DOMINION DIAMOND CORPORATION

Transcription

1 DOMINION DIAMOND CORPORATION Canada s Largest Independent Diamond Producer and Third Largest Producer Globally by Value Fiscal Year 2017 Second Quarter Results

2 Forward-Looking Information Caution Regarding Forward-Looking Information Certain information included herein that is not current or historical factual information, including information about estimated mine life and other development, production and exploration plans and activities regarding mining activities at the Company s mineral properties, estimated economics of the Jay pipe, estimated mineral reserves and mineral resources, projected capital and operating costs, the Company s future capital allocation strategy, the Company s intention to review its dividend policy, future diamond prices, future diamond jewelry demand and diamond production, and future exchange rates constitute forward-looking information or statements within the meaning of applicable securities laws. Forward-looking information can generally be identified by the use of terms such as may, will, should, could, expect, plan, anticipate, foresee, appears, believe, estimate, predict, continue, modelled, hope, forecast or other similar expressions concerning matters that are not historical facts. Forwardlooking information is based on certain factors and assumptions including, among other things, the current mine plan for each of the Ekati Diamond Mine and Diavik Diamond Mine; mining, production, construction and exploration activities at the Company s mineral properties; the timely receipt of required regulatory approvals; mining methods; currency exchange rates; estimates related to the capital expenditures related to bring the Jay pipe and the A-21 pipe into production; required operating and capitals costs; labour and fuel costs; world and US economic conditions; future diamond prices; and the level of worldwide diamond production. These assumptions may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what the Company currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, risks associated with the remote location of and climate at the Company s mineral properties, variations in mineral reserves and mineral resources estimates, grade estimates and expected recovery rates, risks resulting from the Eurozone financial crisis, failure of plant equipment processes to operate as anticipated, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate, uncertainty as to whether dividends will be declared by the Company s board of Directors or whether the Company s dividend policy will be maintained; and cash flow and liquidity risks. Actual results may vary from the forward-looking information. Readers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this presentation, and should not rely upon this information as of any other date. While the Company may elect to, it is under no obligation and does not undertake to, update or revise any forward-looking information, whether as a result of new information, further events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Company s filings with Canadian and United States securities regulatory authorities and can be found at and respectively. Technical Information The scientific and technical information contained in this presentation has been prepared and verified by Dominion, operator of the Ekati Diamond Mine, under the supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd., an independent mining consultant, and a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. Dominion was assisted in the preparation of the Jay Feasibility Study by Danny Tolmer, P.Eng., of Golder Associates Ltd., who supervised the probable mineral reserve estimate, and John Cunning, P.Eng., of Golder Associates Ltd., who supervised the capital development cost estimates for the construction of the dike and its associated infrastructure, including roads and pumping infrastructure, each of whom is a Qualified Person within the meaning of National Instrument Each Qualified Person has reviewed and approved the information in this presentation relevant to the Jay Feasibility Study for which they are responsible. The scientific and technical information relating to the Diavik Diamond Mine included herein has been prepared and verified by Diavik Diamond Mines (2012) Inc., operator of the Diavik Diamond Mine, under the supervision of Calvin Yip, P. Eng., Principal Advisor, Strategic Planning of Diavik Diamond Mines (2012) Inc., and a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. 2

3 Compelling Investment Opportunity in the Diamond Sector Strong Company Profile Top tier assets and jurisdiction Known and trusted operators in the north of Canada Experienced management team Significant Growth Optionality Internal development opportunities Exploration potential across existing land package Logical vehicle for consolidation in the Canadian diamond space Positioned to Capitalize on Improving Diamond Market Market is poised for growth Strongest growth areas match our changing production profile Well Capitalized Balance sheet strength supports payment of regular dividend and substantial capital requirements Strong existing and future cash flows from operations Disciplined capital allocation strategy, including: stable dividends share buyback program 3

4 Capital Allocation Strategy Delivering Value to Shareholders Through. Disciplined investment in development opportunities Jay, Sable and A21 approved development projects Divestment of non-core asset Sale of 100% owned downtown Toronto office building for ~ CDN$85M Transaction completed September 2016 Exploration potential Returning Capital to Shareholders Normal course issuer bid to purchase up to 6.15M shares commenced in July Confirmation of minimum-level dividend for fiscal 2017 of US $0.40 per share Intention to enhance base level of dividends 4

