures and other capital
         expenditures of the Diavik Mine for 30 days following January 31,
         2007. The effective interest at January 31, 2007 was 6.86%.

         Scheduled amortization of the Company's senior secured term facility
         is over ten equal consecutive semi-annual installments commencing
         June 15, 2004. The scheduled repayment of the new term facility is
         over four equal consecutive semi-annual installments of
         $25.0 million commencing December 15, 2006. The maximum amount
         permitted to be drawn under the senior secured revolving facility is
         reduced by $12.5 million semi-annually, commencing September 2006.
         As at January 31, 2007, the Company had $95.6 million of senior
         secured term facilities and had $62.5 million drawn under its senior
         secured revolving facility. Interest and financing charges include
         interest incurred on long-term debt, as well as amortization of
         deferred financing charges.

    (b)  Harry Winston Credit Facilities
         (i)  Harry Winston Inc. and Harry Winston Japan, K.K. amended its
              $85.0 million secured credit agreement on January 31, 2006 with
              a syndicated group of banks to increase it to $130.0 million on
              July 1, 2006. The credit agreement includes both a revolving
              line of credit and fixed rate loans. At January 31, 2007,
              $112.0 million had been drawn against the facility. The amount
              available under this facility is subject to availability
              determined using a borrowing formula based on certain assets
              owned by Harry Winston Inc. and Harry Winston Japan, K.K. The
              Harry Winston credit facility, which expires on March 31, 2008,
              has no scheduled repayments required before that date.

              The credit agreement contains affirmative and negative
              financial and non-financial covenants, which apply to Harry
              Winston on a consolidated basis. These provisions include
              minimum net worth, minimum coverage of fixed charges, leverage
              ratio, minimum EBITDA and limitations on capital expenditures.
              The outstanding borrowings under the credit facility are
              secured by inventory and accounts receivable of Harry Winston
              Inc. and inventory of Harry Winston Japan, K.K. with no
              guarantees or recourse to Aber. The common stock of Harry
              Winston Inc. and 65% of the common stock of Harry Winston's
              foreign subsidiaries are also pledged to the bank to secure the
              loan.

              The facility provides for fixed rate loans and floating rate
              loans, which bear interest at 2.25% above LIBOR and 1.00% above
              the bank's prime rate, respectively. The effective interest
              rate at January 31, 2007 was 9.25% for the revolving line of
              credit loans and 7.73% for the fixed rate loans.

              On November 1, 2006, the credit agreement was amended to
              provide for a temporary increase in the credit facility of
              $10.0 million to $140.0 million. Borrowings under the temporary
              facility for fixed rate loans and floating rate loans bear
              interest at 2.75% above LIBOR and 1.00% above the bank's prime
              rate, respectively. The temporary credit facility expires on
              April 30, 2007 and is guaranteed by HW Holdings Inc. and its
              domestic subsidiaries and Aber Diamond Corporation. Under this
              agreement, $nil was outstanding at January 31, 2007.

         (ii) On March 31, 2006, Harry Winston S.A. entered into a 30-year
              loan agreement to finance the construction of a new watch
              factory in Geneva, Switzerland. The watch factory has been
              pledged to secure the loan. The loan agreement bears interest
              at 3%. Under this agreement approximately $2.8 million is
              outstanding at January 31, 2007.

    (c)  Required Principal Repayments

         2007                                                      $  95,434
         2008                                                        165,892
         2009                                                         13,008
         2010                                                            549
         2011                                                            594
         Thereafter                                                    5,403
         --------------------------------------------------------------------
                                                                   $ 280,880
         --------------------------------------------------------------------
         --------------------------------------------------------------------

    (ii) Bank Advances
         The Company operates two other revolving financing facilities. The
         Company has available $45.0 million (utilization in either
         US dollars or Euros) and $10.0 million for inventory and receivables
         funding in connection with marketing activities through its Belgian
         subsidiary, Aber International N.V. and its Israeli subsidiary, Aber
         Diamond Israel 2006 Ltd., respectively. Borrowings under the Belgium
         facility bear interest at the bank's base rate plus 1.5% and
         borrowings under the Israeli facility bear interest at LIBOR plus
         1%. At January 31, 2007, $24.1 million was drawn under these two
         facilities. The Belgium facility has an annual commitment fee of
         0.75% per annum. Both facilities are guaranteed by Aber Diamond
         Corporation.

    Harry Winston Japan, K.K. maintains unsecured credit agreements with two
    banks each amounting to Yen 350 million (US $2.9 million). The credit
    facilities bear interest at 2.125% and 1.925% per annum and expire on
    April 27, 2007 and December 28, 2007, respectively. Under these
    agreements, bank advances of $5.7 million were outstanding at January 31,
    2007.

