Dominion Diamond Corporation Reports Fiscal 2013 Fourth Quarter and Year-End Results

TORONTO, April 3, 2013 /CNW/ - Dominion Diamond Corporation (TSX:DDC), (NYSE:DDC) (the "Company") today announced its fourth quarter and year-end results for the period ending January 31, 2013.

Robert Gannicott, Chairman and Chief Executive Officer stated: "The last year, and this first quarter, has been a time of great positive change for the Company, including changing its very identity to "Dominion Diamond Corporation".  This change reflects a focus on the production, sorting and sale of diamonds from Northern Canada, a region that we know and understand well. The acquisition of the Ekati Mine, and its operating team, is expected to close next week giving us operational control of both a producing mine and development opportunities in the large scale resources on the Ekati property. Together with our exploration acreage adjacent to the Ekati and Diavik properties, this positions us from grass-roots exploration through development opportunities. We also become the largest supplier of Canadian diamonds sold through an expert sorting and marketing chain that we have perfected through the years of Diavik production."

Fourth Quarter Highlights:

Corporate

• The sale of the Company's Luxury Brand Segment, Harry Winston, Inc., to The Swatch Group Ltd. was completed on March 26, 2013. As part of the closing of the transaction, the Company's name was changed to Dominion Diamond Corporation, and its common shares now trade on both the Toronto and New York stock exchanges under the symbol DDC. As a result, the Company's consolidated results from continuing operations relate solely to its mining operations, which include the production, sorting and sale of rough diamonds. The results of the Luxury Brand Segment are treated as discontinued operations for accounting and reporting purposes and current and prior period results have been adjusted accordingly.
  
  
• During the quarter, the Company entered into share purchase agreements with BHP Billiton to purchase all of BHP Billiton's diamond assets, including its controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium for an agreed purchase price of $500 million. The transaction is currently expected to close on or about April 10, 2013.  In connection with this acquisition, the Company has also arranged new secured credit facilities consisting of a $400 million term loan, a $100 million revolving credit facility (of which $50 million will be available for purposes of funding the Ekati acquisition) and a $140 million letter of credit facility (expandable to $265 million in aggregate). These new facilities would replace the Company's current $125 million facility with Standard Chartered Bank.

Diamond Market

• During the fourth quarter of fiscal 2013, the retail jewelry market improved in almost all areas, led by Diwali and the wedding season in India, followed closely by a positive US year-end holiday season and improved consumer demand in China, which regained momentum in advance of the Lunar New Year. Rough diamond supply was impacted by delivery problems at certain diamond mines combined with lower than expected Russian rough diamond supply. The tight supply coupled with a more active polished market helped improve rough prices during the quarter.

Q4 Results Highlights

• Consolidated sales from continuing operations increased 8% to $110.1 million for the fourth quarter compared to $102.2 million for the comparable quarter of the prior year. The increase in sales resulted from an 11% increase in achieved rough diamond prices due to an improved sales mix, partially offset by a 3% decrease in volume of carats sold during the quarter.
  
  
• Operating profit from continuing operations decreased 12% to $21.0 million compared to an operating profit of $24.0 million in the comparable quarter of the prior year.  Consolidated EBITDA from continuing operations decreased 6% to $45.3 million compared to $48.3 million in the comparable quarter of the prior year.
  
  
• Rough diamond production during the fourth calendar quarter increased 19% to 1.9 million carats, compared to 1.6 million carats for the fourth calendar quarter of last year (on a 100% basis).  The increase was primarily due to improved grades in each of the kimberlite pipes.
  
  
• The Company had 0.5 million carats of rough diamond inventory with an estimated current market value of approximately $65 million at January 31, 2013, of which approximately $25 million represents rough diamond inventory available for sale, with the remaining $40 million currently being sorted.
  
  
• The Company recorded a consolidated net profit attributable to shareholders of $14.9 million or $0.18 per share for the quarter, compared to a net profit attributable to shareholders of $16.6 million or $0.20 per share in the fourth quarter of the prior year. Net profit from continuing operations attributable to shareholders (which now represents the "mining operations") was $12.1 million or $0.14 per share compared to $12.7 million or $0.15 per share in the comparable quarter of the prior year. Continuing operations includes all costs related to the Company's mining operations, including those previously reported as part of the corporate segment.

Annual Results Highlights:

• Consolidated sales from continuing operations for the full financial year increased 19% to $345.4 million, compared to $290.1 million for the prior year. The increase in sales resulted from a 49% increase in volume of carats sold during the year, offset by a 20% decrease in achieved rough diamond prices.
• Rough diamond production for the calendar year 2012 increased 8% to 7.2 million carats compared to 6.7 million carats in the prior calendar year (on a 100% basis).  The increase was due primarily to improved grades in each of the kimberlite pipes.
  
  
• The 49% increase in the quantity of carats sold was primarily the result of the decision by the Company to hold back some lower priced goods at October 31, 2011 due to an oversupply in the market at that time and the subsequent sale of almost all of these lower priced carryover goods during fiscal 2013.
  
  
• The 20% decrease in the Company's achieved average rough diamond prices during the fiscal year resulted from a combination of two factors: first, the sale of the lower priced goods originally held back in inventory by the Company at October 31, 2011; and second, a decrease in the market price for rough diamonds from the peak achieved in the prior year.
• Operating profit increased 27% to $47.7 million compared to an operating profit of $37.6 million in the prior year.  Included in the operating profit for the prior year was a $13.0 million ($8.4 million after tax) non-cash charge related to the de-recognition of certain assets associated with paste production at the Diavik Diamond Mine, which were no longer expected to be required for underground mining.  Consolidated EBITDA from continuing operations rose 10% to $127.9 million compared to $116.3 million in the prior year.
  
  
• The Company recorded a consolidated net profit attributable to shareholders of $34.7 million or $0.41 per share for the year, compared to a net profit attributable to shareholders of $25.5 million or $0.30 per share in the prior year. Net profit from continuing operations attributable to shareholders was $22.3 million or $0.26 per share compared to $17.3 million or $0.20 per share in the prior year. Continuing operations includes all costs related to the Company's mining operations, including those previously reported as part of the corporate segment.

