FDI.L Regulatory News (FDI)

02 October 2014

Firestone Diamonds plc

("Firestone" or the "Company") (AIM: FDI)

Final results for the year ended 30 June 2014

Firestone Diamonds plc, the AIM-quoted diamond company, is pleased to announce its final audited results for the year ended 30 June 2014.

HIGHLIGHTS

Liqhobong Mine Development Project (Liqhobong or the Project)

· The Project is fully funded through to completion;

· The management team and contractors are in place to deliver the project on time and on budget; and

· Construction and earthworks commenced in late June 2014.

Updated Project Definitive Feasibility Study (DFS)

· Base Case Post-tax NPV at an 8% discount rate of $379 million and IRR of 30% at an average diamond price of $107 per carat;

· Upside Case Post-tax NPV at an 8% discount rate of $728 million and IRR of 45% at an average diamond price of $156 per carat which also includes large plus 100 carat stones;

· Average annual production of plus 1 million carats commencing in 2016;

· 15 year life of open pit mine;

· 3.6 million run of mine tonnes per annum; and

· Total capital expenditure for the plant and associated infrastructure of $185 million.

Strengthened management team

· Chief Executive Officer, Mr Stuart Brown, appointed 2 September 2013; and

· Chief Project Officer, Mr Glenn Black, appointed 3 March 2014.

Financial

· Group net loss decreased to $11.2 million (2013: $22.6 million);

· Funding package of $222.4 million completed;

· Net amount of $114.5 million equity funding raised in two separate equity raises; and

· Cash on hand at year-end of $107 million (2013: $4.1 million)

Outlook

· Focused on Liqhobong, with the goal of becoming a mid-tier plus 1 million carats per annum producer from mid-2016; and

· Initiated formal disposal process for Botswana assets.

Analyst conference call and presentation

Firestone will be hosting an audio conference call and presentation today at 09:00 BST. Participants may join the conference call by dialling one of the following numbers approximately 10 minutes before the start of the call and can access the presentation by clicking on the link below:

From UK (toll free): 080 8237 0030

From the rest of the world: +44 (0) 20 3139 4830

Participant PIN code: 20937258#

The presentation is available via this link: http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=131650834&PIN=20937258

Extracts from the Company's Annual Report and Accounts appear below and the full version will be made available on the Company's website today.

For more information contact

Background information on Firestone

Firestone is an international diamond development company with operations focused on Lesotho and Botswana. Firestone is currently in the process of developing the Liqhobong Mine Development Project in Lesotho to become a plus 1 million carat per annum producer.

Lesotho is emerging as one of Africa's significant new diamond producers, and hosts Gem Diamonds' Letseng Mine, Firestone's Liqhobong Mine, as well as Namakwa Diamonds' Kao Mine and the Mothae development project.

For more information please visit: www.firestonediamonds.com.

Chairman's Statement

The past year has seen some very exciting developments for Firestone culminating in the Company now having the required management and financing in place to realise its strategy of becoming a mid-tier, plus 1 million carat per year diamond producer.

The beginning of the year saw the recruitment of Stuart Brown to the Board and subsequently his appointment as Chief Executive Officer (CEO). Stuart joined the Company from De Beers where he held the position of Joint Acting CEO and Chief Finance Officer, having been with De Beers for almost 20 years. Attracting a CEO of Stuart's calibre with such extensive diamond experience was a significant achievement for Firestone and reflects the underlying quality of Firestone's Liqhobong Diamond Mine in Lesotho.

The Company was similarly pleased that Tim Wilkes, the outgoing CEO, agreed to remain involved with the Project in a consultancy capacity and assisted Stuart during the revision of the Liqhobong DFS, which was published in November 2013 and was a requirement in securing funding for the Project. The revised DFS confirmed the strong economics of the Project, setting out a compelling base case post tax net present value at an 8% discount rate (NPV8%) of $379 million and an IRR of 30%, and a significant upside case post tax NPV8% of $728 million and an IRR of 45% which also includes large plus 100 carat stones.

For the mining sector, and in particular for junior mining companies, it has been a very challenging environment for seeking finance. Fortunately, this environment did not affect Firestone and, in May 2014, the Company announced the completion of its $222.4 million funding package which is required for the construction and commissioning of the Liqhobong Mine Development Project and other working capital requirements of the Group. The Board firmly believes that the successful financing represents a clear endorsement for the quality of the Project, Firestone's management team and, importantly, the Kingdom of Lesotho.