    Note 7:
    Earnings per Share

    The following table sets forth the computation of diluted earnings per
    share:

                                            2007          2006          2005
    -------------------------------------------------------------------------

    Numerator:
    Net earnings for the year          $ 104,269     $  81,253     $  53,084
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Denominator
     (thousands of shares):
    Weighted average number of
     shares outstanding                   58,257        57,957        57,569
    Dilutive effect of employee
     stock options                         1,019           864         1,175
    -------------------------------------------------------------------------
                                          59,276        58,821        58,744
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Number of anti-dilutive options            -             -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 8:
    Segmented Information

    The Company operates in two segments within the diamond industry, mining
    and retail, as of January 31, 2007.

    The mining segment consists of the Company's rough diamond business. This
    business includes the 40% interest in the Diavik group of mineral claims
    and the sale of rough diamonds in the market-place. The retail segment
    consists of the Company's ownership in Harry Winston. This segment
    consists of the marketing of fine jewelry and watches on a worldwide
    basis.

    For the twelve months
     ended January 31, 2007               Mining        Retail         Total
    -------------------------------------------------------------------------

    Revenue
      Canada                         $   332,573   $         -   $   332,573
      United States                            -        97,989        97,989
      Europe                                   -        75,092        75,092
      Asia                                     -        53,139        53,139
    Cost of sales                        166,879       118,619       285,498
    -------------------------------------------------------------------------
                                         165,694       107,601       273,295
    Selling, general and
     administrative expenses              21,222       105,314       126,536
    -------------------------------------------------------------------------
    Earnings from operations             144,472         2,287       146,759
    -------------------------------------------------------------------------
    Interest and financing expenses      (13,008)       (8,142)      (21,150)
    Other income/(expense)                 5,323          (242)        5,081
    Foreign exchange gain/(loss)           9,775          (991)        8,784
    -------------------------------------------------------------------------
    Segmented earnings before
     income taxes                    $   146,562   $    (7,088)  $   139,474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segmented assets as at
     January 31, 2007
      Canada                         $   731,194   $         -   $   731,194
      United States                            -       451,934       451,934
      Other foreign countries             14,775        90,011       104,786
    -------------------------------------------------------------------------
                                     $   745,969   $   541,945   $ 1,287,914
    -------------------------------------------------------------------------
    Goodwill as at January 31, 2007  $         -   $    98,142   $    98,142
    Capital expenditures             $   100,325   $    19,579   $   119,904
    Other significant non-cash items:
      Income tax expense             $    22,972   $    (2,905)  $    20,067
    -------------------------------------------------------------------------


    For the twelve months
     ended January 31, 2006               Mining        Retail         Total
    -------------------------------------------------------------------------

    Revenue
      Canada                         $   314,073   $         -   $   314,073
      United States                            -        75,212        75,212
      Europe                                   -        66,279        66,279
      Asia                                     -        49,670        49,670
    Cost of sales                        129,061        93,546       222,607
    -------------------------------------------------------------------------
                                         185,012        97,615       282,627
    -------------------------------------------------------------------------
    Selling, general and
     administrative expenses              21,129        85,819       106,948
    -------------------------------------------------------------------------
    Earnings from operations             163,883        11,796       175,679
    -------------------------------------------------------------------------
    Interest and financing expenses      (10,150)       (4,783)      (14,933)
    Other income/(expense)                 4,352           (19)        4,333
    Foreign exchange loss                (10,488)         (855)      (11,343)
    -------------------------------------------------------------------------
    Segmented earnings before
     income taxes                    $   147,597   $     6,139   $   153,736
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segmented assets as at
     January 31, 2006
      Canada                         $   706,431   $         -   $   706,431
      United States                            -       255,424       255,424
      Other foreign countries             19,515        62,243        81,758
    -------------------------------------------------------------------------
                                     $   725,946   $   317,667   $ 1,043,613
    -------------------------------------------------------------------------
    Goodwill as at January 31, 2007  $         -   $    41,966   $    41,966
    Capital expenditures             $    37,743   $    14,931   $    52,674
    Other significant non-cash items:
      Income tax expense             $    61,677   $    (1,893)  $    59,784
    -------------------------------------------------------------------------

    Sales to one customer in the mining segment totalled $29.0 million
    (2006 - $23.0 million) for the fiscal year.
    

    %SEDAR: 00003786E




For further information:

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

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Dominion Diamond Corporation

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