Botswana Diam Regulatory News (BOD)

26th October 2017

Botswana Diamonds PLC

("Botswana Diamonds" or the "Company")

Preliminary Results for the Year Ended 30 June 2017

As the Natural Resources Exploration Sector shows signs of life we are well positioned to take advantage of emerging investor interest.

The past nine years have been difficult for Directors of stock exchange listed explorers. There has been virtually no new money available. Survival was the task so exploration spending declined. Not all survived.

Companies have disappeared while many more languish at miniscule valuations often at prices less than 5% of their highs. What funding was available was generally from Directors, their families and friends.

In recent times there has been a significant improvement. A long bull market on the stock exchange has given investors renewed confidence. The commodity cycle has turned upwards with prices of many metals showing significant rises. New opportunities have also arisen. Prospective ground which was held by mining companies is now available as the companies are unable to pay the ongoing costs and/or spend money on exploration.

The market for diamond jewellery continues to grow. As hundreds of millions around the world enter the middle classes, diamond jewellery becomes a "must have" item. Supply is currently sluggish and set to decline. There are few new mines while existing mines get more expensive to operate or simply run out of diamonds. The collapse of the structures put in place by De Beers to control prices has led to more volatility, yet over a 20 year period prices have grown more than inflation.

While market sentiment has played a part in the recent revival of Botswana Diamonds, your Board has also been decisive. We are delighted that James Campbell joined us as Managing Director in December 2016. He brings knowledge, experience, contacts and energy to the Company. James previously worked with us in African Diamonds where he was responsible for turning the AK6 diamond discovery into what became the world-class Karowe Diamond Mine.

His impact is obvious. In joining BOD he brought with him the Vutomi projects; Thorny River, Ontevreden and 6 prospecting rights in the Free State Province. The Thorny River Project is the most advanced with a 7.5 km diamond bearing kimberlite dyke. A bulk sample is currently being taken. An inferred resource is expected by end of 2017. On Ontevreden, a kimberlite pipe has been discovered in an area close to Petra's high-grade Helam Diamond Mine. The 6 Free State licences cover 40,000 ha and contain fourteen known kimberlite occurrences.

Since its foundation in 2011 the focus of BOD has been on Botswana, a country blessed with good government, good title and good ground. We have two significant joint ventures there - a 50/50 venture with Alrosa of Russia, the world's largest diamond company and a 15% stake in Maibwe (BCL 51%, Future Minerals 20%, Siseko 29%, BOD owns 51% of Siseko) which holds 12 licences in the Gope Region of the Kalahari.

The Alrosa joint venture, Sunland, holds 15 licences in Botswana, 4 in the Orapa area and 11 in the Gope area. Extensive geophysical and geochemical work has been conducted on these licences by Alrosa teams. Drilling has been undertaken by local contractors supervised by BOD personnel. The results to date after three years of work are encouraging. Excellent anomalies have yielded little when drilled. But that is the nature of exploration. A number of drill targets have been identified on certain Gope licences. Also, permits are needed to drill in the Central Kalahari Game Reserve (CKGR). We are in the process of applying for these.

The Maibwe joint venture is at an interesting stage of development. BCL, the operator who purports to own 51% of the joint venture company has not spent or invested the capital to acquire the stake, and is now in liquidation. It is a large Botswana state-owned copper and nickel miner. The liquidator is dealing with a number of options including the sale of assets as a unit and/or a piecemeal sale. Decisions are due by end February 2018.

The time period to conduct work on the 12 Maibwe licences, 3 years plus extensions, has been suspended by the Botswana Government until such time as ultimate ownership of the BCL assets is decided.

BOD made an offer to acquire the BCL interest in Maibwe. The liquidator appointed experts to evaluate the assets and to report on the offer.

Future

Alrosa has had significant management changes. The new team has expressed an interest in expanding their African interests. We are meeting the new team in the coming weeks to analyse and evaluate what we have in Botswana and to look at ways to progress.

The coming months should see developments in Maibwe, with most likely new owners of BCL. Until we know who they are and their attitude towards diamonds, little progress can be made.

Major developments are likely on the South African projects. With a maiden Mineral Resource Estimate to be published for Thorny River. High hopes exist for the kimberlite pipe discovered at Ontevreden. A number of other projects are being looked at.

We are rebuilding investor interest in BOD. The funds raised in August 2017 will fund operations into 2018. This will continue as we attempt to expand and improve our investor base in the United Kingdom, South Africa and Botswana.