I am particularly pleased that we have now completed the funding required to enable the development of the Project in order to achieve its full potential after so many years in preparation and planning.

We were also pleased to be able to secure the renewal of the mining lease and mining agreement for the Liqhobong mine with our partners, the Government of The Kingdom of Lesotho. We look forward to a long and rewarding partnership with the Kingdom of Lesotho.

As the Company enters its next phase of development, it was necessary to make certain changes to the Board and on 18 June 2014, Mr Niall Young (as the representative of Pacific Road Capital Management) and Mr Ken Owen were appointed to the Board. At the same time Mr Julian Treger resigned. Both Ken and Niall have considerable experience in mining and in the diamond industry having both worked for De Beers for many years earlier in their careers. I welcome them and look forward to their valuable contribution and take this opportunity to also thank Julian for his tremendous support and contribution in helping to successfully restructure the Company.

Operations

Due to the continued operating losses from the pilot plant and the potential to break large valuable stones, we took the decision to close the pilot plant at Liqhobong and ceased production in October 2013. While this decision was extremely difficult to make, it was necessary from both a financial and operational perspective to allow site preparation to begin for the construction of the Liqhobong Mine Development Project in 2014.

Following completion of the project financing in May 2014, Firestone commenced its development programme to build and commission the Liqhobong Mine Development Project. The development programme is being executed by Firestone's project team, led by the Chief Project Officer, Mr Glenn Black, who was appointed to the Senior Management Team of the Company in March 2014. Glenn has over 40 years' experience in the mining industry including over 30 years' project experience at a senior management level.

I am pleased to report that the Liqhobong Mine Development Project started as planned in late June 2014 with the commencement of the decommissioning and removal of the existing pilot plant, the beginning of general site earthworks and with overhead power line contractors working hard establishing site works and logistics.

As previously communicated to shareholders, the Board is considering various strategic alternatives for its Botswana operations and exploration portfolio, and commenced a formal disposal process in August 2014. We hope to conclude this process in 2015, thus allowing the management team to completely focus their attention on the successful completion of the Liqhobong Mine Development Project.

Financial

In a year of transition, where the Company was focused on preparing itself for the necessary fundraising, I am pleased to report that we contained our losses and costs while we successfully raised sufficient funding to begin our journey to success.

On behalf of the Board, I would like to take this opportunity to thank the management team for their efforts in securing the funds required to commence the construction of the Liqhobong Mine Development Project. I welcome our new investors, in particular Pacific Road Resources and Resource Capital Fund, to our register and I look forward to keeping shareholders up to date towards the commencement of production in 2016 and thereafter to achieving average annual production of plus 1 million carats.

Lucio Genovese

Non-Executive Chairman

1 October 2014

Strategic Report

Introduction to strategy

Firestone is a diamond mining and exploration company focused on developing its principal asset, the Liqhobong Diamond Mine in Lesotho.

Firestone's interest in Lesotho is its 75% ownership of Liqhobong (with the Government of the Kingdom of Lesotho holding 25%). The deposit was first discovered in the late 1950s and over the past 60 years it has been through a series of trial mining and feasibility studies, which due to various issues, could never reach funding success. In 2010, Firestone acquired its 75% interest in Liqhobong and successfully completed all the required work to finalise the DFS and subsequently raised the necessary funds to begin building and commissioning the Liqhobong Mine Development Project in 2014.

The Liqhobong Mine Development Project is expected to take two years to build and commission and when completed in 2016, Liqhobong is expected to be a plus one million carat a year producer, which would place it in the top tier of diamond mines globally.

In Botswana, Firestone's principle investment is the BK11 diamond mine, a low-grade high-value mine, currently under care and maintenance. Firestone has been active in Botswana through exploration and mining since its inception in 1998. The Company has commenced a formal disposal process in respect of the BK11 mine and other assets in Botswana, which the Company hopes to conclude in the first half of 2015.

Our vision

Our vision is to be a mid-tier diamond producer that is trusted by its partners, stakeholders and investors and is the preferred partner of choice for investors and local communities alike.

Our strategy

Firestone's strategy is to become a world-class mid-tier diamond producer, producing over 1 million carats a year and is based on:

· Our African operating experience

We have a strong team of experienced industry executives who have an in depth understanding of the diamond sector.

