Firestone Diamonds plc

Final results for the year ended 30 June 2013

LONDON: 4 October 2013

The Board of Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and development company (AIM: FDI), is pleased to announce its final audited results for the year ended 30 June 2013.

Highlights:

RESTRUCTURING INITIATIVES

???????????? Stuart Brown appointed as CEO designate on 2 September 2013

???????????? Unlocking value from the non-core Botswana assets through disposal or joint venture arrangements

???????????? Successful sale of South African alluvial assets

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FINANCIAL

???????????? Revenue increased by 52% to ??9.9 million (2012: ??6.5 million)

???????????? Cash operating loss decreased by 88% to ??1.0 million (2012: ??8.3 million)

???????????? Care and maintenance costs decreased by 50% to ??0.4 million (2012: ??0.8 million)

???????????? Corporate expenses decreased by 17% to ??1.9 million (2012: ??2.3 million)

???????????? Loss for the year decreased by 52% to ??14.5 million (2012: ??30.4 million)

???????????? Placing concluded on 19 August 2013 raising ??3.8 million net of expenses

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LIQHOBONG MINE, LESOTHO

PILOT PLANT

???????????? Cash operating loss reduced by 79% to ??1.0 million (2012: ??4.8 million)

???????????? Grade and diamond quality in line with expectations

???????????? Nine +100 carat stones broken valued at US$15-25 million

MAIN TREATMENT PLANT ('MTP')

???????????? DFS results announced on 25 October 2012

???????????? Pre-tax NPV_8% of US$335 million at a project level

???????????? Financing discussions well advanced

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OUTLOOK

???????????? Focused on Liqhobong, with the goal of becoming a +1 million carat per annum producer from 2016

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

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For more information contact:

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Background information on Firestone Diamonds:

Firestone Diamonds plc is an international diamond mining and development company with operations focused on Lesotho and Botswana. Firestone currently operates the pilot plant at the Liqhobong Mine in Lesotho and is in the process of developing the Main Treatment Plant to become a +1 million carat per annum producer.

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

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Chairman's Letter

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Dear Shareholder,

During early 2012 we announced a revised strategy for the Company that focuses on the future development of the MTP at the Liqhobong mine, converting the operation into a one million plus carats per annum producer, whilst seeking ways to unlock value for our shareholders in respect of the Company's non-core assets.?? I am pleased to update you on a year during which Firestone has made significant progress in the implementation and delivery of this strategy.

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Operations

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2012 was a pivotal development period culminating in the completion of the Liqhobong Definitive Feasibility Study ('DFS') during October 2012 and we are closer to achieving our aim of commencing the development of the MTP. This will provide Liqhobong with the capability of reaching its stated production target.

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The DFS endorsed the Board's view that Liqhobong is a financially robust diamond project, with an indicated post-tax IRR of 40% and NPV_8% of US$335 million, on a conservative basis.??

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The DFS also confirmed Liqhobong's total resource of circa 89 million tonnes containing 29 million carats at an average grade of 33 carats per hundred tonnes, which, when brought into production, will elevate Liqhobong Mine into the elite group of mines producing over 1 million carats a year.?? Applying a conservative US$100 per carat revenue, this equates to a contained value of approximately US$2.9 billion.

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To date, the Liqhobong Pilot Plant has produced in excess of 325,000 carats and has provided confirmation of the quality, grade and size of our stones as well as valuable information on the characteristics of the ore body.?? The Pilot Plant identified the presence of several +100 carat stones, which unfortunately were all broken during the recovery process.?? The MTP has been specifically designed to successfully recover these stones.?? Unbroken, these +100 carat stones would have resulted in a significant increase in revenue and profits for the Pilot Plant. An independent evaluation of the fragments recovered, conservatively estimated the combined value of these stones at between US$15 million and US$25 million.?? The financial evaluation in the DFS excludes the presence of these large special stones, providing further investor upside to the future value of Liqhobong.

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Our next steps from an operational perspective include closing the Pilot Plant at an appropriate time in order to prepare the site for construction of the MTP.