Fourth Quarter and Fiscal 2013 Financial Summary from Continuing Operations
(US$ in millions except Earnings per Share amounts)

Outlook
A new mine plan and budget for calendar 2013 has been approved by Rio Tinto plc and the Company. The plan for calendar 2013 foresees Diavik Diamond Mine production of approximately 6 million carats from the mining and processing of approximately 1.6 million tonnes of ore with a further 0.2 million tonnes processed from stockpile ore. Mining activities will be exclusively underground with approximately 0.7 million tonnes expected to be sourced from A-154 North, approximately 0.5 million tonnes from A-154 South and approximately 0.4 million tonnes from A-418 kimberlite pipes.  Included in the estimated production for calendar 2013 is approximately 0.6 million carats from RPR and 0.1 million carats from the improved recovery process for small diamonds. These RPR and small diamond recoveries are not included in the Company's reserves and resource statement and are therefore incremental to production.

The development of A-21, the last of the Diavik Diamond Mine's kimberlite pipes in the original mine plan, has been deferred due both to the current diamond market conditions and the decreased urgency of development following the identification of extensions to the existing pipes. Although these extension areas cannot be categorized as ore at this time due to insufficient definition work, the Company expects the life of the existing developed pipes will be extended, thereby deferring the need for production from A-21 to keep the processing plant full. The A-21 pre-feasibility study currently being undertaken assumes that the A-21 pipe will be mined with the open pit methods used for the other pipes. A dike would be constructed similar to the two other pits but smaller in size. Detailed plans are still being refined and optimized although no underground mining is currently envisaged.

Conference Call and Webcast
Beginning at 8:30AM (ET) on Thursday, April 4th, the Company will host a conference call for analysts, investors and other interested parties. Listeners may access a live broadcast of the conference call on the Company's investor relations web site at www.ddcorp.ca or by dialing 800-299-8538 within North America or 617-786-2902 from international locations and entering passcode 80556554.

An online archive of the broadcast will be available by accessing the Company's investor relations web site at www.ddcorp.ca A telephone replay of the call will be available one hour after the call through 11:00PM (ET), Thursday, April 18th, 2013 by dialing 888-286-8010 within North America or 617-801-6888 from international locations and entering passcode 39398597.

About Dominion Diamond Corporation
Dominion Diamond Corporation is focused on the mining and marketing of rough diamonds to the global market from attractive operating mine assets that present low political risk.  Our business encompasses 40% of the Diavik Diamond Mine in Canada's Northwest Territories and rough diamond sorting and sales operations in Canada, Belgium and India. The Company is in the process of purchasing an 80% interest in the Ekati Diamond Mine, also located in the Northwest Territories of Canada, as well as a control interest in surrounding areas containing significant prospective resources.  The Company expects the closing of the transaction will occur on or about April 10, 2013.

For more information, please visit www.ddcorp.ca

FOURTH QUARTER RESULTS
During the quarter, Dominion Diamond Corporation (the "Company") announced that it had entered into an agreement to sell its luxury brand diamond jewelry and timepiece division, Harry Winston, Inc. (the "Luxury Brand Segment") to The Swatch Group Ltd. ("Swatch Group"). The sale transaction was completed on March 26, 2013. As a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston".  The Company's name has now been changed to "Dominion Diamond Corporation" and its common shares trade on both the Toronto and New York stock exchanges under the symbol "DDC". See "Discontinued Operations". Accordingly, the Company's consolidated results are supported from continuing operations, which no longer include the operations of the Luxury Brand Segment and the results of this segment are now treated as discontinued operations for reporting purposes. Current and prior period results have been restated to reflect this change.

The Company recorded a consolidated net profit attributable to shareholders of $14.9 million or $0.18 per share for the quarter, compared to a net profit attributable to shareholders of $16.6 million or $0.20 per share in the fourth quarter of the prior year. Net profit from continuing operations attributable to shareholders (which now represents the "mining operations") was $12.1 million or $0.14 per share compared to $12.7 million or $0.15 per share in the comparable quarter of the prior year. Continuing operations includes all costs related to the Company's mining operations, including those previously reported as part of the corporate segment.

Consolidated sales from continuing operations were $110.1 million for the fourth quarter compared to $102.2 million for the comparable quarter of the prior year, resulting in an operating profit of $21.0 million compared to an operating profit of $24.0 million in the comparable quarter of the prior year. Gross margin increased 6% to $31.1 million from $29.5 million in the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $45.3 million compared to $48.3 million in the comparable quarter of the prior year.

The increase in sales resulted from an 11% increase in achieved rough diamond prices, partially offset by a 3% decrease in volume of carats sold during the quarter. Rough diamond production during the fourth calendar quarter was 19% higher than the comparable quarter of the prior year. The Company had 0.5 million carats of rough diamond inventory with an estimated current market value of approximately $65 million at January 31, 2013, of which approximately $25 million represents rough diamond inventory available for sale, with the remaining $40 million currently being sorted.

The net earnings from discontinued operations of $2.8 million are presented separately in the consolidated income statements, and comparative periods have been adjusted accordingly.

ANNUAL RESULTS
The Company recorded a consolidated net profit attributable to shareholders of $34.7 million or $0.41 per share for the year, compared to a net profit attributable to shareholders of $25.5 million or $0.30 per share in the prior year. Net profit from continuing operations attributable to shareholders was $22.3 million or $0.26 per share compared to $17.3 million or $0.20 per share in the prior year. Continuing operations includes all costs related to the Company's mining operations, including those previously reported as part of the corporate segment.

Consolidated sales from continuing operations were $345.4 million for the year compared to $290.1 million for the prior year, resulting in an operating profit of $47.7 million compared to an operating profit of $37.6 million in the prior year. Gross margin increased 25% to $77.8 million from $62.2 million in the prior year. Consolidated EBITDA from continuing operations was $127.9 million compared to $116.3 million in the prior year.

The increase in sales resulted from a 49% increase in volume of carats sold during the year, offset by a 20% decrease in achieved rough diamond prices. The 49% increase in the quantity of carats sold was primarily the result of a decision by the Company to hold back some lower priced goods at October 31, 2011 due to an oversupply in the market at that time and the subsequent sale of almost all of these lower priced carryover goods during fiscal 2013. Rough diamond production during the year was 8% higher than the prior year. The Company recorded a consolidated operating profit from continuing operations of $47.7 million compared to $37.6 million in the prior year. Included in the operating profit for the prior year was a $13.0 million ($8.4 million after tax) non-cash charge related to the de-recognition of certain assets associated with paste production at the Diavik Diamond Mine, which were no longer expected to be required for underground mining.