5 Overview of Operations Sable Koala U/G Pigeon Koala North Ekati Panda Beartooth Fox Jay A-21 A-418 A-154S A-154N Misery Lynx Diavik 5

6 Dominion Diamond A Global Leader in Diamonds Top-Tier Assets Offering Diversified Diamond Supply in Canada Ekati Diamond Mine controlling interest of the Core Zone and Buffer Zone Diavik Diamond Mine 40% ownership Well Capitalized US $180M of unrestricted cash as at the end of FY17 Q2 US $210M of undrawn credit facility Strong existing and future cash flow from operations Strong Long-Term Growth Potential Large-scale development projects, including the Sable and Jay projects at Ekati currently in development A-21 pipe at Diavik currently in development Significant resource base and exploration potential on existing land package Interim Dividend Declared of US $0.20 per Share to be Paid in November

7 Established Operations in Canadian North Ekati Moving to next phase in the mine plan Misery Main commercial production declared in May 2016, ahead of plan Positive impact on cash flow generation expected in the fourth quarter LTM Adjusted EBITDA 1 of $78M Diavik Delivering consistent results Continuing to deliver at or above plan in ore mined and processed and carats recovered during Q2 FY17 YTD FY17 operating costs are on plan LTM Adjusted EBITDA 1 of $138M 1 Adjusted EBITDA is a non-ifrs measure. See slides 35 through 38 of this presentation for more information. 7

8 Long-Life Mine with Expansion Potential Ekati SABLE Project Approved for Construction Major construction commenced in early 2016 JAY Project Approved for Construction Feasibility study results demonstrate a technically and economically sound project Anticipated to be fully funded from cash and future cash flows Supports strategy for growing Dominion, with Ekati as one major platform for expansion FOX DEEP Significant Exploration Potential Exploratory drilling program completed; results expected to be received in Q4 Diavik A-21 Pipe Approved for Construction 10 million carats of proven reserves Total development capital estimated to be CDN $157M 1 Major construction phases of dike on or ahead of plan Expect dike to be closed during open water construction season as planned 1 Represents Dominion s 40% share of development costs. 8

9 EKATI & DIAVIK LIFE OF MINE PLANS

10 MILLIONS OF TONNES Ekati Life of Mine Plan Tonnage Processed Ekati Life of Mine Plan updated to integrate Jay, Sable and existing operations Consistent ore feed through FY34 Misery Deep, Fox Deep and coarse processed kimberlite represent future plant feed upside potential TOTAL PLANT FEED FROM 2H FISCAL YEAR 2017 (100% basis) Total Plant Feed (100% basis) Koala Ore Misery Main Ore Misery SW Kimberlite Misery S Kimberlite Pigeon Ore Lynx Ore Sable Ore Jay Ore 1.0 Note: Operating case shown includes the impact of the process plant fire that occurred in Q2 FY17. Lynx and Jay are part of the Buffer Zone. All other deposits are part of the Core Zone. Misery South and Southwest are currently inferred mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the operating case mine plan will be realized H FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 10

11 MILLIONS OF CARATS Ekati Life of Mine Plan - Increased Carat Recoveries Total Ekati mine life of 17 years from fiscal 2018 TOTAL CARATS RECOVERED FROM 2H FISCAL YEAR 2017 (100% basis) 12.0 Total Carats Recovered (100% basis) Ekati expected to produce over 112 M carats from 2H fiscal 2017 Carat recoveries increase substantially in later years of mine plan as Jay Volcaniclastic Kimberlite (VK) ore processed Koala Ore Misery Main Ore Misery SW Kimberlite Misery S Kimberlite Pigeon Ore Lynx Ore Sable Ore Jay Ore 2.0 Note: Operating case shown includes the impact of the process plant fire that occurred in Q2 FY17. Lynx and Jay are part of the Buffer Zone. All other deposits are part of the Core Zone. Misery South and Southwest are currently inferred mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the operating case mine plan will be realized H FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 11

