Preliminary Results for Year Ended 30 June 2016

18th November 2016

Botswana Diamonds PLC

("Botswana Diamonds" or the "Company")

Preliminary Results for the Year Ended 30 June 2016

Highlights:

· Visual observation of the core from AK22 noticed a diamond

· Four diamond bearing kimberlite pipes, forming a cluster within close proximity to each other, identified at Maibwe

Botswana, where we work, is the home of diamonds. It is the world's largest producer by value and is the outstanding provider of large stones including the second largest diamond ever found, the 1,109 ct. stone found in the Karowe mine in 2015. There are 13 known kimberlite fields in the country containing over 400 kimberlites, 8 of which have become mines, including two of the world's biggest diamond mines, Orapa and Jwaneng, producing about 15% of the world's diamonds.

Botswana itself is an excellent place in which to explore. Known to some as the Switzerland of Africa it is a stable democracy. The Rule of Law applies and title to assets is good. There are just over 2 million people in the country with one main ethnic group in a land mass 93% covered by the Kalahari Desert.

Botswana Diamonds (BOD) holds substantial ground in the country and has an active exploration programme ongoing in two separate joint ventures.

The first, Sunland Minerals, is a 50/50 joint venture with Alrosa, the world's biggest diamond producer. The joint venture holds 14 exploration licences of which 7 are in the Orapa area where existing diamond mines operate and 7 are in the Gope area, an emerging diamond province.

The partnership, which is working well, merges the in-house technological expertise of Alrosa with the extensive geological and local expertise of BOD personnel. We run two field campaigns a year. Up to 15 Alrosa geologists, geophysicists and mineralogists work with the local BOD geologists and management team. We have conducted extensive soil sampling, electromagnetic and drilling programmes over a number of licences.

Extensive background research enabled the joint venture to apply for ground in Orapa covering 3 known kimberlites AK 21, AK 22 and AK 23. These had been discovered, explored and abandoned by De Beers in 2008 who believed the diamond grades found at about 1.5 carats per hundred tonne (cpht) were not commercial. Alrosa specialists believe the grades may be higher in fresh kimberlite. They believe that the mineralogy and geology is similar to BK 11 which is a Botswana kimberlite being assessed for commerciality. We were awarded licence PL 260 covering the ground in 2015 and have spent the last two years undertaking work on it.

Fieldwork led to a core hole drilling programme in 2015, followed by a Large Diameter Drilling (LDD) programme on AK 21 in early 2016 and a recent core hole programme on AK 22. Alrosa believes AK 22 and AK 23 are one.

Processing in South Africa of a 80 ton bulk sample from the LDD drilling was poor with no diamonds recovered - not even the nine control diamonds we inserted into the material. We are reworking, in Botswana, the concentrate from the bulk sample and have discovered two small diamonds. Material from an earlier drill hole on AK 21 and from the two new holes drilled on AK 22 is currently being analysed for microdiamonds - again in South Africa, but at a new, independent processing facility. Visual observation of the core from AK 22 noticed a diamond - a positive sign. The objective of the drilling is to assess economic potential.

Drilling has been undertaken, in H2 2016, on two other licences PL 135 in the Gope region of the Kalahari and PL 085 in Orapa. Gope is an emerging diamond area with two projects, the Ghagoo mine and an advanced discovery KX-36. No kimberlites were found. The complex anomaly under 400 feet of sand on PL 135 is a magnetic basalt. Drilling on PL 085 in Orapa encountered dolerite sills rather than kimberlite. No additional work is planned on these licences.

Fieldwork will continue on licence 260 in Orapa and on licence PL 235 in Gope. The initial fieldwork undertaken in 2016 on licences PL 232, PL 233 and PL 234 will be expanded on in 2017.

The second joint venture had exciting results in 2015. Maibwe is a joint venture on 10 licences in the Gope region. The joint venture is made up of three parties BCL, a Botswana state owned copper/nickel producer which was given 51% in return for a 10 million Pula investment (US$1 million approx.); Future Minerals, a local Botswana group (20%) who first acquired the licences and Siseko Minerals (29%), a South African company. Botswana Diamonds holds 51% of Siseko. Siseko and Future have a free carry up to Bankable Feasibility Study. BCL is the operator.

Though 10 prospecting licences are held by Maibwe, comprehensive work has been successfully carried out on PL 186. This work has managed to identify four diamond bearing kimberlite pipes forming a cluster within close proximity to each other. The pipes were identified through a series of ground-magnetic surveys at 50m spacing and 800m of diamond core drilling from which 305kg of sampled material returned diamonds. The work was carried out by Joint Venture partner BCL.