The net earnings from discontinued operations of $12.4 million are presented separately in the consolidated income statements, and comparative periods have been adjusted accordingly.

Management's Discussion and Analysis

(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED)

On March 26, 2013, Harry Winston Diamond Corporation changed its name to Dominion Diamond Corporation ("Dominion Diamond Corporation" or the "Company"). The following is management's discussion and analysis ("MD&A") of the results of operations for Dominion Diamond Corporation for the year ended January 31, 2013, and its financial position as at January 31, 2013. This MD&A is based on the Company's consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") and should be read in conjunction with the consolidated financial statements and related notes. Unless otherwise specified, all financial information is presented in United States dollars. Unless otherwise indicated, all references to "year" refer to the fiscal year ended January 31, 2013.

Certain information included in this MD&A may constitute forward-looking information within the meaning of Canadian and United States securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "foresee", "appears", "believe", "intend", "estimate", "predict", "potential", "continue", "objective", "modeled", "hope" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding plans, timelines and targets for construction, mining, development, production and exploration activities at the Diavik Diamond Mine, future mining and processing at the Diavik Diamond Mine, projected capital expenditure requirements and the funding thereof, liquidity and working capital requirements and sources, estimated reserves and resources at, and production from, the Diavik Diamond Mine, the number and timing of expected rough diamond sales, the demand for rough diamonds, expected diamond prices and expectations concerning the diamond industry, expected cost of sales and gross margin trends, and the ability to complete the Ekati Diamond Mine Acquisition (as defined herein). Actual results may vary from the forward-looking information. See "Risks and Uncertainties" on page 15 for material risk factors that could cause actual results to differ materially from the forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, mining, production, construction and exploration activities at the Diavik Diamond Mine, world and US economic conditions, diamond supply, and the timeline for the funding and completion of the Ekati Diamond Mine Acquisition. In making statements regarding expected diamond prices and expectations concerning the diamond industry, the Company has made assumptions regarding, among other things, the state of world and US economic conditions, and worldwide diamond production levels. While the Company considers these assumptions to be reasonable based on the information currently available to it, they may prove to be incorrect. See "Risks and Uncertainties" on page 15.

Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what we currently expect. 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, including risks associated with the inability to control the timing and scope of future capital expenditures, the risk that the operator of the Diavik Diamond Mine may make changes to the mine plan and other risks arising because of the nature of joint venture activities, risks associated with the remote location of and harsh climate at the Diavik Diamond Mine site, risks resulting from the Eurozone financial crisis, risks associated with regulatory requirements, fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate, cash flow and liquidity risks, and the risks relating to the ability to satisfy the closing conditions of the Ekati Diamond Mine Acquisition and the Company's related new credit facilities. Please see page 15 of this MD&A, as well as the Company's current Annual Information Form, available at www.sedar.com and www.sec.gov, respectively, for a discussion of these and other risks and uncertainties involved in the Company's operations.

Readers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this MD&A, and should not rely upon this information as of any other date. Due to assumptions, risks and uncertainties, including the assumptions, risks and uncertainties identified above and elsewhere in this MD&A, actual events may differ materially from current expectations. The Company uses forward-looking statements because it believes such statements provide useful information with respect to the expected future operations and financial performance of the Company, and cautions readers that the information may not be appropriate for other purposes. 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, future 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 www.sedar.com and www.sec.gov, respectively.

Summary Discussion
Dominion Diamond Corporation is focused on the mining and marketing of rough diamonds to the global market. The Company supplies rough diamonds to the global market from its 40% ownership interest in the Diavik Diamond Mine, located in Canada's Northwest Territories.

The Company has an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI") (60%) and Dominion Diamond Diavik Limited Partnership (formerly known as Harry Winston Diamond Limited Partnership) ("DDDLP") (40%) where DDDLP holds an undivided 40% ownership interest in the assets, liabilities and expenses of the Diavik Diamond Mine. DDMI is the operator of the Diavik Diamond Mine. DDMI and DDDLP are headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary of Rio Tinto plc of London, England.

On November 13, 2012, the Company entered into share purchase agreements with BHP Billiton Canada Inc. and various affiliates to purchase all of BHP Billiton's diamond assets, including its controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium (the "Ekati Diamond Mine Acquisition"). The Ekati Diamond Mine consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential. The agreed purchase price, payable in cash, is $400 million for the Core Zone and $100 million for the Buffer Zone, subject to adjustments in accordance with the terms of the share purchase agreements. The share purchase agreements include typical closing conditions, including receipt of required regulatory and competition or antitrust law approvals. Each of the Core Zone and the Buffer Zone is subject to a separate joint venture agreement. BHP Billiton holds an 80% interest in the Core Zone and a 58.8% interest in the Buffer Zone, with the remainder held by the Ekati minority joint venture parties. BHP Billiton has advised the Company that all of the minority joint venture partners have agreed to waive their rights of first refusal to purchase the interests in the Buffer Zone and Core Zone that they do not own, as applicable, pursuant to the terms of their respective joint venture agreements. Closing of the Ekati Diamond Mine Acquisition is currently expected to occur on April 10, 2013. In connection with the Ekati Diamond Mine Acquisition, the Company has arranged new secured credit facilities consisting of a $400 million term loan, a $100 million revolving credit facility (of which $50 million will be available for purposes of funding the Ekati Diamond Mine Acquisition) and a $140 million letter of credit facility (expandable to $265 million in aggregate). These new facilities will replace the Company's current $125 million facility with Standard Chartered Bank.

On January 14, 2013, the Company announced that it entered into an agreement to sell the Luxury Brand Segment to Swatch Group (the "Luxury Brand Divestiture"). The Luxury Brand Divestiture was completed on March 26, 2013. As a result of the Luxury Brand Divestiture, the Company's corporate group underwent name changes to remove references to "Harry Winston". The Company's name has now been changed to "Dominion Diamond Corporation" and its common shares trade on both the Toronto and New York stock exchanges under the symbol "DDC".