John Teeling

Chairman

25th October 2017

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

ENDS

Enquiries:

www.botswanadiamonds.co.uk

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017

Share Premium

The share premium reserve comprises of a premium arising on the issue of shares.

Share Based Payment Reserve

The share based payment reserve arises on the grant of share options under the share option plan.

Retained Deficit

Retained deficit comprises of losses incurred in the current and prior years.

Translation Reserve

The translation reserve arises from the translation of foreign operations.

Other Reserve

During 2010 the Company acquired certain assets and liabilities from African Diamonds plc, a Company under common control. In accordance with accounting standards the assets and liabilities acquired were recognised at their book value and no goodwill was recognised on acquisition. The difference between the book value of the assets acquired and the purchase consideration was recognised directly in reserves.

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2017

1. ACCOUNTING POLICIES

The accounting policies and methods of computation followed in these financial statements are consistent with those published in the Group's Annual Report for the year ended 30 June 2016.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements have also been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union.

The financial information set out below does not constitute the Group's financial statements for the year ended 30 June 2017 or 30 June 2016, but is derived from those accounts. The financial statements for the year ended 30 June 2016 have been delivered to the Registrar of Companies and those for the year ended 30 June 2017 will be delivered following the Group's Annual General Meeting.

The auditors have reported on the 2017 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

2. GOING CONCERN

The Group incurred a loss for the year of £161,868 after exchange differences on retranslation of foreign operations (2016: £199,846) and had a retained deficit of £3,511,712 (2016: £3,200,914) at the balance sheet date. These conditions represent a material uncertainty that may cast doubt on the Group's ability to continue as a going concern.

The directors have prepared cashflow projections and forecasts for a period of not less than 12 months from the date of this report which indicate that the group will require additional finance to fund working capital requirements and develop existing projects. On 3 August 2017 the Group raised £867,576 by placing of 48,240,000 new ordinary shares and the exercise of 31,244,300 warrants. Further details are outlined in Note 5.

As in previous years the Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements and believe the going concern basis is appropriate for these financial statements. The financial statements do not include any adjustments

3. LOSS PER SHARE

Basic loss per share is computed by dividing the loss after taxation for the year available to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year. Diluted earnings per share is computed by dividing the profit or loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets forth the computation for basic and diluted earnings per share (EPS):

The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of shares for the purposes of the diluted earnings per share:

4. INTANGIBLE ASSETS 

Exploration and evaluation assets relate to expenditure incurred in exploration for diamonds in Botswana and South Africa. The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.

On 11 November 2014 the Brightstone block was farmed out to BCL Investments (Proprietary) Limited, a Botswana Company, who assumed responsibility for the work programme. Botswana Diamonds will retain a 15% carried interest.

On 16 August 2013 the Group entered into a joint venture agreement with Alrosa Overseas SA a wholly owned subsidiary of OJSC Alrosa of Russia to explore for diamonds in Botswana.

On 6 February 2017 the Group entered into an Option and Earn-In Agreement with Vutomi Mining Pty Ltd and Razorbill Properties 12 Pty Ltd (collectively known as 'Vutomi'), a private diamond exploration and development firm in South Africa.

Pursuant to the terms of the Agreement, Botswana Diamonds has agreed to pay Vutomi a total of £942,000 in cash, of which £581,000 will be used to fund exploration activities. In addition, the Company will issue 100 million ordinary shares of 0.25p each ("Ordinary Shares") to Vutomi shareholders. The Agreement will be executed in three Phases after which the Company will own 72% of Vutomi. The remaining 28% will continue to be held by Vutomi's Black Economic Empowerment ('BEE') partners. The three Phases are summarised below:

Exclusivity and Option Fee

Botswana Diamonds paid Vutomi an exclusivity and option fee of £122,000, with £61,000 paid in cash and £61,000 paid in the Company's Ordinary Shares at a price of 1.9p. The shares were issued on 3 April 2017. Upon completion of this payment Phase 1 of the earn-in commenced.

Phase 1

Phase 1 will last for a further 12 months, during which period the Company will, subject to available funding, have the option to pay Vutomi £215,000 to fund exploration activities to earn an initial 15% of Vutomi. During Phase 1 Vutomi will grant the Company the sole and exclusive right to fund exploration activities in, on and under the Vutomi Prospecting Rights Area in order to prepare a conceptual mining and development plan. The required mining permits are in place.

