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AFRICAN DIAMONDS PLC

('African Diamonds' or the 'Company')

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008

The immediate future for African Diamonds revolves around the AK6 discovery. Hard rock diamond mines are rare, only 17 exist. Economically viable hard rock diamond discoveries are very rare. The AK6 discovery is a world class discovery in a top class location.

Under the terms of the Mining Licence, awarded to the joint venture company, production on AK6 must commence prior to April 2011. The partners in the joint venture company, De Beers 71%, African Diamonds 28% and Wati 1%, have sought finance for a $260 million mine development. This has proven difficult, so an alternative has been developed by African Diamonds and presented to the Group.

The objective of this proposal is to mine money and not diamonds. The African Diamonds study shows that a 2 million tonne a year mine, scalable to 4 million tonnes, costing less than $40 million with operating costs of under $10 a tonne is viable in the present hostile climate. In the early years, annual output would be over 450,000 carats of quality diamonds. This plan envisages construction start up in 2009 with production by end 2010.

Exploration

African Diamonds is involved in exploration in Botswana, West Africa and the Democratic Republic of the Congo (DRC).

In Botswana, African Diamonds holds licences over 1,852 sq km of some of the most prospective ground in the country. The ground is mainly in the Orapa area and contains 33 of 77 known kimberlite pipes in the area. Work done to date has identified two kimberlites with potential, AK8 and AK9, while a number of heavy mineral targets remain to be drilled. Work on the economic potential of AK8 and AK9 is ongoing.

AFD were awarded five Prospecting Licences during 2007 in the Kedia region of Botswana. High interest kimberlitic indicators, mostly garnets (and some ilmenites), were recovered during exploration by earlier explorers. Some of the garnets were G9 and G2, indicating a source not too far away. Their presence has never been explained. Preliminary analysis has been undertaken with a view to undertaking fieldwork in the near future.

In March 2007, AFD acquired a 35.42% share in Bugeco S.A., a private Belgian company, with exclusive exploration rights in the Eastern Kasai province of the DRC. Bugeco was in a joint venture with De Beers, who took over exploration and spent almost $10 million. The current licence holding of approximately 1,000 sq km contains 9 new kimberlite discoveries (exceeding 25 Hectares in total area), on which drilling has been carried out and which are known to contain micro-diamonds of gem quality. De Beers have decided to withdraw from the DRC and Bugeco now has full and unencumbered ownership of the licences and the potential to further explore the potential of the kimberlites.

West African Diamonds ('WAD') was demerged and separately listed from AFD in January 2007 as a diamond and precious metals company focusing on West Africa. AFD retains a 7.3% shareholding in WAD. WAD holds title to a range of projects in Sierra Leone and Guinea. The Bomboko alluvial mine in Guinea is due to come on stream in April of this year. The Droujba licence will see a detailed drilling and sampling programme later this year.

Future

The diamond industry is in a state of flux. Credit considerations have seriously restricted the auction process. Intermediaries between mine and consumer took advantage of cheap credit to build stocks and to invest in non diamond assets. The loss of credit facilities is hitting hard. There is little money to buy rough diamonds. Forced sales have seen significant drops in reported prices. This in turn has caused reductions in inventory values leading to closures in some cases and forced sales at low prices in others. The diamond pipeline is congested and is likely to remain so in 2009, and possibly 2010.

But diamond fundamentals are sound. The supply gap is not going away. Demand in India and China may be restricted or slowed down in the short term, but the demographic and social factors causing the demand for diamonds remain. The fall in diamond prices may curtail the supply as marginal mines close, developments are delayed and exploration cut. By 2011, according to most commentators, the price of diamonds should begin to rise as fundamental forces once more exert themselves.

African Diamonds were fortunate to have De Beers as a partner, but objectives diverge. What suits the privately owned De Beers does not always coincide with the needs of a small publicly traded company. The current credit environment has led to delays and postponement of many projects. African Diamonds has reacted to the situation by producing a mining plan that is viable in the current circumstances. 

John Teeling

Chairman

31 March 2009

Further information:

African Diamonds Plc
John Teeling	Tel: +353 1 8332833
Alex van Zyl	Tel: +27 83 261 2956
James AH Campbell	Tel: +27 83 457 3724
FinnCap
Matthew Robinson, Corporate Finance	Tel: +44 207 600 1658
College Hill
Paddy Blewer	Tel: +44 (0) 20 7457 2020
Nick Elwes
www.afdiamonds.com

    

African Diamonds plc 

Financial Information (Unaudited)

Condensed Consolidated Income Statement

					Six Months Ended					Year Ended
					31 Dec 08		31 Dec 07				30 Jun 08
					unaudited		unaudited				audited
					£'000		£'000				£'000
Revenue					-		-				-
Administrative Costs					(335)		(235)				(462)
Operating Loss					(335)		(235)				(462)
Finance Revenue					37		34				125
Finance Costs					(2)		(1)				(2)
Other (losses)/gains - write down of investment in WAD					(475)		(62)				(475)
Loss before taxation					(775)		(264)				(814)
Income tax expense					-		-				-
Loss for the period					(775)		(264)				(814)
Loss per share					(1.02p)		(0.35p)				(1.07p)