12 Ekati Life of Mine Capital and Operating Costs 100% basis, in millions of Canadian dollars CAPITAL COSTS OPERATING COSTS Fiscal Year Initial Development Sustaining Total Total 2H Total 1, ,437 6,492 The operating costs in the table above do not include the costs of marketing, reclamation activities, royalties or taxes. Initial development capital is exclusive of pre-stripping capital and capital allocations, which are included in operating costs for the purposes of life of mine planning. Capital costs are also exclusive of changes in working capital. 12

13 MILLIONS OF TONNES Diavik Life of Mine Plan Diavik processing plant has capacity to process 2.3 million tonnes a year 2.5 TOTAL PLANT FEED (100% basis) Total Plant Feed (100% basis) A-21 production keeps the process plant filled close to capacity through calendar A154S In addition to the current reserves, 2.4 M tonnes (in the aggregate) of Inferred resources 1 are distributed among the lower parts of each of A-154 South, A-418 and most significantly, A-154 North. This material is expected to be processed as the lower levels are reached at each pipe A154N A418 A21 CY23 CY22 CY21 CY20 CY19 CY18 CY17 1 Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. They have therefore not been included in the above mine plan. 13

14 MILLIONS OF CARATS Diavik Life of Mine Carat Recoveries Diavik expected to produce over 46 M carats from calendar 2016 to end of mine life at calendar TOTAL CARATS RECOVERED (100% basis) Total Carats Recovered (100% basis) A154S A154N A A CY23 CY22 CY21 CY20 CY19 CY18 CY17 14

15 Diavik Life of Mine Capital and Operating Costs 100% basis, in millions of Canadian dollars CAPITAL COSTS OPERATING COSTS Calendar Year Initial Development Sustaining Total Capital Total Total ,750 The operating costs in the table above do not include marketing costs, private royalties and estimated reclamation costs. The Diavik Diamond Mine pays a Northwest Territories royalty equal to the lesser of 13% of the value of the Output of the mine or an amount calculated based on a sliding scale of royalty rates dependent upon the value of Output of the mine, ranging from 5% for value of output between $10,000 and $5 M to 14% for value of output over $45 M. Under this mine plan, Diavik will cease mining operation in calendar The reclamation costs are estimated at $165 M based on a DDMI closure cost model that is considered to be equal to or better than others used in the industry. The majority of these closure costs are expected to be spent between calendar 2024 and 2028, although the full reclamation plan will not be completed until calendar

16 DEVELOPMENT & EXPLORATION POTENTIAL

17 Diavik A-21 Pipe A-21: the fourth pipe is currently in development 10 M carats of proven reserves Major construction phases of dike on or ahead of plan Expect dike to be closed during open water construction season as planned First production expected in late 2018 Projected 6 years of production 17

18 Ekati Sable Pipe Starting Major Construction Construction of the all-seasons access road to the project site was completed in August 2016 Pre-stripping is expected to begin in February

19 Ekati Jay Feasibility Study Approved Demonstrates Technically and Economically Sound Project Positive Project Economics 100% basis: US $398 M after-tax NPV 7, IRR 15.6% Dominion share: US $278 M after-tax NPV 7, IRR 16.7% Platform for Future Growth at Ekati 44.7 M tonnes of probable 1.8 carats/tonne Self-funded Development Existing cash and internally generated cash flows to fund project Development Schedule Aligned with Positive Market Outlook Development: calendar First ore: calendar 2022 Mine life extended to calendar

20 Jay - Timeline to Development Calendar Years Feasibility Study Environmental Assessment Minister s Response Permitting Road Construction Dike Construction Instrumentation & Dewatering Waste Stripping Ore Production Open water construction seasons 20

21 Ekati Exploration Potential Fox Deep Drilling Program Exploratory drilling beneath the completed Fox open pit commenced in February 925 tonnes of samples recovered. Results expected to be received in Q4 Significant indicated mineral resources of approximately 35 million tonnes 1 below the bottom of the open pit Objective of drilling campaign is to better understand the grade of the material below the existing resource. To be of economic interest, the grade needs to increase at depth 1 Mineral resources that are not mineral reserves do not have demonstrated economic viability; mineral resources are inclusive of mineral reserves. 21