· Skills development

We create in-country skills and capacity through careful recruitment of local employees who are then trained and deployed in front-line positions in the Company thereby realising the skills transfer requirements for our partner, the Government of the Kingdom of Lesotho.

· Trusted expertise

By demonstrating that our actions mirror our words we will become the preferred investment vehicle for global investors and partners in Africa.

· High quality management

The formation of a highly skilled and experienced management team, which is able to execute mine construction projects and operate mines to ensure the Company's planned returns are realised.

Risk review

Firestone's current activity is the successful execution of the Liqhobong Mine Development Project in Lesotho. The Liqhobong Mine Development Project entails the construction and commissioning of a new main treatment plant capable of treating 500 tonnes per hour, as well as the required infrastructure to ensure that the mine successfully operates over its planned life and once built operates at the designed specification to deliver the anticipated returns.

The Company is exposed to a number of risks and uncertainties, which, if they occur or manifest, could have a material impact on the successful achievement of its goals. Management of these risks and uncertainties is a key function of the board and management of the Company.

The following risks have been identified as the main risks that potentially impact on the Company achieving its goals.

Strategic risk

Retention of key personnel

The Company is heavily reliant on a small group of key staff to achieve its objectives.

Responsibility

The Board carries the responsibility through its Executive Directors, the Remuneration Committee and the Nomination Committee to ensure appropriate remuneration structures are adequate to attract and retain staff with the required skills and experience to ensure the project and operational requirements are met.

Mitigation

Firestone believes it has mitigated this risk by implementing competitive remuneration structures and practices and has attracted the required team. Furthermore the team and employees have been given the authority to fulfil their potential and have been empowered to achieve the desired results.

External risk

Country and political risk

Firestone's Liqhobong mine is situated in Lesotho and its BK11 mine is situated in Botswana, both in southern Africa. Whilst Botswana has been politically stable over its history the same is not true for Lesotho. Lesotho is currently experiencing a period of political difficulty. This is not uncommon in emerging markets which can be subject to greater volatility and political risk.

Responsibility

The responsibility for managing this risk lies with the executive management.

Mitigation

The Firestone team has extensive experience of operating in southern Africa. The Company keeps in close contact with representatives of the Government in Lesotho in order to ensure it is as up to date as possible with all political and regulatory developments. In relation to Lesotho, the issues in 2014 have not materially disrupted the Company's operations directly but they have caused uncertainty which is being managed as closely as possible under the circumstances and will continue to be monitored.

Operational risks

Health, safety, environmental and community risk

Failure to comply with any of the legislative or social requirements would cause a delay or suspension of the Company's operational activities in Lesotho or Botswana.

Responsibility

The Executive Directors and the Safety, Health, Environment and Corporate Social Responsibility Committee.

Mitigation

Firestone is establishing its operational footprint in Lesotho and has been very thorough in the execution of its strategy in engaging with the local community in Liqhobong as well as local and central government representatives to manage expectations and requirements. These relationships are maintained and monitored on a regular basis.

Project delivery risk

Firestone is exclusively reliant on the Liqhobong Mine Development Project being executed and completed on time and on budget by mid-2016. Should the Company not achieve the completion on time, this will impact on the Company achieving its goal of producing 1 million carats per annum by 2016.

Responsibility

The Executive Directors and the Chief Project Officer.

Mitigation

The Company has assembled an experienced team, members of which have a track record of successful project delivery in the diamond industry.

The engineering, procurement and contract management partner also has extensive experience in the diamond industry and importantly, a history of working in the Lesotho Highlands.

The project design has been selected to mitigate time overruns and is closely monitored and measured by the Project Management Steering Committee.

Financial risk

The Company raised what it believes to be sufficient funding, through a combination of debt and equity, to fund the Group through to early commissioning of Liqhobong in mid-2016. A project cost overrun or delay in commissioning could lead to a further funding requirement.

Responsibility

The Executive Directors, the Audit Committee and the senior management.

Mitigation

Management has prepared detailed capital expenditure plans and budgets for the construction phase of the Liqhobong Mine Development Project and whilst these have been carefully considered, it is often the case that actual expenditure can differ from that which is budgeted. The Company has implemented a detailed cash and expenditure monitoring system to ensure that expenditure remains within approved capital and contingency budgets. Cash flow planning is continually updated to take into account historic cash outflow against budget, exchange rate movements as well as budget shifts. The Audit Committee considers cash flow forecasts on a regular basis to ensure that the Company is adequately funded. Project spending is tightly controlled and managed.

