FDI.L Regulatory News (FDI)

28 March 2017

Firestone Diamonds plc

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

Unaudited Interim Results for the six months to 31 December 2016

Firestone Diamonds plc, the AIM-quoted diamond mining company, is pleased to announce its unaudited interim results for the six months ended 31 December 2016 ("H1 2017" or the "Period").

HIGHLIGHTS FOR THE PERIOD

LIQHOBONG DIAMOND MINE ("Liqhobong", the "Project" or the "Mine")

· Zero lost time injury record continued, with over 3.6 million man hours worked

· Project completed on time and within the US$185.4 million budget

· Commissioning commenced in October 2016

· 37 carat white diamond recovered, alongside a further 20 special stones larger than 10.8 carats as well as several fancy yellow diamonds

· Nameplate capacity achieved on multiple occasions and 402,440 tonnes treated

FINANCIAL

· Loss for the Period of US$8.8 million (H1 2016: US$4.6 million)

· Loss per share of 2.0 cents (H1 2016: 1.5 cents)

· Total available debt facilities of US$29.0 million

· Cash of US$3.3 million

POST PERIOD HIGHLIGHTS

· First two diamond sales completed in February and March 2017 in Antwerp

· Total sale proceeds of US$13.7 million, all 127,590 carats offered for sale were sold, achieving an average price of US$107 per carat

· Mine commissioning progressing with continued good recovery of special stones and steadily increasing grade

Stuart Brown, Chief Executive Officer of Firestone, commented:

"Finishing the construction of the Liqhobong Diamond Mine and commencing production in October 2016 are two momentous milestones for the Company and I would like to sincerely thank all of the team that has made our vision possible.

This has been a very successful Project from a construction and commissioning perspective. To have completed the Project within the budget in a very difficult environment and without any lost time injuries, makes us all very proud.

We look forward to the continued trend of over achievement that we have demonstrated throughout as we continue with our ramp-up phase. Importantly we are now working towards achieving commercial production in the coming months."

ANALYST CONFERENCE CALL

Firestone will be hosting an analyst conference call today, Tuesday 28 March 2017, at 10:00 BST. Participants may access the call by dialling one of the following numbers below approximately 10 minutes prior to the start of the call:

From UK (toll free): 0808 237 0030

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

Participant PIN code: 22140509#

For further information, please visit the Company's website or contact:

Background information on Firestone

Firestone is an international diamond mining company with operations focused on Lesotho. Firestone is currently in the process of commencing commercial production at the Liqhobong Diamond Mine. Liqhobong is owned 75% by Firestone and 25% by the Government of Lesotho.

Lesotho is emerging as one of Africa's significant new diamond producers, hosting Gem Diamonds' Letseng Mine, Firestone's Liqhobong Mine and Namakwa Diamonds' Kao Mine.

For more information please visit: www.firestonediamonds.com

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

CHIEF EXECUTIVE'S REVIEW

The completion of the Project to a state such that production ramp-up could commence in late October 2016 was very pleasing. This milestone was the culmination of a tremendous amount of hard work and co-operation from many parties. Our sincere thanks go to all our employees and contractors who have worked tirelessly to ensure the Project construction was completed within the revised schedule and commissioning could commence earlier than expected. In addition, the support from our partner, the Government of Lesotho, is greatly appreciated.

By the end of October 2016 we had seen our first carats which were recovered from mixed stockpiled and diluted ore sources. The remainder of the Period was devoted to getting the plant up and running and steadily increasing the daily tonnes treated. By the end of the Period we had successfully treated over 400,000 tonnes and recovered over 57,000 carats. Despite starting our production on treating lower grade ore and old mixed stockpile material, we recovered some high value diamonds that have encouragingly achieved very good prices at our first two sales in Antwerp in February and March 2017.

The Mine's ramp-up process has not been without its challenges. Substantial rain, and some plant and equipment teething problems were experienced initially, but pleasingly these have largely been resolved and the mine and plant have been operating at, and close to, nameplate capacity on a number of occasions since commencing production in October 2016. Initially, grades were impacted by the under recovery of the lower value finer diamonds. The grade is steadily increasing as minor modifications are continuing to be made to the plant, and are expected to improve as we begin treating the better quality ore. The waste stripping is on schedule and we are now in the process of dewatering the south-eastern side of the main pit, to begin accessing better quality ore later in the financial year. We expect the Mine to improve steadily as it reaches commercial production in the coming months.