The four pipes have sizes 5ha, 6ha, 2ha and 1ha respectively, collectively summing up to more than 12ha of diamondiferous kimberlite material. These pipes are in close proximity to each other. The mineral chemistry shows the pipes have diamond compositions similar to the Orapa diamond composition.

Verification drilling is needed. The fall in commodity prices has made BCL heavily loss making and as a result BCL have been unable to undertake their agreed work programme. To date, BCL have been reluctant to dilute their interest by allowing outside investors to undertake the necessary work. BCL is now in provisional liquidation. Discussions are ongoing with the liquidator to allow a combination of Future Minerals/Siseko/BOD/others, to conduct the essential drilling to verify exactly what is in kimberlite GP 173 on PL 186.

Why Diamonds

Powerful fundamentals are driving the diamond market. Historically the US and Continental Europe drove demand but emphasis is moving now to Asia, led by China and India. As per capita income rises, so too does disposable income. Gem quality diamonds are a major beneficiary of growing incomes. Consumers decide to spend their growing wealth on jewellery. Botswana benefits as a large percentage of its diamond production is gem quality.

Demand is only one side of the equation. Diamonds are hard to find and existing mines are depleted. There has been no major discovery in the past 12 years though there have been several smaller discoveries including the ultra-high value Karowe mine in Botswana in November 2004. The principals of Botswana Diamonds played a seminal role in the discovery of Karowe, then known as AK 6.

There is typically a long lead time from discovery to production so given the lack of new finds analysts expect a demand supply gap to exist in the coming years with upward pressure on prices. In fact, despite world economic uncertainty prices have been very resilient.

Future

We are very active on good ground in the best diamond province in the world. We are partnered with the most technologically advanced diamond explorer in the world. Our own team is very experienced and has found diamonds previously, specifically the Karowe discovery in the early 2000s.

We believe that our expertise and experience can reduce the extreme risk in grass roots diamond exploration. We are making steady progress in the Alrosa/BOD joint venture. To date we have been able to fund the exploration activities. We now have diamonds in two pipes on PL 260. An economic assessment will be made in 2017. The potential in the Maibwe discovery is exciting as GP 173 and PL 186 has kimberlites and diamonds. Verification of the work to date is essential. We are offering to conduct this work. It needs to be drilled.

John Teeling

Chairman

17th November 2016

-Ends-

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

Enquiries:

www.botswanadiamonds.co.uk

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

Share Premium

The share premium 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 year.

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.

Translation Reserve

The translation reserve arises from the translation of foreign operations.

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2016

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 2015.

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 2016 or 30 June 2015, but is derived from those accounts. The financial statements for the year ended 30 June 2015 have been delivered to the Registrar of Companies and those for the year ended 30 June 2016 will be delivered following the Group's Annual General Meeting.

The auditors have reported on the 2016 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 £199,846 after exchange differences on retranslation of foreign operations (2015: £372,502) and had a retained deficit of £3,200,914 (2015: £2,897,660) 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. Although it is not possible at this stage to predict whether financing efforts will be successful the directors are confident that they will be able to raise additional finance as required to meet the group's committed obligations as they fall due.

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 that would result if the Group was unable to continue as a going concern.

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.

The Group's focus is to maximize the full potential of the Botswana operations. Therefore, in the current year, the directors have decided to provide in full against the carrying value of the operations in South Africa. Accordingly, an impairment provision of £33,625 has been recorded by the Group in the current year (Company: £33,625).

On 23 July 2013 the Group entered into an agreement with Siseko Minerals (Pty) Limited over the 13 licence Brightstone block in the Gope area of Botswana. Under the terms of the agreement the company would have earned a 51% interest in the block by spending up to US$940,000 over three years.

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.

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:

- price fluctuations;

- foreign exchange 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;

- liquidity risks;

- funding risks;

- going concern; and

- operational and environmental risks.

Included in additions for the year are £428 of share based payments (2015: £428), £14,749 (2015: £14,008) of wages and salaries and £15,000 (2015: £32,500) 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 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 are exercisable for a period of three years from 24 December 2015.

On 6 May 2016, the Company raised £500,000 through the 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 £7,200.

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6. POST BALANCE SHEET EVENTS

There are no material post balance sheet events affecting the Group.

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 botswanadiamonds.co.uk. Copies of The Annual Report will also be available for collection from the company's registered office at 20-22 Bedford Row, London, WC1R 4JS.

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 15 December 2016 at 10.00am. A Notice of the Annual General Meeting is included in the Company's Annual Report.