Currency risk

The Company is exposed to currency risk as a result of its operations in various jurisdictions which includes Lesotho, South Africa, Botswana and the UK. The most substantial currency risk for the Group relates to the Liqhobong Mine Development Project costs which are incurred in South African Rand (Rand) and Lesotho Maloti (Maloti), which is pegged to the Rand, from funds raised through a combination of US Dollars (USD) or ($) and Pounds Sterling (£). Should the Rand, which is a volatile currency, strengthen against these currencies beyond the rates budgeted, the Group could have a potential funding shortfall.

Responsibility

The Executive Directors and the Audit Committee.

Mitigation

The Company monitors the movement of the Rand against the $ and £ on an ongoing basis. By applying the Company's hedging policy, a number of hedging contracts were entered into after the financial year end, thereby reducing the risk to an acceptable level at this stage of the Liqhobong Mine Development Project.

Chief Executive Officer's Review

Operationally, 2014 was a year of transition for Firestone, with material changes in the Senior Management Team, which included my appointment in September 2013, subsequently taking over as CEO in December 2013. I was specifically recruited to restructure and assist with developing the Company into a successful and focused mid-tier diamond producer. To do this, we have moved all our available resources and attention to the successful execution of the economically robust Liqhobong Mine Development Project.

The major focus of the management team was to prepare the Company for the required fundraise to execute the Liqhobong Mine Development Project. To maximise the ability to successfully raise the required debt and equity the Company took the difficult decision to close the loss making pilot plant at Liqhobong. This step was taken at the end of October 2013 and stopped the associated losses and allowed the team to focus on completing the fundraising required to build and commission the Liqhobong Mine Development Project.

With our focus firmly on developing Liqhobong, there continued to be no further activity at the BK11 mine in northern Botswana, which remained on care and maintenance. No exploration or evaluation work was undertaken on any of the Company's prospecting licences in Botswana and where possible, these licences were relinquished. The BK11 mine and other in-country assets in Botswana have been prepared for a potential sale process that commenced following the year end and is expected to be completed in the first half of 2015.

Liqhobong Mining Development Company (LMDC), Lesotho

The 2009 independent resource estimate concluded that to a depth of about 150 metres (2370 metres above sea level (masl)), the extent of the majority of drillholes, the Liqhobong main pipe indicated resource is estimated to comprise 12.0 million carats (Mcts) in 38.5 million tonnes (Mt) at an average grade of 31carats per hundred tonnes (cpht) at a 1.0 millimetres (mm) bottom cut off. A further 17.6 Mcts in 51.5 Mt at an average grade of 34 cpht is estimated to a depth of 2040 masl. These carats are classified at the Inferred level and also stated at a 1.0 mm bottom cut off. The total undepleted diamond resource is therefore approximately 90 Mt and 29.6 Mcts at an average grade of 33 cpht. When adjusted for depletions up to 1 July 2012 the diamond resource figures change as follows:

Diamond resource estimate for the Liqhobong main pipe as at 1 July 2012:

Diamond resources are stated at a 1mm bottom cut-off

The 2009 estimate includes boart diamonds

75% of diamond resources are attributable to Firestone Diamonds

2370 metres above sea level (masl) is approximately 150 metres below the surface

2040 metres above sea level (masl) is approximately 480 metres below the surface

Source: 2012 DFS

Included in the current open pit mine plan is a probable reserve of circa 36.4 Mt and a further inferred resource of 18.6 Mt, providing a life of mine of around 15 years, down to 393 metres below surface, at a projected production capacity of 3.6 Mt and plus 1 million carats per annum.

Diamond resource and reserve included in the original 2012 Definitive Feasibility Study Open Pit Mine Plan:

Total DFS open pit plan contains 55Mt and 17.6Mct to 393 metres below surface

Open pit mining will deplete only about 60% of the total resource indicating that some 35 Mt and 12 Mcts will remain in and below the open pit. It is envisaged that the remaining resource could be mined by either a fourth cut in the open pit or through the development of an underground operation. Trade-off studies will be conducted at the appropriate time when further drilling results can be evaluated and the options for mine expansion can be considered. Furthermore, the current resource is still open at depth as evidenced by a vertical hole drilled to a depth of 650 metres and terminating in kimberlite.