The Group's finances are well managed with sufficient cash and debt facilities available to fund the Group for the foreseeable future.

The overall diamond market remains fairly difficult although prices for the larger and better quality diamonds continue to be strong. The impact of the Indian demonetisation event towards the end of the Period has negatively affected the lower quality, high volume, end of the diamond market. The impact of this has meant that prices for these goods have weakened and in some cases the very poor quality goods have remained unsold. It is not certain how long this situation will continue for, but there are some signs that pricing is improving in these categories. Pleasingly, Firestone sold all its goods offered at its first two diamond sales in the first quarter of 2017, generating revenues of, in aggregate, US$13.7 million.

BK11 in Botswana remains under care and maintenance after the termination of the sale process with Tango Mining Limited. We are currently negotiating a bulk sampling exercise with an external partner, the results of which will enable us to assess our options with BK11.

I am particularly pleased with our safety record. To have continued throughout the Project with no lost time injuries has been simply outstanding and I would like to congratulate all our employees and contractors.

We have maintained our strong relationship with the local communities, continuing the crop loss compensation payments as well as commencing loss of grazing payments. Recently we completed and handed over a new crèche facility at the Liqhobong Village and have commenced other community enhancement projects.

Finally, I would like to thank everyone involved to date in the successful completion of the Project and I look forward to bigger, and better, diamonds as we move to the higher grade ore and reach commercial production.

Stuart Brown

Chief Executive Officer

27 March 2017

FINANCIAL REVIEW

Summary

The first half of the financial year saw the Company complete the construction of the Liqhobong Mine and commence the ramp-up of production in October 2016.

A total of 402,440 tonnes were treated recovering 57,723 carats at a total cost of US$5.6 million. A cost of sales section is excluded from the statement of comprehensive income as production costs are capitalised to the cost of the Project until such time as commercial production is achieved, in line with the applicable accounting standard. Commercial production will be established once certain operating parameters and criteria, as determined by management, have been consistently achieved over a continuous 3 month period.

Administrative expenses for the Period were US$1.1 million higher than the prior Period at US$3.6 million (H1 2016: US$2.5 million) as a result of a depreciation charge of US$0.6 million related to the BK11 mine and US$0.5 million to the grid power line which provides electricity to the Liqhobong Mine. No depreciation charge was recognised in the prior period for either of these assets as the BK11 mine was classified as 'held for sale' and the Grid power line was in the process of being commissioned.

Physical Project construction was complete by the end of December 2016 and from a funding perspective, US$173.8 million had been spent against the original Project budget of US$185.4 million, leaving a balance of US$11.6 million to be paid in the second half of the year as scheduled final payments become due. During the Period, US$25.0 million was drawn against the ABSA Debt Facility to fund Project costs.

At the end of December, the Group had access to total debt facilities of US$29.0 million, comprising US$14.0 million from the ABSA Debt Facility, which has now been fully drawn, and the US$15.0 million standby facility.

Statement of comprehensive income

The Group's loss before tax for the six month Period ended 31 December 2016 of US$4.1 million was slightly lower than the prior year loss for the same Period of US$4.6 million. However, due to a deferred tax charge during the Period of US$4.6 million, the Group's loss after tax is US$8.8 million (H1 2016: US$4.6 million).

The deferred tax charge resulted from foreign currency translation gains in Liqhobong. The Maloti, Liqhobong's functional currency strengthened against the US dollar by 7.9% during the Period. This resulted in a lower value of debt in Maloti currency terms at the end of the Period and taxable foreign currency translation gains for the Period. Although a deferred tax charge is recognised for the Period, no cash tax payment is payable until Liqhobong's assessed loss of Maloti 3.7 billion is utilised.

Total comprehensive income for the Period of US$9.6 million compares favourably to the loss of US$31.5 million incurred in the prior comparative Period. This was mainly as a result of gains on currency revaluations due to a weaker US Dollar.

The loss incurred of 2.0 cents per share is 0.5 cents per share more than the loss in the prior comparative Period of 1.5 cents per share, largely as a result of the deferred tax charge.