Market Commentary
The Diamond Market
The rough and polished diamond markets continued to soften throughout the first half of fiscal 2013 due to the macroeconomic uncertainty that negatively impacted the second half of fiscal 2012. The retail industry had built up diamond stocks in expectation of 2012 being a year of greater growth in demand, and the overstocking did not clear until late 2012. Market conditions improved in the second half of fiscal 2013 as a stronger US holiday season and renewed activity in the retail market in China helped increase prices from the market lows experienced in the middle of the year. In addition, the retail markets in both India and the Middle East recovered in the second half of the year, adding further stability to the diamond markets. The diamond market is impacted by currency fluctuations and the dramatic fall in the Indian rupee against the US dollar in early 2012 negatively affected the cost of diamonds to the consumer and the credit available to the Indian diamond cutting industry. In early 2012, industry leading banks reviewed their credit exposure to the diamond industry, tightening liquidity and creating an additional challenge to the difficult market conditions. This tightening of credit forced many diamond companies to improve their operations, allowing the industry to take full advantage of the better market conditions that were evident at the end of fiscal 2013.

During the fourth quarter of fiscal 2013, the retail jewelry market improved in almost all areas, led by Diwali and the wedding season in India followed closely by a positive US year-end holiday season and improved consumer demand in China, which regained momentum in advance of the Lunar New Year. Rough diamond supply was impacted by delivery problems at certain diamond mines combined with lower than expected Russian rough diamond supply. The tight supply coupled with a more active polished market helped improve rough prices during the quarter.

Consolidated Financial Results
On January 14, 2013, the Company announced that it entered into an agreement to sell the Luxury Brand Segment to Swatch Group. The sale transaction was completed on March 26, 2013. As a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston".  The Company's name has now been changed to "Dominion Diamond Corporation" and its common shares trade on both the Toronto and New York stock exchanges under the symbol "DDC". See "Discontinued Operations". Accordingly, the Company's consolidated results from continuing operations relate solely to its mining operations, which include the production, sorting and sale of rough diamonds. The results of the Luxury Brand Segment are treated as discontinued operations for accounting and reporting purposes and current and prior period results have been adjusted accordingly. The following is a summary of the Company's consolidated quarterly results for the eight quarters ended January 31, 2013 following the basis of presentation utilized in its IFRS financial statements:

(expressed in thousands of United States dollars except per share amounts and where otherwise noted)
(unaudited)

The comparability of quarter-over-quarter results is impacted by seasonality of mining operations. Dominion Diamond Corporation expects that the quarterly results for its mining operations will continue to fluctuate depending on the seasonality of production at the Diavik Diamond Mine, the number of sales events conducted during the quarter, and the volume, size and quality distribution of rough diamonds delivered from the Diavik Diamond Mine in each quarter.

Three Months Ended January 31, 2013 Compared to Three Months Ended January 31, 2012

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a fourth quarter consolidated net profit attributable to shareholders of $14.9 million or $0.18 per share compared to a net profit attributable to shareholders of $16.6 million or $0.20 per share in the fourth quarter of the prior year. Net profit from continuing operations attributable to shareholders was $12.1 million or $0.14 per share compared to $12.7 million or $0.15 per share in the comparable quarter of the prior year. Discontinued operations represented $2.8 million of net profit or $0.04 per share compared to $3.9 million or $0.05 per share in the fourth quarter of the prior year.

CONSOLIDATED SALES FROM CONTINUING OPERATIONS

(expressed in thousands of United States dollars)
(unaudited)

During the fourth quarter, the Company sold approximately 0.83 million carats for a total of $110.1 million for an average price per carat of $133 compared to approximately 0.86 million carats for a total of $102.2 million for an average price per carat of $120 in the comparable quarter of the prior year. The 11% increase in the Company's achieved average rough diamond prices during the fourth quarter versus the comparable quarter of the prior year resulted from an improved sales mix.

Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $117 per carat based on the prices achieved in the February 2013 sale.

The Company expects that results for its mining operations will continue to fluctuate depending on the seasonality of production at the Diavik Diamond Mine, the number of sales events conducted during the quarter, rough diamond prices and the volume, size and quality distribution of rough diamonds delivered from the Diavik Diamond Mine and sold by the Company in each quarter.

CONSOLIDATED COST OF SALES AND GROSS MARGIN FROM CONTINUING OPERATIONS
The Company's fourth quarter consolidated cost of sales was $79.0 million resulting in a gross margin of 28.2% compared to a cost of sales of $72.8 million and a gross margin of 28.8% in the comparable quarter of the prior year. Cost of sales for the fourth quarter included $23.6 million of depreciation and amortization compared to $23.5 million in the comparable quarter of the prior year. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

A substantial portion of consolidated cost of sales is mining operating costs, which are incurred at the Diavik Diamond Mine. During the fourth quarter, the Diavik cash cost of production was $44.8 million compared to $44.2 million in the comparable quarter of the prior year. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the unit-of-production method over estimated proven and probable reserves.

The MD&A 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 the Diavik 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 mining operations' cost of sales disclosed for the three months ended January 31, 2013 and 2012.

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS
Consolidated SG&A expenses for the fourth quarter increased by $4.6 million from the prior year primarily due to $1.6 million related to the Ekati Diamond Mine Acquisition, $0.6 million related to the Luxury Brand Divestiture and $0.8 million related to stock-based compensation.

CONSOLIDATED INCOME TAXES FROM CONTINUING OPERATIONS
The Company recorded a net income tax expense from continuing operations of $7.0 million during the fourth quarter, compared to a net income tax expense from continuing operations of $10.3 million in the comparable quarter of the prior year. The Company's combined Canadian federal and provincial statutory tax rate for the quarter is 26.5%.  There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate such as earnings in foreign jurisdictions, and changes in the Company's view of whether deferred tax assets are probable of being realized.  As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the fourth quarter, the Company recorded an unrealized foreign exchange loss of $0.3 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability. This compares to an unrealized foreign exchange gain of $1.2 million in the comparable quarter of the prior year. The unrealized foreign exchange loss is recorded as part of the Company's deferred income tax expense, and is not deductible for Canadian income tax purposes.  During the fourth quarter, the Company also recognized a deferred income tax expense of $0.9 million for temporary differences arising from the difference between the historical exchange rate and the current exchange rate translation of foreign currency non-monetary items. This compares to a deferred income tax expense of $2.8 million recognized in the comparable quarter of the prior year.  The recorded tax provision during the fourth quarter also included a net income tax recovery of $1.1 million relating to foreign exchange differences between income in the currency of the country of origin and the US dollar.  This compares to a net income tax recovery of $0.6 million recognized in the comparable period of the prior year.