Condensed Consolidated Balance Sheet 

					31 Dec 08		31 Dec 07		30 Jun 08
					unaudited		unaudited		audited
					£'000		£'000		£'000
Non Current Assets
Intangible Assets					4,479		2,245		2,703
Financial Assets					250		1,138		725
Investments					870		836		870
					5,599		4,219		4,298
Current Assets
Receivables and prepayments					34		73		74
Cash and cash equivalents					991		3,309		2,926
					1,025		3,382		3,000
Total Assets					6,624		7,601		7,298
Liabilities
Current Liabilities
Trade and other payables					(181)		(114)		(80)
Net Assets					6,443		7,487		7,218
Equity
Share Capital and Reserves					6,443		7,487		7,218
Total Equity					6,443		7,487		7,218

 

Condensed Consolidated Statement of Changes in Shareholders Equity 

 

					Share Based
	Share		Share		Payment		Retained		Total
	Capital		Premium		Reserves		Losses		Equity
	£'000		£'000		£'000		£'000		£'000
As at 1 July 2007	761		2,133		392		4,442		7,728
Share based payments					23				23
Loss for the period							(264)		(264)
As at 31 December 2007	761		2,133		415		4,178		7,487
Share based payments					248				248
Shares issued as consideration	1		32						33
Loss for the period							(550)		(550)
As at 30 June 2008	762		2,165		663		3,628		7,218
Share based payments									-
Loss for the period							(775)		(775)
As at 31 December 2008	762		2,165		663		2,853		6,443

   

Condensed Consolidated Cash Flow 

					Six Months Ended					Year Ended
					31 Dec 08		31 Dec 07				30 Jun 08
					unaudited		unaudited				audited
					£'000		£'000				£'000
Cash Flows from Operating Activities
Operating Loss					(335)		(235)				(462)
Movements in Working Capital					141		125				67
Cash used by Operations					(194)		(110)				(395)
Finance Revenue					37		34				125
Finance Costs					(2)		(1)				(2)
Net Cash used in Operating Activities					(159)		(77)				(272)
Cash Flow from Investing Activities
Capital Expenditure					(1,776)		(295)				(483)
Investments					-		-				-
Net Cash used in Investing Activities					(1,776)		(295)				(483)
Cash Flow from Financing Activities
Issue of Share Capital					-		-				-
Net Decrease in Cash and Cash Equivalents					(1,935)		(372)				(755)
Cash and Cash Equivalents at beginning of the period					2,926		3,681				3,681
Cash and Cash Equivalents at end of the period					991		3,309				2,926

Notes:

1. Information

The financial information for the six months ended December 31st, 2008 and December 31st, 2007 is unaudited. The financial information above does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.

The interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting and the accounting policies and methods of computation used in the interim financial statements are consistent with those used in the Group 2008 Annual Report, which is available at www.afdiamonds.com.

The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.

2.    No dividend is proposed in respect of the period.

3.    Earnings per share

Basic earnings per share is computed by dividing the profit or loss after taxation for the year available to ordinary shareholders by the sum of 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):

	31 Dec 08	31 Dec 07	30 Jun 08
	£	£	£
Numerator
For basic and diluted EPS retained loss	(775,200)	(264,000)	(814,290)
Denominator
For basic and diluted EPS	76,210,766	76,155,766	76,210,766

4.    Other (losses)/gains

	31 Dec 08£'000	31 Dec 07 £'000	30 Jun 08 £'000
Other losses	(475)	(62)	(475)

    

Other (losses)/gains arise from the subsequent measurement of financial assets at fair value through the income statement in relation to the Group's interest in West African Diamonds Plc.

5.    Intangible Assets

	31 Dec 08	31 Dec 07	30 Jun 08
Exploration and evaluation assets:	£'000	£'000	£'000
Cost
Opening balance	2,703	1,948	1,948
Additions	1,776	297	755
Closing balance	4,479	2,245	2,703

    

    

Exploration and evaluation assets relates to expenditure incurred in mineral exploration in Botswana.

At the balance sheet date there were no facts or circumstances known to the directors which suggested that the carrying amount exceeds its recoverable amount. No impairment provision has been made in respect of these intangible assets.

The realisation of this intangible asset is dependent on the discovery and successful development of economic reserves which is affected by those risks outlined below. Should this prove unsuccessful the value included in the balance sheet would be written off to the income statement.

The directors are aware that, by its nature, there is an inherent uncertainty in exploration and evaluation expenditure as to the recoverable value of the asset. Having reviewed the exploration and evaluation expenditure at 31 December 2008, the directors are satisfied that the value of the intangible asset is not less than carrying value. 

The group's exploration activities are subject to a number of significant and potential risks including:

- Price fluctuations

- Uncertainties over development and operational risks

- Operational and environmental risks

- Political and legal risks, including arrangements and governments for licenses, profit sharing and taxation

- Funding developments

6.    Financial Assets

    Financial assets carried at fair value through profit or loss (FVTPL):

	31 Dec 08 £’000	31 Dec 07 £’000	30 Jun 08 £’000
Non-derivative financial assets designated as at FVTPL	250	1,138	725

 

         The company purchased 5,000,000 shares (£1,000,000) in West African Diamonds plc in January

         2007. At the period end this investment represented 8.6% of the issued share capital of West

         African Diamonds plc. West African Diamonds plc is listed on the London AIM market. In the

         opinion of the directors, the company does not have significant influence over West African

         Diamonds plc.

7.      The Interim Report for the six months to December 31st, 2008 was approved by the Directors on

         31 March 2009.

8.      Copies of this announcement will be sent to shareholders and will be available for inspection at

         the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS. The Interim Report

         may also be viewed at African Diamonds plc's website at www.afdiamonds.com.

ENDIR EBLFXKXBZBBF