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Corporate

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As announced in May 2013, an international bank was mandated to lead the project finance for the MTP on behalf of the Company.?? This process remains on track and financing will be subject to the satisfactory completion of the Bank's due diligence and standard internal approval processes as well as debt insurance to be provided by the Export Credit Insurance Corporation of South Africa.

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Firestone continues to enjoy the support of its major shareholders as evidenced by the successful completion of our recent equity financing of US$6 million, amid very challenging capital market conditions. We also succeeded in securing another US$6 million off-take agreement with a diamantaire to further strengthen our working capital position.?? Interest from potential large external investors continues to prove encouraging and the Board and management are making good progress in developing an optimum finance solution for the implementation of the MTP.

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In relation to our non-core assets, various opportunities have presented themselves to the Company and we remain committed to unlocking value for our shareholders in this regard either through disposal or an appropriate joint venture arrangement.

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As part of the Company's on-going transformation, our efforts to strengthen the executive team culminated in the appointment of Stuart Brown as an Executive Director and CEO designate of Firestone on 2 September 2013. Stuart is the former CFO and Joint Acting CEO of the De Beers Group, the world's leading diamond group, where he worked for 20 years. He will bring highly strategic and coveted expertise to the Firestone management team when he takes over the mantle of CEO from Tim Wilkes on 2 December 2013.. An appointment of Stuart's calibre reflects the rigorous ambition of Firestone and the opportunity that Liqhobong presents. We very much look forward to working with Stuart in the coming years.

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Finally, I would like to thank Tim Wilkes for his dedication and hard work during his tenure as CEO. Tim has actively contributed towards repositioning the Company to focus on Liqhobong and I look forward to continuing to work with him in assisting Firestone to deliver on its strategy.

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Lucio Genovese

Non-Executive Chairman

3 October 2013

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Review of operations

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The focus during the year was to optimise production from the Company's Pilot Plant operations at the Liqhobong Mine in Lesotho. The information gained from ongoing production endorses the findings of the DFS that was released on 25 October 2012, and gives further comfort to investors who are looking to invest in an expanded built for purpose MTP that will produce more than 1 million carats per annum from 2016.

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With our focus firmly on developing Liqhobong, there was no activity at the BK11 Mine in northern Botswana, which remains on care and maintenance. No exploration or evaluation work was undertaken on any of the Company's prospecting licenses in Botswana, and management continue to look for ways to unlock shareholder value from these assets through disposal or joint venture opportunities.

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Production results from Liqhobong are discussed below, however cognisance must be taken that the Pilot Plant has served its purpose. In order to allow the site to be prepared for the commencement of the construction of the 500 tonne per hour MTP, the Pilot Plant will be closed in Q4 of 2013 and decommissioned in HI 2014. It is envisaged that mobilisation of the early works contractors will take place in H1 2014, subject to the completion of financing.

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Liqhobong Mining Development Company ('LMDC'), Lesotho

The mine has a total resource of 89 million tonnes at the Main Pipe containing 29 million carats at an average grade of 33 carats per hundred tonnes. With an estimated diamond value of US$100/ct the mine has a contained value of approximately US$2.9 billion.

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Pilot Plant Production

Mining and associated ore treated continued an upward trend throughout the year and by year-end a total of 623,000 tonnes (2012: 488,000 tonnes) had been treated at an average grade of 25 carats per hundred tonnes, resulting in 156,000 carats (2012: 164,000 carats) being recovered. Although the tonnage treated increased significantly compared to 2012, the carats recovered were lower due to the expected lower grade areas within K2 being mined and treated compared to a higher local grade within K2 in 2012. The K2 unit covers approximately 50% of the pipe in the upper benches of the mine but reduces in volume below bench 6 as the higher grade K5 and K6 units become volumetrically dominant.?? A total of 166,712 carats were sold during the year realising revenues of US$15.5 million at an average price of US$93/ct. The prices obtained are robust, considering that there were no special or large stones sold in the last three quarters of the year. The average price achieved of US$93/ct reflects the presence of smaller, but higher quality white diamonds recovered from mining the K2 unit.