22 Ekati Exploration Potential Misery Deep Opportunity to mine additional resources (indicated and inferred) after completion of the Misery open pit and prior to use of pit for Jay de-watering Major assumptions Jay construction starting in FY18 with pumping to Misery starting in May FY22 (CY21) Simple Sub-level Retreat (SLR) mining method, 2,000 tonnes per day, similar to Koala North and Panda UG Option of mining 3 to 4 levels with ore production spreading from FY19 Q3 to FY21 Q2 Misery UG production would displace Coarse Ore Rejects (COR) planned to be fed to the plant in FY21, which would significantly improve Operating margin Further optimization required 22

23 Exploration Potential Ekati, Lac de Gras and Glowworm Lake Properties Robust exploration program planned for fiscal 2018 The Lac de Gras region hosts some of the richest kimberlite pipes in the world Dominion has earned a 55% interest in the Lac de Gras property south of Diavik and now controls a 100% interest in the Glowworm Lake property to the east of Ekati Re-evaluation underway of historical data on Glowworm Lake, as well as several undeveloped kimberlites on the Ekati property 23

24 DIAMOND MARKET OVERVIEW

25 Strong, Steady Demand Growth Across Established and Emerging Markets DIAMOND JEWELRY DEMAND BY MARKET 2015 PROJECTED DIAMOND JEWELRY DEMAND GROWTH E Rest of world USA India Europe Gulf Japan USA China Japan Gulf China India Europe Rest of world 3.4% global average 0% 2% 4% 6% 8% CAGR % Source: DDC analysis, 2015 prices, non-recycled diamond jewelry. 25

26 MILLIONS OF CARATS Constrained Supply Supports Growth Fundamentals 2015 ROUGH DIAMOND MARKET SHARE (BY VALUE) 160 PROJECTED ROUGH DIAMOND PRODUCTION E Rio Tinto 5% Dominion 6% Other 22% De Beers 37% ALROSA 30% E 2019E 2021E 2023E Source: Annual reports, investor presentations, KPCS. 26

27 MINE AVERAGE PRODUCTION PRICE (2015 PRICES) COLOUR CLARITY Key Growth in the Diamonds We Will Produce CHANGE IN PRODUCTION VOLUME E AVERAGE CHANGE IN RAPAPORT POLISHED PRICE LIST VVS SI >US$150/ct US$70/ct -US$150/ct 0.5% DEF +13% KLM <US$70/ct -40% -20% 0% 20% 40% +3% +8% Source: Annual reports, investor presentations, KPCS. 27

28 Uniquely Positioned to Grow and Protect Demand Founding member of Diamond Producers Association June 2016 marketing program: Real Is Rare. Real Is a Diamond CanadaMark hallmark: assures integrity of Canadian diamonds Fostering aspirational demand for natural coloured diamonds 28

29 Compelling Investment Opportunity in the Diamond Sector Strong Company Profile Top tier assets and jurisdiction Known and trusted operators in the north of Canada Experienced management team Significant Growth Optionality Internal development opportunities Exploration potential across existing land package Logical vehicle for consolidation in the Canadian diamond space Positioned to Capitalize on Improving Diamond Market Market is poised for growth Strongest growth areas match our changing production profile Well Capitalized Balance sheet strength supports payment of regular dividend and substantial capital requirements Strong existing and future cash flows from operations Disciplined capital allocation strategy, including: stable dividends share buyback program 29