As at 30 June 2017, Botswana Diamonds plc made cash advances totaling £130,694 under Phase 1 of the Option and Earn-In Agreement.

Phase 2

Phase 2 will last for a further 12 months, during which period the Company will, subject to available funding, have the option to pay Vutomi £366,000 to fund exploration activities to earn an additional 25% of Vutomi.

Phase 3

Phase 3 will commence within 90 days of the successful completion of Phase 2. Pursuant to the Agreement, the Company will have the option to issue the outstanding balance of 96.8m Ordinary Shares, priced at VWAP, to Vutomi and, subject to available funding, settle Vutomi's shareholders loan accounts of approximately £300,000 in cash to earn a further 32% of Vutomi.

Termination

At any point the Agreement will lapse if the Company does not exercise its option regarding a specific Phase.

The directors believe that there were no facts or circumstances indicating that the carrying value of intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic diamond resources and the ability of the Group to raise sufficient finance to develop the projects. It is subject to a number of significant potential risks, as set out below:

- licence obligations;;

- exchange rate risks;

- uncertainties over development and operational costs;

- political and legal risks, including arrangements with governments for licenses, profit sharing and taxation;

- foreign investment risks including increases in taxes, royalties and renegotiation of contracts;

- title to assets;

- financial risk management ;

- going concern; and

- operational and environmental risks.

Included in additions for the year are £6,951 (2016: £428) of share based payments, £16,006 (2016: £14,749) of wages and salaries and £73,758 (2016: £15,000) of directors remuneration.

5. CALLED-UP SHARE CAPITAL

Movements in share capital

On 22 December 2015, the Company raised £458,656 through the issue of 53,959,400 new ordinary shares of 0.25p each at a price of 0.85p per share to provide additional working capital and fund development costs. In addition, the Company settled £86,660 of existing liabilities with the directors of the Company through the issue of 10,195,450 new ordinary shares at a price of 0.25p at a price of 0.85p.

On 22 December 2015, 64,154,850 warrants were granted to the subscribers of the placing at a price of 0.85p per share. These warrants were exercisable for a period of three years from 24 December 2015.

On 6 May 2016, the Company raised £500,000 through issue of 33,333,333 new ordinary shares at a price of 1.5p to provide additional working capital and fund development costs.

On 15 June 2016, 588,250 warrants were exercised at a price of 0.85p per warrant for £5,000.

On 28 June 2016, 847,100 warrants were exercised at a price of 0.85p per warrant for £7,000.

On 27 February 2017, the Company raised £525,000 through the issue of 35,000,000 new ordinary shares of 0.25p at a price of 1.5p per share to provide additional working capital and fund development costs.

On 13 March 2017, 1,764,700 warrants were exercised at a price of 0.85p per warrant for £15,000.

On 3 April 2017, the Company issued 3,210,527 new ordinary shares of 0.25p each at a price of 1.9p to Vutomi shareholders for £61,000 as part of the Joint Venture Agreement entered into. Further details are outlined in Note 4.

On 11 May 2017, 1,176,500 warrants were exercised at a price of 0.85p per warrant for £10,000

6. POST BALANCE SHEET EVENTS

On 3 August 2017 the company announced that it had raised £868,576. The details of the placing are

as follows:

· £543,000 was raised through a private placing of 43,440,000 shares at a price of 1.25p a share.

· The directors John Teeling, James Finn and David Horgan subscribed for 2,400,000, 1,200,000

and 1,200,000 new ordinary share respectively on the same terms as the placing to raise £60,000.

· 31,244,300 warrants were also exercised following the placing at £0.0085 a share to raise £265,576.

On 29 September 2017, the company moved into Phase 2 of the Earn-In Agreement with Vutomi Mining (Pty) Ltd and Razorbill Properties 12 (Pty) Ltd.

7. GENERAL INFORMATION

The Annual Report and Accounts will be mailed shortly only to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report and Accounts will be available on the website at www.botswanadiamonds.co.uk. Copies of The Annual Report will also be available for collection from the company's registered office at Suite 1, 3rd Floor, 11-12 St. James's Square, London, SW1Y 4LB

8. ANNUAL GENERAL MEETING

The Annual General Meeting is due to be held at the Hilton London Paddington Hotel, 146 Praed Street, London W2 IEE on Thursday 30th November 2017 at 10.30am. A Notice of the Annual General Meeting is included in the Company's Annual Report.