The latest base case revenue estimate completed in October 2013 as part of the revision to the DFS, incorporated the latest pilot plant parcel valuations and size frequencies derived from bulk samples which were then modelled to include stone sizes up to 100 carats. This exercise resulted in a range of values between an expected $107 per carat to an upside value of $156 per carat when plus 100 carat stones are included. The expected value of $107 per carat was used in the revised DFS published in November 2013. Due to the substantial number of broken and damaged large stones recovered during the trial mining activities using the pilot plant, we are hopeful that we will recover a number of stones above 100 carats; however, this upside has not been modelled into any of our expectations.

During early 2015, as part of the operational readiness work, the diamond resource and reserve will be updated to reflect depletions as a result of the pilot plant production up to October 2013 as well as incorporate an improved density dataset and fine-tuning of internal geology. The boart factor used in the 2009 estimate will be removed as part of the update. The update will also incorporate all the latest indices relating to diamond revenue, costs, exchange rates and other relevant information which will allow us to calculate the expected performance of the plant and ore body with greater confidence as we head to the commencement of production.

Pilot plant production

Due to ongoing losses from operating the pilot plant at Liqhobong, Firestone had to prioritise the use of their remaining cash prior to the potential fundraise. Consequently a decision was taken to close the loss making pilot plant at the end of October 2013. In the four month period up until the closure of the plant, ore treated totalled 282,000 tonnes (2013: 1,408,000 tonnes) at an average grade of 21.6 cpht (2013: 25.1 cpht), producing 42,929 carats (2013: 156,131 carats).

The reduction in recovered grade was due to a number of factors that included processing of remaining low grade ore stockpiles whilst simultaneously minimising mining costs at the closure period, as well as lower recovery factors from the pilot plant prior to closure.

Diamond tenders continued to be conducted at the Antwerp Diamond Centre (AWDC) where interest in the Liqhobong goods remained high. A total of 58,086 carats were sold during the year realising revenues of $3.9 million at an average price of $68 per carat. The prices obtained were market related and steady considering that no large or special stones were sold in the last two tenders, which also included the sale of lower quality and near gem inventory.

Summary of production data for LMDC:

a - Ore treated consists of 165,000 tonnes from ore mined and 34,000 tonnes of ore in process from the prior year. All of the ore was processed prior to closure of the plant in October 2013.

Rough diamond prices continued to experience single-digit growth for the second half of 2013 and the first half of 2014, providing us with a level of confidence that the rough diamond market is well supported at present. Global demand for rough diamonds is being driven by the increasing demand in retail diamond jewellery from China and India as well as the ongoing recovery and growth in the United States. We remain cautiously optimistic that the rough market fundamentals are solid in that forecast demand for diamond retail jewellery continues to grow at a higher rate than rough diamond production from all producers. In the long term, this divergence is positive for rough producers and while there may be short-term fluctuations in rough prices, the trend for price growth in the long term is positive. The Company continued to sell its -11 sieve size diamonds, to a reputable Belgium based diamantaire, under the terms of a $6 million two year off-take agreement, with the remainder of the pilot plant's production being sold via electronic tender. The early closure of the pilot plant in October 2013 resulted in an outstanding balance of $1.8 million owing against the off-take agreement. This was settled by way of new ordinary shares issued as part of the fundraise in May 2014.

Liqhobong Mine Development Project

As part of the fundraise preparation, the capital estimates in the original DFS completed in October 2012 were revalidated and a revised DFS was published in November 2013. As part of the fundraise process, the revised DFS was subjected to three sets of due diligence from our new major shareholders and financiers and we were pleased that it withstood the process and we were able to complete the financing in May 2014.

In parallel, we were also renegotiating the mining lease and mining agreement with the Government of Lesotho. A new mining lease agreement for Liqhobong was signed in April 2014, which is valid for 10 years and has renewal provisions contained in the agreement and in accordance with the Lesotho Mines and Minerals act.

The total capital expenditure for the Liqhobong Mine Development Project, which includes the building and commissioning of the Main Treatment Plant, associated infrastructure to maintain the mine operation and appropriate risk mitigation assets as well as a grid power solution is estimated to be $185 million.