30 FINANCIAL RESULTS

31 Fiscal Year 2017 Second Quarter Results Consolidated For the three months ending July 31 (in millions of United States dollars except earnings per share and where otherwise noted) FISCAL PERIOD Q Q Restated 1 YOY Change YTD 2017 YTD 2016 Restated 1 YOY Change Sales 2 $160 $210 (24)% $338 $398 (15)% Cost of sales $159 $187 (15)% $356 $351 2% Gross margin (%) 0.5% 10.8% (1030) bp (5.3)% 11.8% (1710) bp Selling, general & administration $9 $15 (39)% $17 $24 (28)% Mine standby costs $22 -- NM $22 -- NM Operating profit (loss) $(30) $8 (499)% $(57) $23 (349)% Adjusted EBITDA 3 $35 $60 (41)% $90 $121 (26)% Adjusted EBITDA margin (%) 3 22% 29% (700) bp 27% 30% (300) bp Free cash flow 3 $(21) $23 (191)% $(111) $(71) (56)% Capital Expenditures % % Earnings (loss) per share 4 $(0.39) $(0.21) (81)% $(0.40) $(0.07) (471)% 1 Prior year figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31, 2016, a copy of which can be found on the Company s profile at and the Company s website. 2 Excluded from sales recorded in the second quarter were 0.1 million carats produced from Misery Main pipe during the pre-commercial production period for proceeds of $8.3 million (Q2 fiscal 2016 $5.2 million from Misery Northeast). 3 These terms are non-ifrs measures. Please see non-ifrs measures slides in this presentation for more information. 4 Earnings per share for the second quarter decreased by $0.18 per share due to the expensing of mine standby costs, impairment of available-for-sale inventory, and continued sales of production from lower value Misery Satellites. The impact to the six months ended July 31, 2016 was a decrease by $0.33 per share. 31

32 Fiscal Year 2017 Second Quarter Results Ekati Mine (100% basis) For the three months ending July 31 (in millions of United States dollars except earnings per share, per tonne or per carat amounts and where otherwise noted) FISCAL PERIOD Q Q Restated 1 YOY Change YTD 2017 YTD 2016 Restated 1 YOY Change Sales 2 $83 $138 (40)% $188 $265 (29)% Carats sold (000s) % 2,213 1,220 81% Gross margin $(23) 4 (659)% $(55) $18 (406)% Gross margin (%) (27.4)% 3.0% (3040) bp (29.0)% 6.6% (3560) bp Average price per carat 3 $125 $269 (54)% $85 $217 (61)% Operating profit (loss) $(46) $3 NM $(78) $15 (626)% Cash cost of production 4 $61 $83 (27)% $136 $166 (18)% Cash cost per tonne processed 4 $102 $86 19% $86 $92 (6)% Non-cash cost per tonne processed 4 $68 $34 104% $48 $36 33% Adjusted EBITDA 4 $1 $37 (97)% $27 $78 (65)% Capital Expenditures $48 $33 46% $171 $88 94% 1 Prior year figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the three months ended April 30, 2016 and the consolidated financial statements for the year ended January 31, 2016, a copy of which can be found on the Company s profile at and the Company s website. 2 Excluded from sales recorded in the second quarter were 0.1 million carats produced from Misery Main pipe during the pre-commercial production period for proceeds of $8.3 million (Q2 fiscal 2016 $5.2 million from Misery Northeast). 3 Carats sold increased by 81% and price per carat decreased by 61% compared to YTD Q2 fiscal 2016 due to the change in the ore mix with more production coming from sources with a lower average price. 4 These terms are non-ifrs measures. Please see non-ifrs measures slides in this presentation for more information. 32

33 Fiscal Year 2017 Second Quarter Results Diavik Mine (40% basis) For the three months ending July 31 (in millions of United States dollars except earnings per share, per tonne or per carat amounts and where otherwise noted) FISCAL PERIOD Q Q Restated 1 YOY Change YTD 2017 YTD 2016 Restated 1 YOY Change Sales $77 $72 6% $150 $132 13% Carats sold (000s) % 1, % Gross margin $24 $19 27% $37 $29 25% Gross margin (%) 30.9% 25.8% 510 bp 24.5% 22.2% 230 bp Average price per carat 2 $114 $175 (35)% $87 $138 (37)% Operating profit $23 $18 30% $35 $28 25% Cash cost of production 3 $29 $30 (2)% $60 $63 (4)% Cash cost per tonne processed 3 $136 $131 4% $138 $151 (9)% Non-cash cost per tonne processed 3 $77 $101 (24)% $85 $93 (9)% Adjusted EBITDA 3 $42 $36 18% $77 $62 23% Capital Expenditures $12 $8 50% $38 $20 90% 1 Prior year figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31, 2016, a copy of which can be found on the Company s profile at and the Company s website. 2 Carats sold increased by 81% and price per carat decreased by 37% compared to YTD Q2 fiscal 2016, primarily due to a decision in the prior year to hold back lower-than-average priced inventory due to market conditions. 3 These terms are non-ifrs measures. Please see non-ifrs measures slides in this presentation for more information. 33