The Pilot Plant also confirmed the presence of nine +100 carat stones that were unfortunately broken during the recovery process.?? If recovered, the financial contribution of these stones would have been material.?? The MTP has been designed to recover stones of this size intact.

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Diamond Sales

The newly constructed facilities at the Antwerp Diamond Centre (AWDC) where a further five tenders were held during the year, has proven to be a great success.?? Well over 100 diamantaires participated in these tenders.

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Summary of quarterly production data for LMDC

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i)???????????????????????????????????????? Average price of US$87/ct was achieved at the June tender. Only the off-take inventory was sold in the 2012 financial year with the remainder in the 2013 financial year.

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Diamond prices recovered well from the lows of H1 2012 and remained consistently within the US$85-US$100 range for the year under review. The Company continues to sell its -11 diamond sieve size stones, to a reputable Belgium based diamantaire, in terms of a two year off-take agreement. The remainder of the Pilot Plant's production was sold on tender.

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Main Treatment Plant

The DFS was completed in August 2012 and released on 25 October 2012. Price validation exercises, and early work schedules are all in progress as part of the Front End Engineering and Design (FEED) which is well under way in parallel with financing arrangements in order to facilitate the construction of the +1 million carat per annum MTP. Early works required include construction of a new access road, accommodation camp for contractors and the construction of the starter wall for the residue slimes facility.

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For further information, a copy of the DFS presentation is available on the Company's website at www.firestonediamonds.com.

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Financial review

Pro-forma Statement of Profit and Loss

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a - These business segments are classified as held for sale. Operating losses of these segments are disclosed as losses from discontinued operations in the consolidated statement of profit and loss.

b - Cost of sales presented in this report excludes depreciation and amortisation charges on assets used in the production process in order to reflect a cash operating result.

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The Group loss before taxation was ??14.5 million (2012: ??30.4 million), including ??2.5 million (2012: ??13.8 million) impairment losses, a ??5.6 million (2012: ??2.9 million) charge for depreciation and amortisation and a share-based payment expense of ??1.2 million (2012: ??0.2 million).?? Impairment losses during the year mainly relate to the BK11 assets.?? Cash losses were reduced across all of the Group's business segments during the year under review.?? Improved operating results were achieved at the Liqhobong Mine where cash losses reduced from ??6.5 million in 2012 to ??2.7 million for the year, due to both an increase in revenue per carat and a reduction in operating costs.?? Corporate expenses, which include one-off restructuring costs of ??0.1 million, reduced by ??0.4 million year on year to ??1.9 million (2012: ??2.3 million) as the Company continued to drive its cost reduction program.?? The BK11 Mine remained on care and maintenance resulting in a reduction in losses of ??3.9 million compared to the 2012 financial year.?? Care and maintenance expenses for the BK11 Mine decreased by ??0.4 million to ??0.4 million for the year (2012: ??0.8 million).

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Total revenue increased by ??3.4 million to ??9.9 million for the year (2012: ??6.5 million) due to a year on year increase in carats sold from 151,948 to 166,712 during 2013 and an increase in average price per carat from US$59 in 2012 to US$93 during 2013. ??Revenue for 2012 includes ??1.2 million of diamond sales from the BK11 Mine.

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Group cost of sales decreased by ??3.9 million mainly due to the discontinuation of the BK11 operations during the second half of FY2012.

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LMDC

Revenue at LMDC increased by ??4.6 million to ??9.9 million for the year (2012: ??5.3 million) due to the sale of 166,712 carats (2012: 139,556 carats).?? The average diamond price achieved was 58% higher during the year at US$93/ct compared with US$59/ct in the previous year, partly as a result of a stronger diamond market and an improvement in the quality of the diamonds sold.?? 15,080 carats of prior year production were sold at the July 2012 tender at an average price of US$197/ct..?? The sale, which included 4 special stones, boosted the current year's average price by US$10/ct to US$93/ct from US$83/ct.