I have been extremely pleased with the quality of the work undertaken on the Project to date and am also pleased that we have engaged an experienced team under Mr Glenn Black to bring the project to completion.

Conclusion

2014 has been a defining year in the history of Firestone Diamonds. It has been a long journey that has culminated in the successful fundraising to move Firestone from an explorer for diamonds to a company that will soon be a mid-tier producer with the Liqhobong diamond mine producing over 1 million carats per annum when in full production.

The Company completed all the required funding and licensing requirements by the end of the financial year with construction commencing at the end of June 2014.

The 2015 financial year will be focused on Project execution with commissioning of the plant and infrastructure expected in mid-2016.

The successful commissioning of Liqhobong in 2016 is expected to place Firestone in the top tier of diamond producing mines globally. I am very pleased that we have assembled the right team at Firestone that will help shape the future of the Company for years to come.

Stuart Brown

Chief Executive Officer

1 October 2014

Financial review

Statement of profit and loss

a - This business segment is classified as held for sale. Operating losses of this segment is disclosed as losses from discontinued operations in the consolidated statement of profit and loss.

b - Operational changes in the Group resulted in certain corporate and administrative functions being transferred from Botswana to South Africa, where the Group established a new corporate office. Administrative costs of $0.2 million incurred during 2013 in Botswana which previously formed part of corporate costs, are classified as BK11 costs as they are closely associated with the BK11 operation.

The Group incurred a loss of $11.2 million for the year ended 30 June 2014 which is substantially lower than the prior year's loss of $22.6 million, mainly as a result of lower depreciation and amortisation charges of $3.4 million (2013: $8.8 million) (of which $3.3 million (2013: $6.3 million) is classified within cost of sales) and no impairment expense for the year (2013: $3.8 million). Pleasingly, losses were reduced across all business segments. Losses at LMDC reduced to $7.2 million (2013: $10.4 million) as a result of a lower depreciation charge due to closure of the pilot plant at Liqhobong in October 2013 in preparation for the Liqhobong Mine Development Project. At BK11, losses reduced substantially to $0.6 million (2013: $7.2 million) as a result of no depreciation charges or impairment expense which, in the prior year, amounted to $2.3 million and $3.8 million respectively. The loss from corporate activities decreased to $3.4 million (2013: $5.0 million) as a result of a lower share-based payments expense of $0.5 million (2013: $1.9 million) and foreign exchange gains of $0.6 million (2013: $nil).

LMDC

LMDC's main focus during the year was to reduce operating losses from the pilot plant whilst financing arrangements for the Liqhobong Mine Development Project were progressing. LMDC incurred a loss for the year of $7.2 million (2013: $10.4 million). Due to the drive to curtail costs and reduce losses at Liqhobong, mine development and plant maintenance was reduced, resulting in mostly low-grade free-dig ore and existing low grade stockpiles being treated through the pilot plant. During the year, LMDC sold 58,086 carats (2013: 166,712 carats) at an average price of $68 per carat (2013: $93 per carat), generating revenue of $3.9 million (2013: $15.4 million). Revenue for the year was lower as the pilot plant was only operational for four months before being closed in October 2013. Cost of sales decreased to $8.5 million (2013: $23.2 million), which includes a lower depreciation charge of $3.3 million (2013: $6.3 million) and $0.4 million of inventory write downs (2013: $nil). Administrative expenses were lower at $1.8 million (2013: $2.6 million) due to a weaker Lesotho Maloti, the currency in which LMDC's expenses are denominated, and the classification of certain expenses as care and maintenance costs since closure in October 2013.

BK11 mine

With the Group firmly focused on the Liqhobong Mine Development Project, and subsequent to a review of the Group's Botswana assets, a decision was taken to dispose of or joint venture the assets, with the principle asset being the BK11 mine. The mine remained on care and maintenance during the year at a cost of $0.6 million (2013: $0.6 million) whilst management progressed their strategy, which included delisting Firestone from the Botswana Stock Exchange in April 2014 and commencing a disposal process, which took place after the year end.

The BK11 assets have been classified as held for sale since the end of the 2013 financial year.

Corporate

Corporate costs which include corporate expenses, share-based payments and finance income decreased to $3.4 million for the year (2013: $5.0 million). The increase in corporate expenses to $3.4 million (2013: $2.9 million), which resulted mainly from additional costs in connection with the $222.4 million funding arrangements, was partially offset by a decrease in the share-based payment expense of $0.5 million (2013: $1.9 million).