34 Fiscal Year 2017 Q2 Sales and Inventory Q1 FY 2017 Summary Sales in millions of US dollars Three months ended Jul. 31, 2016 Six months ended Jul. 31, Ekati rough (100% basis) 2 $83.3 $188.4 Diavik rough (40% basis) $76.7 $149.8 Total sales 3 $160.0 $338.2 Carats sold (000s) Ekati rough (100% basis) 668 2,213 Diavik rough (40% basis) 673 1,727 Total carats sold 3 1,341 3,940 Diamond Inventory (available for sale) (in millions of US dollars, except carats) Jul. 31, 2016 Apr. 30, 2016 Jan 31, 2016 Ekati Diamond Mine (100%) Carats (million) Estimated Market Value $89 $96 $66 Diavik Diamond Mine (40%) Carats (million) Estimated Market Value $53 $71 $40 Diamond inventory Estimated Market Value of Inventory $142 $167 $106 1 Prior year figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31, 2016, a copy of which can be found on the Company s profile at and the Company s website. 2 Excluded from sales recorded in the second quarter were 0.1 million carats produced from Misery Main pipe during the pre-commercial production period for proceeds of $8.3 million (Q2 fiscal 2016 $5.2 million from Misery Northeast). 3 Figures may not add up due to rounding. 34

35 Adjusted EBITDA Non-IFRS Measure The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to International Financial Reporting Standards ( IFRS ). The Company discloses Adjusted EBITDA, which removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total sales for the period. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and analysts as an indicator of the Company s operating performance and ability to incur and service debt and as a valuation metric. Other issuers may calculate Adjusted EBITDA and Adjusted EBITDA margin differently. CONSOLIDATED (expressed in thousands of United States dollars) (quarterly results are unaudited) (i) Figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the three and six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31,

36 Adjusted EBITDA Non-IFRS Measure The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to International Financial Reporting Standards ( IFRS ). The Company discloses Adjusted EBITDA, which removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total sales for the period. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and analysts as an indicator of the Company s operating performance and ability to incur and service debt and as a valuation metric. Other issuers may calculate Adjusted EBITDA and Adjusted EBITDA margin differently. EKATI DIAMOND MINE SEGMENT (expressed in thousands of United States dollars) (quarterly results are unaudited) (i) Figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the three and six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31,

37 Adjusted EBITDA Non-IFRS Measure The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to International Financial Reporting Standards ( IFRS ). The Company discloses Adjusted EBITDA, which removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total sales for the period. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and analysts as an indicator of the Company s operating performance and ability to incur and service debt and as a valuation metric. Other issuers may calculate Adjusted EBITDA and Adjusted EBITDA margin differently. DIAVIK DIAMOND MINE SEGMENT (expressed in thousands of United States dollars) (quarterly results are unaudited) (i) Figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the three and six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31,

38 Adjusted EBITDA Non-IFRS Measure The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to International Financial Reporting Standards ( IFRS ). The Company discloses Adjusted EBITDA, which removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total sales for the period. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and analysts as an indicator of the Company s operating performance and ability to incur and service debt and as a valuation metric. Other issuers may calculate Adjusted EBITDA and Adjusted EBITDA margin differently. CORPORATE (expressed in thousands of United States dollars) (quarterly results are unaudited) (i) Figures have been restated as a result of retrospective application of a voluntary change in accounting policy related to asset retirement obligations. For further details, refer to note 3 of the condensed consolidated interim financial statements for the three and six months ended July 31, 2016 and the consolidated financial statements for the year ended January 31,

39 Cash Cost of Production Non-IFRS Measure This presentation refers to cash cost of production, a non-ifrs performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well each of the Diavik Diamond Mine and the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS The following table provides a reconciliation of cash cost of production to the Ekati Diamond Mine s cost of sales disclosed for the three and six months ended July 31, 2016 and July 31,