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Cost of sales for the year of ??10.9 million (2012: ??10.1 million) include a write down of ??0.6 million and ??0.4 million of uncut diamond inventory and stock piles respectively, in accordance with the Company's adopted accounting policy on inventory.?? Cost of sales remained largely unchanged from 2012 despite a 19% year on year increase in total tonnes mined and a 28% year on year increase in ore treated.

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The operational improvements above resulted in a 58% reduction in cash loss for the year of ??2.7 million compared to the previous year's loss of ??6.5 million.

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BK11 Mine

Operations at the mine remained on care and maintenance costing the Group ??0.4 million for the year under review.?? Management are committed to and continue to seek ways of unlocking shareholder value from this asset and from the Group's portfolio of exploration assets, which have both been classified as non-current assets held for sale in these annual financial statements.

Pro-forma Statement of Financial Position

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Non-current assets reduced by ??19.8 million year on year to ??34.4 million (2012: ??54.2 million) mainly due to depreciation and amortisation of ??5.6 million, an impairment charge of ??2.5 million relating to the BK11 Mine, the transfer of assets to non-current assets held for sale of ??9.0 million and foreign exchange losses of ??5.4 million, offset by additions to property, plant and equipment of ??2.7 million.?? Exchange losses relate to the strengthening of the British Pound, being the Group's reporting currency, relative to the Lesotho Maloti and the Botswana Pula, currencies in which a majority of the Group's non-current assets are recorded.

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Certain of the Group's South African and Botswana assets have been classified as held for sale, in line with the Board's decision to unlock shareholder value from these assets either through joint venture structures or a disposal process.?? These assets include:

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Current assets excluding cash decreased by ??1.2 million (2012: ??1.0 million) from ??4.0 million to ??2.8 million mainly due to the discontinuation of BK11.?? Current assets include inventory of ??1.1 million (2012: ??2.4 million) and accounts receivable of ??1.7 million (2012: ??1.6 million). Inventory at year-end includes 17,392 carats (2012: 30,946 carats) of mostly lower quality rough diamonds valued at US$61/ct (2012: US$69/carat).?? Accounts receivable, which comprise diamonds sold on tender, were received in full subsequent to year-end.

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Interest bearing borrowings were reduced by ??1.2 million (2012: ??2.2 million) to ??1.7 million (2012: ??2.9 million) with no new debt financing introduced.?? All interest bearing borrowings were transferred to liabilities of a disposal group as they relate to the BK11 Mine.

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Current liabilities mainly comprise trade creditors and accruals.?? Increased operational activity at the Liqhobong Mine resulted in an increase in current liabilities from ??2.4 million to ??3.7 million, offset by a repayment of creditor balances at BK11 Mine where current liabilities decreased from ??2.0 million at the end of FY2012 to ??0.1 million for the current year, which are classified as liabilities of a disposal group.

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Pro-forma Cash Flow Statement??

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The Group's net cash outflow for the year was ??7.9 million (2012: ??6.3 million inflow) and its closing cash balance was ??2.7 million (2012: ??10.6 million) including cash held by disposal groups.

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LMDC incurred an operating cash loss for the year of ??2.7 million (2012: ??6.5 million) which was largely offset by a decrease in working capital of ??2.5 million (2012: ??3.2 million increase in working capital).?? ??2.7 million was invested in property, plant and equipment (2012: ??3.8 million) which relates mainly to the MTP project.?? The parent company invested a further ??2.7 million (2012: ??14.0 million) into LMDC during the year to fund these cash expenses.

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??0.4 million was spent on BK11 Mine's care and maintenance program for the year.?? Net working capital payments of ??0.7 million and a repayment of ??1.3 million (2012: ??1.9 million) of debt financing brought the total cash cost of the BK11 Mine for the year to ??2.4 million, which was funded from opening cash of ??0.4 million and funding from the parent company of ??2.0 million.

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The Corporate segment spent ??1.9 million (2012: ??2.3 million) on corporate activities during the year and transferred ??4.7 million to fund LMDC and BK11, resulting in closing cash of ??2.3 million (2012: ??9.6 million).

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The financial statements were approved by the Board of Directors and authorised for issue on 3 October 2013.

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Lucio Genovese

Director

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