Statement of financial position

The equity raise in May 2014 increased the equity value of the Group to $159.3 million (2013: $55.7 million) and cash equivalents to $107.0 million (2013: $4.1 million).

Non-current assets reduced by $2.3 million year on year to $50.1 million (2013: $52.4 million) due to depreciation and amortisation of $4.7 million, which included the accelerated depreciation of the pilot plant at LMDC of $0.8 million and foreign exchange losses of $3.5 million offset by additions to property, plant and equipment of $5.9 million. Exchange losses relate to the strengthening of the US Dollar, being the Group's reporting currency, relative to the Lesotho Maloti, the currency in which the Group's non-current assets are recorded.

Current assets excluding cash decreased by $3.4 million to $0.7 million (2013: $4.1 million). This is mainly due to the receipt in the current year of proceeds from the final tender held at the end of the 2013 financial year, and the write down of consumables inventory relating to the pilot plant. Current assets at year end include consumables inventory of $0.2 million (2013: $1.6 million) and prepayments and value-added tax receivable of $0.5 million (2013: $2.5 million). All gem diamond inventory was sold during the year after the pilot plant was closed in October 2013.

Current liabilities at the end of the year of $4.7 million (2013: $7.2 million) comprise mainly construction-related creditors.

During 2013, the Group's South African and Botswana assets were classified as held for sale. Sale of the South African assets is nearly complete, pending only local regulatory approval and in August 2014, a formal disposal process commenced for the Botswana assets.

Assets held for sale include:

The decrease in liabilities of a disposal group by $2.5 million to $2.1 million (2013: $4.6 million) was due to settlement of an interest-bearing loan with Standard Chartered Bank Botswana.

Cash flow statement

The Group began the year with cash of $4.1 million (2013: $16.5 million) and raised a net $114.5 million in two separate capital raises, providing the Group with total cash of $118.6 million. A total of $11.6 million was spent during the year; $3.2 million on operations, $5.8 million on capital development and $2.6 million on repayments of loans resulting in a closing cash balance of $107 million (2013: $4.1 million) which includes cash held by disposal groups.

LMDC

LMDC began the year with cash of $0.6 million, received $21.8 million in funding from the parent company and spent $6.5 million, $5.8 million relating to the Liqhobong Mine Development Project resulting in closing cash of $15.9 million (2013: $0.6 million).

BK11 mine

During the year, BK11 spent $0.6 million (2013: $0.6 million) on continued care and maintenance expenses and settled an outstanding balance of $2.6 million on an interest-bearing loan with Standard Chartered Bank. Cash requirements for the year were funded from opening cash of $0.5 million and additional funding from the parent company of $2.7 million.

Corporate and other

Corporate began the year with $3.0 million and received a further net $114.5 million taking total cash available to $117.5 million. During the year, $2.5 million (2013: $3.2 million) was spent on activities, which was offset by a decrease in working capital of $0.6 million (2013: $1.2 million increase in working capital). Cash advances to operations include $21.8 million (2013: $4.2 million) of further investment in LMDC, of which $21.1 million relates to the Liqhobong Mine Development Project, and $2.7 million (2013: $3.5 million) to BK11 to settle the balance owing on its loan with Standard Chartered Bank.

Equity raises

During the year, the Company undertook two separate equity raises, raising, in aggregate, net proceeds of $114.5 million after expenses.

The first equity raise took place in July 2013 when 198.5 million new ordinary shares were issued at 2 pence per share raising $5.8 million net of expenses. These funds were utilised to progress the development project at Liqhobong, fund working capital costs and repay debt.

The second equity raise, in May 2014, raised a total of $108.7 million net of expenses from the issue of 2.3 billion new shares at 3 pence each. This equity raise formed part of the total funding package of $222.4 million secured to build and commission the Liqhobong Mine Development Project, and fund working capital requirements of the Group.

Strategic Report

This Strategic Report was approved by the Board on 1 October and is signed on its behalf by:

Lucio Genovese

Non-Executive Chairman

1 October 2014

Directors' Report

The Directors present their annual report and the audited financial statements for the year ended 30 June 2014.

Results and dividends

The Group made a loss after taxation of $11.2 million (2013: $22.6 million). Further details are shown in the consolidated statement of profit and loss and the consolidated statement of profit and loss and other comprehensive income.