Due to the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors, as discussed above, it is expected that the Company's effective tax rate will fluctuate in future periods.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expenses for the fourth quarter were $2.4 million compared to $1.6 million for the comparable quarter of the prior year. Also included in consolidated finance expense is accretion expense of $0.6 million (2012 - $(0.3) million) related to the Diavik Diamond Mine's future site restoration liability.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $0.3 million was incurred during the fourth quarter compared to $0.2 million in the comparable quarter of the prior year.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $0.6 million was recorded during the fourth quarter compared to $0.1 million in the comparable quarter of the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange gain of $0.1 million was recognized during the fourth quarter compared to a net foreign exchange gain of $0.7 million in the comparable quarter of the prior year. The Company does not currently have any significant foreign exchange derivative instruments outstanding.

Year Ended January 31, 2013 Compared to Year Ended January 31, 2012

CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a consolidated net profit attributable to shareholders of $34.7 million or $0.41 per share for the year ended January 31, 2013, compared to a net profit attributable to shareholders of $25.5 million or $0.30 per share in the prior year. Excluding the $8.4 million after-tax de-recognition in the prior year of certain paste production assets, the Company would have recorded a net profit attributable to shareholders of $33.8 million or $0.40 per share. Net profit from continuing operations attributable to shareholders was $22.3 million or $0.26 per share, compared to $17.3 million or $0.20 per share in the prior year. Excluding the $8.4 million described above, the Company would have recorded a net profit from continuing operations attributable to shareholders of $25.7 million or $0.30 per share in the prior year. Discontinued operations represented $12.4 million of net profit or $0.15 per share compared to $8.1 million or $0.10 per share in the prior year.

CONSOLIDATED SALES FROM CONTINUING OPERATIONS
During the year ended January 31, 2013, the Company sold approximately 3.2 million carats for a total of $345.4 million for an average price per carat of $109 compared to approximately 2.1 million carats for a total of $290.1 million for an average price per carat of $137 in the prior year. The 49% increase in the quantity of carats sold was primarily the result of a decision by the Company to hold back some lower priced goods at October 31, 2011 due to an oversupply in the market at that time and the subsequent sale of almost all of these lower priced carryover goods during fiscal 2013. The 20% decrease in the Company's achieved average rough diamond prices during the fiscal year resulted from a combination of two factors: first, the sale of the lower priced goods originally held back in inventory by the Company at October 31, 2011; and second, a decrease in the market price for rough diamonds from the peak achieved in the prior year.

CONSOLIDATED COST OF SALES AND GROSS MARGIN FROM CONTINUING OPERATIONS
The Company's cost of sales was $267.6 million during the year ended January 31, 2013, resulting in a gross margin of 22.5% compared to a cost of sales of $228.0 million and a gross margin of 21.4% in the prior year. Included in the cost of sales for the prior year was a non-cash $13.0 million charge related to the de-recognition of certain components of the backfill plant associated with paste production at the Diavik Diamond Mine. Cost of sales for the year ended January 31, 2013, included $77.3 million of depreciation and amortization compared to $76.1 million for the prior year. The gross margin is anticipated to fluctuate between quarters, resulting from variations in the specific mix of product sold during each quarter and rough diamond prices.

A substantial portion of cost of sales is mining operating costs, which are incurred at the Diavik Diamond Mine. During the year ended January 31, 2013, the Diavik cash cost of production was $171.4 million compared to $167.8 million in the prior year. Cost of sales also includes sorting costs, which consists of the Company's cost of handling and sorting product in preparation for sales to third parties, and depreciation and amortization, the majority of which is recorded using the unit-of-production method over estimated proven and probable reserves.

The following table provides a reconciliation of cash cost of production (a non-IFRS performance measure) to cost of sales disclosed in the financial statements for the fiscal years ended January 31, 2013 and 2012.

CONSOLIDATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS
Consolidated SG&A expenses increased by $5.6 million from the prior year primarily due to $3.2 million related to the Ekati Diamond Mine Acquisition and $1.0 million related to the Luxury Brand Divestiture.

CONSOLIDATED INCOME TAXES FROM CONTINUING OPERATIONS
The Company recorded a net income tax expense from continuing operations of $15.3 million during the year ended January 31, 2013, compared to a net income tax expense from continuing operations of $9.0 million in the prior year. The Company's combined Canadian federal and provincial statutory tax rate for the period is 26.5%. There are a number of items that can significantly impact the Company's effective tax rate, including foreign currency exchange rate fluctuations, the Northwest Territories mining royalty, earnings subject to tax different than the statutory rate, such as earnings in foreign jurisdictions, and changes in the Company's view of whether deferred tax assets are probable of being realized.  As a result, the Company's recorded tax provision can be significantly different than the expected tax provision calculated based on the statutory tax rate.

The recorded tax provision is particularly impacted by foreign currency exchange rate fluctuations. The Company's functional and reporting currency is US dollars; however, the calculation of income tax expense is based on income in the currency of the country of origin. As such, the Company is continually subject to foreign exchange fluctuations, particularly as the Canadian dollar moves against the US dollar. During the year ended January 31, 2013, the Company recorded an unrealized foreign exchange loss of $1.1 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability. This compares to an unrealized foreign exchange loss of $0.5 million in the prior year. The unrealized foreign exchange loss is recorded as part of the Company's deferred income tax recovery, and is not deductible for Canadian income tax purposes.  During the year ended January 31, 2013, the Company also recognized a deferred income tax expense of $4.4 million for temporary differences arising from the difference between the historical exchange rate and the current exchange rate translation of foreign currency non-monetary items. This compares to a deferred income tax expense of $5.6 million recognized in the prior year.  The recorded tax provision during the year ended January 31, 2013 also included a net income tax recovery of $5.2 million relating to foreign exchange differences between income in the currency of the country of origin and the US dollar. This compares to a net income tax recovery of $4.4 million recognized in the prior year.