Statement of financial position

The Group's total assets increased by US$35.8 million to US$250.0 million (FY 2016: US$214.2 million) mainly as a result of the continued expenditure on the Project, offset by a decrease in the value of the deferred tax asset. The value of property, plant and equipment increased by US$37.6 million to US$214.7 million (FY2016: US$177.1 million), and includes capitalised Project costs of US$25.3 million and translation gains on assets held in currencies other than the US dollar of US$14.9 million, offset by depreciation of US$2.6 million. The deferred tax balance decreased by US$2.1 million during the Period to US$18.1 million (FY2016: US$20.2 million) as a result of foreign currency translation gains for Liqhobong as discussed above. The value of current assets of $14.2 million includes cash balances of US$3.3 million.

Total equity for the Group increased by US$10.5 million to US$150.2 million (FY 2016: US$139.7 million) and includes a US$12.8 million foreign currency translation gain.

The Group's total liabilities increased by US$25.3 million to US$99.8 million (FY 2016: US$74.5 million) mainly as a result of accessing debt funding from the ABSA Debt Facility of US$25.0 million, which was used to fund Project costs.

Cash Flow

The Group began the Period with cash of US$10.3 million, drew down US$25.0 million from the ABSA debt facility and spent US$1.9 million on operations, US$19.9 million on the Project, US$8.7 million on working capital and incurred net finance costs of US$1.5 million, resulting in a closing cash balance of US$3.3 million.

Cash flows used in operating activities of US$1.9 million during the Period compare favourably with US$2.3 million in H1 2016 as costs continued to be well managed and completion of the Project was achieved.

Conclusion

The Group had a successful six months which culminated in the completion of the Project in late October and the start of the ramp up in production.

The Group ended the Period with sufficient cash and debt facilities to complete the Project within the original budget, and to fund other Group operating costs for the foreseeable future.

Post Period events

Two sales took place subsequent to the Period end, the first in February and the second in March 2017. Total sales proceeds of US$13.7 million were received from the sale of 127,590 carats at an average price of US$107 per carat.

The ABSA Debt Facility was fully drawn in January 2017, when the remaining US$14 million of the US$82.4 million facility was received.

Notes to the condensed Group interim financial statements

For the six months ended 31 December 2016

(Unaudited)

1. Accounting Policies

Basis of preparation

Firestone Diamonds plc (the "Company") is a company domiciled in the United Kingdom and is quoted on the AIM market of the London Stock Exchange plc. The unaudited condensed consolidated interim financial statements of the Company for the six months ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in diamond mining and exploration in southern Africa. The audited consolidated financial statements of the Group for the year ended 30 June 2016 are available upon request from the Company's registered office at The Triangle, 5-17 Hammersmith Grove, London W6 0LG or at www.firestonediamonds.com.

Statement of compliance

These unaudited condensed interim financial statements of the Group for the six months ended 31 December 2016 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the European Union (IFRSs) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Group's latest audited financial statements for the year ended 30 June 2016.

These unaudited condensed interim financial statements have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 30 June 2016. The auditors' opinion on those statutory Annual Report and Accounts was unqualified. The auditor's report did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

The comparative figures presented are for the six months ended 31 December 2015 and the year ended 30 June 2016.

Going concern

The Group currently operates the Liqhobong mine which is situated in Lesotho and was under construction since 2014. The mine commenced operations in October 2016 when the first ore was processed. Construction was complete by the end of December 2016. The Group also holds a 90% interest in the BK11 mine, which is situated in Botswana and which remains on care and maintenance.

Funding for the construction phase of the Project was made available by an equity raise of US$110.7 million, a Eurobond facility of US$30.0 million and the ABSA Debt Facility of US$82.4 million. Funds received from the equity raise and Eurobond facility were used to fund Project costs prior to the ABSA Debt Facility being accessed and the final drawdown against the ABSA Debt Facility took place subsequent to the Period end in January 2017. In future, the Group is reliant on proceeds from the sale of diamonds recovered from its Liqhobong Mine for its cash generation together with the US$15 million standby facility that has not yet been drawn.