40 Cash Cost of Production Non-IFRS Measure This presentation refers to cash cost of production, a non-ifrs performance measure, in order to provide investors with information about the measure used by management to monitor performance. This information is used to assess how well each of the Diavik Diamond Mine and the Ekati Diamond Mine is performing compared to the mine plan and prior periods. Cash cost of production includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost of production does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This performance measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not necessarily indicative of net profit or cash flow from operations as determined under IFRS The following table provides a reconciliation of cash cost of production to the Diavik Diamond Mine s cost of sales disclosed for the three and six months ended July 31, 2016 and July 31,

41 Cash Cost per Tonne Processed, Non-Cash Cost per Tonne and Cash Cost per Carat (Ekati) Non-IFRS Measure This presentation refers to the terms cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat, which are non-ifrs financial measures, in order to provide investors with information about the measures used by management to monitor performance. The Company believes these measures will assist analysts, investors and other stakeholders in understanding the costs associated with extracting diamonds. This information is used to assess how well each of the Diavik Diamond Mine and Ekati Diamond Mine is performing compared to the respective mine plan and prior periods. Cash cost per tonne processed is calculated by taking cash cost of production divided by total tonnes processed, and the non-cash cost per tonne processed is calculated by taking depreciation and amortization divided by total tonnes processed. The cash cost per carat processed is calculated by taking cash cost of production divided by total carats produced. Cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat do not have any standardized meanings prescribed by IFRS and differ from measures determined in accordance with IFRS. These performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table demonstrates our calculation of cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat at the Ekati Diamond Mine disclosed for the three and six months ended July 31, 2016 and July 31, Ekati cash cost of production, depreciation and amortization and total cash cost of production are reconciled to each segment s cost of sales. 41

42 Cash Cost per Tonne Processed, Non-Cash Cost per Tonne and Cash Cost per Carat (Diavik) Non-IFRS Measure This presentation refers to the terms cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat, which are non-ifrs financial measures, in order to provide investors with information about the measures used by management to monitor performance. The Company believes these measures will assist analysts, investors and other stakeholders in understanding the costs associated with extracting diamonds. This information is used to assess how well each of the Diavik Diamond Mine and Ekati Diamond Mine is performing compared to the respective mine plan and prior periods. Cash cost per tonne processed is calculated by taking cash cost of production divided by total tonnes processed, and the non-cash cost per tonne processed is calculated by taking depreciation and amortization divided by total tonnes processed. The cash cost per carat processed is calculated by taking cash cost of production divided by total carats produced. Cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat do not have any standardized meanings prescribed by IFRS and differ from measures determined in accordance with IFRS. These performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of net profit or cash flow from operations as determined under IFRS. The following table demonstrates our calculation of cash cost per tonne processed, non-cash cost per tonne processed and cash cost per carat at the Diavik Diamond Mine disclosed for the three and six months and year ended July 31, 2016 and July 31, Diavik cash cost of production, depreciation and amortization and total cash cost of production are reconciled to each segment s cost of sales. 42

43 Free Cash Flow Non-IFRS Measure The term free cash flow is a non-ifrs measure, which is defined as cash provided from (used in) operating activities, less sustaining capital expenditures and less development capital expenditure. Sustaining capital expenditure is generally defined as expenditures that support the ongoing operations of the assets or business without any associated increase in capacity, life of assets or future earnings. This measure is used by management and investors to assess the extent of non-discretionary capital spending being incurred by the Company each period. Development capital expenditure is generally defined as capital expenditures that expand existing capacity, increase life of assets and/or increase future earnings. This measure is used by management and investors to assess the extent of discretionary capital spending being undertaken by the Company each period. Management believes that free cash flow is a useful indicator of our ability to operate without reliance on additional borrowing or usage of existing cash. The intent of free cash flow and free cash flow per share is to provide additional useful information to investors and analysts and such measures do not have any standardized meaning under IFRS. These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate free cash flow and free cash flow per share differently. 43