Due to the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors, as discussed above, it is expected that the Company's effective tax rate will fluctuate in future periods.

CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expenses for the year ended January 31, 2013 were $9.1 million compared to $10.8 million in the prior year. Also included in finance expense is accretion expense of $2.4 million (2012 - $2.0 million) related to the Diavik Diamond Mine's future site restoration liability.

CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $1.8 million was incurred during the year ended January 31, 2013, consistent with the prior year.

CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $0.8 million was recorded during the year ended January 31, 2013, compared to $0.5 million in the prior year.

CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange gain of $0.5 million was recognized during the year ended January 31, 2013, compared to $0.8 million in the prior year. The Company does not currently have any significant foreign exchange derivative instruments outstanding.

OPERATIONAL UPDATE
Production for calendar year 2012 at the Diavik Diamond Mine was 7.2 million carats consisting of 4.3 million carats produced from 1.2 million tonnes of ore from the A-418 kimberlite pipe, 1.9 million carats produced from 0.4 million tonnes of ore from the A-154 South kimberlite pipe, and 0.9 million carats produced from 0.4 million tonnes of ore from the A-154 North kimberlite pipe. Also included in production for the 2012 calendar year was an estimated 0.1 million carats from reprocessed plant rejects ("RPR"). These RPR are not included in the Company's reserves and resource statement and are therefore incremental to production. Rough diamond production was 8% higher than the prior calendar year due primarily to improved grades in each of the kimberlite pipes.

Production in the fourth calendar quarter was 1.9 million carats consisting of 0.8 million carats produced from 0.2 million tonnes of ore from the A-418 kimberlite pipe, 0.7 million carats produced from 0.2 million tonnes of ore from the A-154 South kimberlite pipe, 0.3 million carats produced from 0.1 million tonnes of ore from the A-154 North kimberlite pipe and 0.04 million carats from RPR. Average grade increased to 4.1 carats per tonne in the fourth calendar quarter from 2.9 carats per tonne in the comparable quarter of the prior year. The 19% increase in carats recovered in the quarter was primarily due to improved grades in each of the kimberlite pipes, partially offset by the 16% decline in ore processed in the quarter, which was due to a reduction in processing plant throughput that resulted from changes in the geological composition of the ore. Open pit mining of the A-418 kimberlite pipe concluded in September 2012, although processing of open pit ore from the A-418 kimberlite pipe will continue into calendar 2013.

DOMINION DIAMOND DIAVIK LIMITED PARTNERSHIP'S 40% SHARE OF DIAVIK DIAMOND MINE PRODUCTION
(reported on a one-month lag)

During the fiscal year, the Company expanded its Mumbai, India, office to the Bharat Diamond Bourse in Bandra, India. The new office will continue to support the Company's rough sorting and sales expansion in India.

Mining Operations Outlook

PRODUCTION
A new mine plan and budget for calendar 2013 has been approved by Rio Tinto plc and the Company. The plan for calendar 2013 foresees Diavik Diamond Mine production of approximately 6 million carats from the mining and processing of approximately 1.6 million tonnes of ore with a further 0.2 million tonnes processed from stockpile ore. Mining activities will be exclusively underground with approximately 0.7 million tonnes expected to be sourced from A-154 North, approximately 0.5 million tonnes from A-154 South and approximately 0.4 million tonnes from A-418 kimberlite pipes. Included in the estimated production for calendar 2013 is approximately 0.6 million carats from RPR and 0.1 million carats from the improved recovery process for small diamonds. These RPR and small diamond recoveries are not included in the Company's reserves and resource statement and are therefore incremental to production.

The development of A-21, the last of the Diavik Diamond Mine's kimberlite pipes in the original mine plan, has been deferred due both to the current diamond market conditions and the decreased urgency of development following the identification of extensions to the existing pipes. Although these extension areas cannot be categorized as ore at this time due to insufficient definition work, the Company expects the life of the existing developed pipes will be extended, thereby deferring the need for production from A-21 to keep the processing plant full. The A-21 pre-feasibility study currently being undertaken assumes that the A-21 pipe will be mined with the open pit methods used for the other pipes. A dike would be constructed similar to the two other pits but smaller in size. Detailed plans are still being refined and optimized although no underground mining is currently envisaged.

PRICING
Based on prices from the Company's rough diamond sales during the fourth quarter and the current diamond recovery profile of the Diavik processing plant, the Company has modeled the current approximate rough diamond price per carat for each of the Diavik ore types in the table that follows:

COST OF SALES AND CASH COST OF PRODUCTION
The Company currently expects cost of sales in fiscal 2014 to be approximately $255 million (including depreciation and amortization of approximately $70 million). The Company's share of the cash cost of production at the Diavik Diamond Mine for calendar 2013 is expected to be approximately $170 million at an assumed average Canadian/US dollar exchange rate of $1.00.

CAPITAL EXPENDITURES
During fiscal 2013 and the fourth quarter, DDDLP's 40% share of capital expenditures at the Diavik Diamond Mine was approximately $51.6 million and $8.7 million, respectively. During fiscal 2014, DDDLP's 40% share of the planned capital expenditures is expected to be approximately $28 million at an assumed average Canadian/US dollar exchange rate of $1.00.

Discontinued Operations
On January 14, 2013, the Company announced that it entered into an agreement to sell the Luxury Brand Segment to Swatch Group. The sale transaction was completed on March 26, 2013 and the Company's corporate group underwent name changes to remove references to "Harry Winston".  The Company's name has now been changed to "Dominion Diamond Corporation" and its common shares trade on both the Toronto and New York stock exchanges under the symbol "DDC". As a result of the Luxury Brand Divestiture, the Company's consolidated results no longer include the operations of the Luxury Brand Segment and the results of the Luxury Brand Segment are now treated as discontinued operations for reporting purposes. Current and prior period results have been restated to reflect this change.

Liquidity and Capital Resources
Working Capital
As at January 31, 2013, the Company had unrestricted cash and cash equivalents of $104.3 million compared to $78.1 million at January 31, 2012. During the year ended January 31, 2013, the Company reported cash from operations of $105.1 million compared to $59.0 million in the prior year. The increase resulted primarily from the Company's decision to hold rough diamond inventory due to market conditions in the prior year. At January 31, 2013, the Company had 0.5 million carats of rough diamond inventory with an estimated current market value of approximately $65 million, of which approximately $25 million represents inventory available for sale, with the remaining $40 million currently being sorted. At January 31, 2012, the Company had 0.8 million carats of rough diamond inventory with an estimated market value of approximately $80 million, of which approximately $50 million represented inventory available for sale, with the remaining $30 million being sorted.