The Directors have prepared cash flow forecasts for the Group based on certain assumptions, and the Directors are aware that various uncertainties might affect the validity of their forecasts. These uncertainties include currency risk, operational risks and the risk of change in general market conditions. The Directors are monitoring the working capital requirements of the Group on a regular basis to ensure that action will be taken at the appropriate time to ensure that the Group has adequate funding, or access to additional funds to enable it to fund its operating costs as they fall due.

The Directors are confident that the existing cash resources together with the standby facility of US$15 million are sufficient to fund the Group for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis of preparation for the financial statements.

2. Taxation

Factors affecting the tax charge for the year

The reasons for the difference between the actual tax credit and the standard rate of corporation tax of 20% (2015: 20.75%) in the United Kingdom applied to the loss for the year are as follows:

3. Property, Plant and Equipment

4. Deferred tax

The deferred tax included in the balance sheet is as follows:

The deferred tax asset/(liability) comprises:

The Liqhobong Mine Development Project was completed during the Period. The Directors considered Liqhobong's financial model which provides convincing evidence that sufficient taxable profit will be generated from operations in the foreseeable future to offset unused tax losses. Based on current forecasts the Group expects to deplete the tax losses over the next four years.

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where the Directors believe it is probable that these assets will be recovered. Deferred tax assets and deferred tax liabilities relating to the same tax authorities have been disclosed as a nett asset or liability.

The Group has unrecognised tax losses of approximately US$52.2 million (full year June 2016: US$61.4 million), and unrecognised accelerated capital allowances of US$13.4 million (full year June 2016: US$13.4 million).

5. Inventories

6. Cash and cash equivalents

Net cash and cash equivalents were represented by the following currencies:

The following significant exchange rates applied against the US Dollar during the Period:

7. Share capital

During the Period, the Group issued 3,312,728 (H1 2016: 442,962) new ordinary shares of 1 pence each in respect of the quarterly interest due on the Eurobonds.

8. Loss per share

The calculation of the basic loss per share is based upon the net loss after tax attributable to ordinary shareholders of US$6.2 million (H1 2016: US$4.7 million loss, after the reallocation of US$0.3 million from discontinued operations) and a weighted average number of shares in issue for the year of 312,920,412 (H1 2016: 309,077,713).

The diluted loss per share in H1 2017 and H1 2016 is the same as the basic loss per share as the potential ordinary shares to be issued have no dilutive effect.

The Company has a further 15,540,589 (H1 2016: 15,133,671) potentially issuable shares in respect of share options issued to employees that do not have a dilutive effect as at 31 December 2016 and 48,786,437 (H1 2016: 48,786,437) potentially issuable shares in respect of warrants issued to strategic investors.

9. Borrowings

The ABSA Debt Facility incurs interest at a variable rate, based on LIBOR, which was 0.91% as at 31 December 2016, plus a weighted average margin of 8.29%. The facility is repayable in 18 quarterly instalments commencing 31 March 2017.

The ABSA Debt Facility is secured by a first ranking general notarial bond, over all movable assets for a total capital amount of US$165 million.

The Eurobonds have a coupon rate of 8.00% per annum payable quarterly. The effective interest rate is, in aggregate 12.47%. The interest can be settled in cash or through the issue of ordinary shares at market value based on the volume-weighted average price of the share for the 20 days preceding the interest calculation date. The bonds are repayable on the final maturity date, which is August 2022.

Other loans relate to the power project in Lesotho which was part funded by Lesotho based investors. The loans bear interest at the prime rate of interest in Lesotho, currently 11.75%, plus 1%, and are unsecured. The loans are repayable in quarterly instalments commencing 31 March 2017.

10. Discontinued operations

The Company decided not to recognise the Group's BK11 Mine as held for sale as at 30 June 2016 as disclosed in the Annual Report and Accounts of 30 June 2016.

The Group's Botswana operations remain under care and maintenance whilst the Company is focused on the commissioning of its Liqhobong Diamond Mine in Lesotho. The Company remains committed to seeking ways of unlocking shareholder value from the Group's Botswana assets.

As required by accounting standards certain comparative figures have been reclassified. The effect of the reclassification was disclosed in the 30 June 2016 Annual Report and Accounts.

11. Commitments and contingent liabilities

Capital Commitments

As at 31 December 2016, the Group had contracted capital commitments of US$7.0 million (H1 2015: US$26.6 million) relating to the Project. The total budget for the Project is US$185.4 million.