44 RESERVE & RESOURCE STATEMENTS Ekati Diamond Mine Diavik Diamond Mine

45 Ekati Diamond Mine Mineral Reserve Statement As of July 31, 2016 (100% basis) KIMBERLITE PIPES PROVEN MINERAL RESERVES PROBABLE MINERAL RESERVES PROVEN AND PROBABLE MINERAL RESERVES Zone Location Type M t Ct/t M ct M t Ct/t M ct M t Ct/t M ct Koala Core UG Misery Main Core OP Pigeon Core OP Sable Core OP Jay Buffer OP Lynx Buffer OP Stockpile Core N/A Sub-Total Core Zone Sub-Total Buffer Zone Total Mineral Reserves Note: Totals may not add up due to rounding. No Proven Mineral Reserves have been declared. Mineral reserves are reported at +1.0 mm (diamonds that would be recovered using 1.0 mm slot de-grit screens and inclusive of incremental small diamonds recovered by the Fines Dense Media Separator circuit, which is scheduled for commissioning in late fiscal 2017). The above mineral reserve statement has been prepared and verified by Dominion, operator of the Ekati Diamond Mine, under the supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd., an independent mining consultant, and a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. For further details and information concerning Dominion Diamond Corporation s Mineral Reserves, readers should reference the Company s technical report of the Ekati Diamond Mine with an effective date of July 31, 2016, available through and 45

46 Ekati Diamond Mine Mineral Resource Statement As of July 31, 2016 (100% basis) MEASURED INDICATED INFERRED Kimberlite Pipes MINERAL RESOURCES MINERAL RESOURCES MINERAL RESOURCES Zone Location Type M t Ct/t M ct M t Ct/t M ct M t Ct/t M ct Koala Core UG Fox Core UG Misery Main Core OP Misery South Core OP Misery SW Core OP Pigeon Core OP Sable Core OP Jay Buffer OP Lynx Buffer OP Stockpile Core N/A Sub-Total Core Zone Sub-Total Buffer Zone Total Mineral Resources Note: Totals may not add up due to rounding. Mineral resources are inclusive of mineral reserves. Mineral resources are reported at +0.5 mm (diamonds recovered using a 0.5mm width slot de-grit screen and retained on a 1.0 mm circular aperture screen). The above mineral reserve statement has been prepared and verified by Dominion, operator of the Ekati Diamond Mine, under the supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd., an independent mining consultant, and a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. For further details and information concerning Dominion Diamond Corporation s Mineral Reserves, readers should reference the Company s technical report of the Ekati Diamond Mine with an effective date of July 31, 2016, available through and 46

47 Diavik Diamond Mine Reserve & Resource Statement As of December 31, 2015 (100% basis) KIMBERLITE PIPES PROVEN MINERAL RESERVES PROBABLE MINERAL RESERVES PROVEN AND PROBABLE MINERAL RESERVES Type M t Ct/t M ct M t Ct/t M ct M t Ct/t M ct A-154 South UG A-154 North UG A-418 UG A-21 OP Stockpile N/A Sub-Total Underground Sub-Total Open Pit Sub-Total Stockpile Total Mineral Reserves KIMBERLITE PIPES MEASURED MINERAL RESOURCES INDICATED MINERAL RESOURCES INFERRED MINERAL RESOURCES Type M t Ct/t M ct M t Ct/t M ct M t Ct/t M ct A-154 South UG A-154 North UG A-418 UG A-21 OP Total Mineral Resources Note: Totals may not add up due to rounding. Mineral resources are exclusive of mineral reserves. Mineral resources estimates reflects a bottom screen size of +1.0 mm. The above mineral reserve and mineral resource statement was prepared and verified by Diavik Diamond Mines (2012) Inc., operator of the Diavik Diamond Mine, under the supervision of Calvin Yip, P. Eng., Principal Advisor, Strategic Planning of Diavik Diamond Mines (2012) Inc., and a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. For further details and information concerning Dominion Diamond Corporation s Mineral Reserves and Resources, readers should reference the Company s technical report in respect of the Diavik Diamond Mine dated March 25, 2015, available through and 47

48 DOMINION DIAMOND CORPORATION Canada s Largest Independent Diamond Producer and Third Largest Producer Globally by Value Fiscal Year 2017 Second Quarter Results