The Directors do not recommend a dividend (2013: $nil).

Strategic Report

A detailed review of the important events affecting the Company and likely future developments of the business and future developments as required by the Companies Act 2006 can be found within the Strategic Report.

Capital structure

As part of the fundraising exercise carried out in May 2014 2,336,174,902 new ordinary shares were issued following which a share capital reorganisation was carried out on 6 June 2014 such that:

· all ordinary shares were consolidated on the basis of 1 ordinary share of 10 pence each for every 10 existing ordinary shares of one pence each; and

· immediately following the share consolidation each ordinary share of 10 pence each was subdivided and converted into 1 ordinary share of 1 pence each and one B deferred share of 9 pence each.

At the date of this report the ordinary share capital of the Company was 308,992,814 ordinary shares.

(2013 un-adjusted share capital: 745,352,396).

At the date of this report the Company had been notified of the following interests in the issued ordinary share capital:

1. Includes Pacific Road Resources Fund II L.P. (PRC LP) and Pacific Road Resources Fund II (PC Trust)

2. Mr Treger is interested in 2,208,110 ordinary shares, being 271,466 ordinary shares held directly by Mr Treger and 1,936,644 ordinary shares held by trusts of which Mr Treger is a beneficiary. Mr Treger is a partner in Audley Capital Advisors LLP, which advises clients who have an interest in, in aggregate, 11,778,758 ordinary shares. As a result, Mr Treger has an interest in, in aggregate, 13,986,868 ordinary shares which represent approximately 4.5% of the Company's issued share capital.

Directors

The Directors who served during the year and up to the date of this report were as follows:

Details of Directors' emoluments and fees are shown in the financial statements and further details of their remuneration and share interests are shown in the Remuneration Report.

The Company maintains directors' and officers' liability insurance which in the view of the Directors, should provide appropriate cover for any potential legal action brought against its Directors. The Company has also provided in its Articles of Association an indemnity for its Directors, which is a qualifying third party indemnity provision for the purposes of section 234 of the Companies Act 2006. This was in place throughout the financial year under review and up to the date of the approval of the financial statements.

Financial instruments

Details of the Group's financial instruments and financial risk management objectives and policies are set out in note 28 of the full version of financial statements.

Political and charitable donations

The Group made no political donations during the year (2013: $nil).

Post-balance sheet events

Post-balance sheet events are detailed in note 30 of the full version of the financial statements.

Going concern

The Directors, after making enquiries and considering uncertainties associated with the Group's operations, believe that the Group and Company have, or have access to the necessary financial resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and accounts which do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Auditor

In the case of each person who was a Director at the time this report was approved:

· so far as that Director was aware, there was no relevant available information of which the Company's auditor is unaware: and

· that Director has taken all steps that the Director ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor was aware of that information.

A resolution to reappoint BDO LLP as auditor to the Company will be proposed at the forthcoming Annual General Meeting.

On behalf of the Board

Lucio Genovese

Non-Executive Chairman

1 October 2014

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FIRESTONE DIAMONDS PLC

We have audited the financial statements of Firestone Diamonds plc for the year ended 30 June 2014 which comprise the consolidated statement of comprehensive income, consolidated statement of financial position and Company balance sheet, the Group statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows, Company statement of financial position, Company statement of changes in equity, Company statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditor

As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the FRC's website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

· the financial statements give a true and fair view of the state of the Group's and the parent company's affairs as at 30 June 2014 and of the Group's loss for the year then ended;

· the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

· the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of Directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

_______________________________

Scott Knight (Senior Statutory Auditor)

For and on behalf of BDO LLP, statutory auditor

London

United Kingdom

1 October 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated statement of comprehensive income for the year ended 30 June 2014

Consolidated statement of financial position as at 30 June 2014

The financial statements were approved by the Board of Directors and authorised for issue on 1 October 2014.

Lucio Genovese

Director

Consolidated statement of changes in equity for the year ended 30 June 2014

Consolidated statement of cash flows for the year ended 30 June 2014

Basis of preparation

The Group's financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, issued by the International Accounting Standard Board (IASB) as endorsed for use in the EU and those parts of the Companies Act 2006 that are applicable to companies that prepare their financial statements under IFRS.

The Group's financial statements were approved by the Directors on 1 October 2014.

ENDS