Working capital decreased to $361.5 million at January 31, 2013 from $439.0 million at January 31, 2012. During the year, the Company increased accounts receivable from continuing operations by $1.7 million, decreased other current assets from continuing operations by $0.1 million, decreased inventory and supplies from continuing operations by $9.0 million, increased trade and other payables from continuing operations by $0.1 million and increased employee benefit plans from continuing operations by $1.4 million.

The Company's liquidity requirements fluctuate from quarter to quarter depending on, among other factors, the seasonality of production at the Diavik Diamond Mine, seasonality of mine operating expenses, capital expenditure programs, the number of rough diamond sales events conducted during the quarter, and the volume, size and quality distribution of rough diamonds delivered from the Diavik Diamond Mine and sold by the Company in each quarter.

The Company assesses liquidity and capital resources on a consolidated basis. The Company's requirements are for cash operating expenses, working capital, contractual debt requirements and capital expenditures. The Company believes that it will generate sufficient liquidity to meet its anticipated requirements for the next twelve months.

Financing Activities
The Company maintains a senior secured revolving credit facility with Standard Chartered Bank. At January 31, 2013, $50.0 million was outstanding.

On November 13, 2012, the Company entered into share purchase agreements with respect to the Ekati Diamond Mine Acquisition. In connection with the Ekati Diamond Mine Acquisition, the Company has arranged new secured credit facilities with The Royal Bank of Canada and Standard Chartered Bank consisting of a $400 million term loan, a $100 million revolving credit facility (of which $50 million will be available for purposes of funding the Ekati Diamond Mine Acquisition) and a $140 million letter of credit facility (expandable to $265 million in aggregate).  These new facilities will replace the Company's current $125 million facility with Standard Chartered Bank. These new facilities include customary covenants, including certain reporting and financial covenants, and bear interest at market rates. The term loan will require principal repayments beginning 30 months following closing of the Ekati Diamond Mine Acquisition and a final bullet payment of 50 percent of the principal amount being due on the date that is five years after the closing of the Ekati Diamond Mine Acquisition. The $100 million portion of the revolving facility will be due five years after closing. The letter of credit facility expires 364 days after the closing of the Ekati Diamond Mine Acquisition. These new facilities are subject to customary closing conditions, including closing of the Core Zone acquisition. If the Core Zone acquisition is not completed but the Buffer Zone acquisition is completed, then the Company expects to finance the acquisition of the Buffer Zone using other cash resources available to it.

As at January 31, 2013, $nil and $1.1 million was outstanding under the Company's revolving financing facility relating to its Belgian subsidiary, Dominion Diamond International NV (formerly known as Harry Winston Diamond International NV), and its Indian subsidiary, Dominion Diamond (India) Private Limited (formerly known as Harry Winston Diamond (India) Private Limited), respectively, compared to $nil and $4.3 million at January 31, 2012.

Investing Activities
During the fiscal year, the Company purchased property, plant and equipment of $56.5 million for its continuing operations.

Contractual Obligations
The Company has contractual payment obligations with respect to interest-bearing loans and borrowings and, through its participation in the Joint Venture, future site restoration costs at the Diavik Diamond Mine level. Additionally, at the Joint Venture level, contractual obligations exist with respect to operating purchase obligations, as administered by DDMI, the operator of the mine. In order to maintain its 40% ownership interest in the Diavik Diamond Mine, DDDLP is obligated to fund 40% of the Joint Venture's total expenditures on a monthly basis. Not reflected in the table below are capital expenditures for the calendar years 2013 to 2017 of approximately $70 million assuming a Canadian/US average exchange rate of $1.00 for each of the five years relating to DDDLP's current projected share of the planned capital expenditures (excluding the A-21 pipe) at the Diavik Diamond Mine. Also not included is the potential impact of the Ekati Diamond Mine Acquisition. The most significant contractual obligations for the ensuing five-year period can be summarized as follows:

Non-IFRS Measures
In addition to discussing earnings measures in accordance with IFRS, the MD&A provides the following non-IFRS measures, which are also used by management to monitor and evaluate the performance of the Company.

Cash Cost of Production
The MD&A 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 the Diavik 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.

EBITDA
The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company defines EBITDA as sales minus cost of sales and selling, general and administrative expenses, meaning it represents operating profit before depreciation and amortization.

EBITDA is a measure 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. EBITDA margin is defined as the ratio obtained by dividing EBITDA by sales.

(expressed in thousands of United States dollars)
(unaudited)

Risks and Uncertainties
Dominion Diamond Corporation is subject to a number of risks and uncertainties as a result of its operations. In addition to the other information contained in this MD&A and the Company's other publicly filed disclosure documents, readers should give careful consideration to the following risks, each of which could have a material adverse effect on the Company's business prospects or financial condition.

Nature of Mining
The operation of the Diavik Diamond Mine is subject to risks inherent in the mining industry, including variations in grade and other geological differences, unexpected problems associated with required water retention dikes, water quality, surface and underground conditions, processing problems, equipment performance, accidents, labour disputes, risks relating to the physical security of the diamonds, force majeure risks and natural disasters. Particularly with underground mining operations, inherent risks include variations in rock structure and strength as it impacts on mining method selection and performance, de-watering and water handling requirements, achieving the required crushed rock-fill strengths, and unexpected local ground conditions. Hazards, such as unusual or unexpected rock formations, rock bursts, pressures, collapses, flooding or other conditions, may be encountered during mining. Such risks could result in personal injury or fatality; damage to or destruction of mining properties, processing facilities or equipment; environmental damage; delays, suspensions or permanent reductions in mining production; monetary losses; and possible legal liability.

The Diavik Diamond Mine, because of its remote northern location and access only by winter road or by air, is subject to special climate and transportation risks. These risks include the inability to operate or to operate efficiently during periods of extreme cold, the unavailability of materials and equipment, and increased transportation costs due to the late opening and/or early closure of the winter road. Such factors can add to the cost of mine development, production and operation and/or impair production and mining activities, thereby affecting the Company's profitability.

Nature of Interest in DDMI
DDDLP holds an undivided 40% interest in the assets, liabilities and expenses of the Diavik Diamond Mine and the Diavik group of mineral claims. The Diavik Diamond Mine and the exploration and development of the Diavik group of mineral claims is a joint arrangement between DDMI (60%) and DDDLP (40%), and is subject to the risks normally associated with the conduct of joint ventures and similar joint arrangements. These risks include the inability to exert influence over strategic decisions made in respect of the Diavik Diamond Mine and the Diavik group of mineral claims, including the inability to control the timing and scope of capital expenditures, and risks that DDMI may decide not to proceed with mining of the A-21 pipe or may otherwise change the mine plan. By virtue of DDMI's 60% interest in the Diavik Diamond Mine, it has a controlling vote in virtually all Joint Venture management decisions respecting the development and operation of the Diavik Diamond Mine and the development of the Diavik group of mineral claims. Accordingly, DDMI is able to determine the timing and scope of future project capital expenditures, and therefore is able to impose capital expenditure requirements on DDDLP that the Company may not have sufficient cash to meet. A failure to meet capital expenditure requirements imposed by DDMI could result in DDDLP's interest in the Diavik Diamond Mine and the Diavik group of mineral claims being diluted. Rio Tinto plc, the parent of DDMI, announced a review of its diamond operations in early 2012.

Diamond Prices and Demand for Diamonds
The profitability of the Company is dependent upon production from the Diavik Diamond Mine, which is dependent on the worldwide demand for and price of diamonds. Diamond prices fluctuate and are affected by numerous factors beyond the control of the Company, including worldwide economic trends, particularly in the US, Japan, China and India, worldwide levels of diamond discovery and production, and the level of demand for, and discretionary spending on, luxury goods such as diamonds. Low or negative growth in the worldwide economy, renewed or additional credit market disruptions, natural disasters or the occurrence of terrorist attacks or similar activities creating disruptions in economic growth could result in decreased demand for luxury goods such as diamonds, thereby negatively affecting the price of diamonds. Similarly, a substantial increase in the worldwide level of diamond production or the release of stocks held back during recent periods of low demand could also negatively affect the price of diamonds. In each case, such developments could have a material adverse effect on the Company's results of operations.

Cash Flow and Liquidity
The Company's liquidity requirements fluctuate from quarter to quarter and year to year depending on, among other factors, the seasonality of production at the Diavik Diamond Mine, the seasonality of mine operating expenses, exploration expenses, capital expenditure programs, the number of rough diamond sales events conducted during the quarter, and the volume, size and quality distribution of rough diamonds delivered from the Diavik Diamond Mine and sold by the Company in each quarter. The Company's principal working capital needs include investments in inventory, prepaid expenses and other current assets, and accounts payable and income taxes payable. There can be no assurance that the Company will be able to meet each or all of its liquidity requirements. A failure by the Company to meet its liquidity requirements could result in the Company failing to meet its planned development objectives, or in the Company being in default of a contractual obligation, each of which could have a material adverse effect on the Company's business prospects or financial condition.

Economic Environment
The Company's financial results are tied to the global economic conditions and their impact on levels of consumer confidence and consumer spending. The global markets have experienced the impact of a significant US and international economic downturn since autumn 2008. This has restricted the Company's growth opportunities both domestically and internationally, and a return to a recession or weak recovery, due to recent disruptions in financial markets in the US, the Eurozone or elsewhere, budget policy issues in the US and political upheavals in the Middle East, could cause the Company to experience revenue declines due to deteriorated consumer confidence and spending, and a decrease in the availability of credit, which could have a material adverse effect on the Company's business prospects or financial condition. The credit facilities essential to the diamond polishing industry are largely underwritten by European banks that are currently under stress with the European sovereign debt issue. The withdrawal or reduction of such facilities could also have a material adverse effect on the Company's business prospects or financial condition. The Company monitors economic developments in the markets in which it operates and uses this information in its continuous strategic and operational planning in an effort to adjust its business in response to changing economic conditions.

Currency Risk
Currency fluctuations may affect the Company's financial performance. Diamonds are sold throughout the world based principally on the US dollar price, and although the Company reports its financial results in US dollars, a majority of the costs and expenses of the Diavik Diamond Mine are incurred in Canadian dollars. Further, the Company has a significant deferred income tax liability that has been incurred and will be payable in Canadian dollars. The Company's currency exposure relates to expenses and obligations incurred by it in Canadian dollars. The appreciation of the Canadian dollar against the US dollar, therefore, will increase the expenses of the Diavik Diamond Mine and the amount of the Company's Canadian dollar liabilities relative to the revenue the Company will receive from diamond sales. From time to time, the Company may use a limited number of derivative financial instruments to manage its foreign currency exposure.

Licences and Permits
The operation of the Diavik Diamond Mine and exploration on the Diavik property requires licences and permits from the Canadian government. The Diavik Diamond Mine Type "A" Water Licence was renewed by the regional Wek'eezhii Land and Water Board to October 31, 2015. While the Company anticipates that DDMI, the operator of the Diavik Diamond Mine, will be able to renew this licence and other necessary permits in the future, there can be no guarantee that DDMI will be able to do so or obtain or maintain all other necessary licences and permits that may be required to maintain the operation of the Diavik Diamond Mine or to further explore and develop the Diavik property.

Regulatory and Environmental Risks
The operation of the Diavik Diamond Mine and exploration activities at the Diavik property are subject to various laws and regulations governing the protection of the environment, exploration, development, production, taxes, labour standards, occupational health, waste disposal, mine safety, manufacturing safety and other matters. New laws and regulations, amendments to existing laws and regulations, or more stringent implementation or changes in enforcement policies under existing laws and regulations could have a material adverse effect on the Company by increasing costs and/or causing a reduction in levels of production from the Diavik Diamond Mine.

Mining and manufacturing are subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mining and manufacturing operations. To the extent that the Company's operations are subject to uninsured environmental liabilities, the payment of such liabilities could have a material adverse effect on the Company.

Climate Change
The Canadian government has established a number of policy measures in response to concerns relating to climate change. While the impact of these measures cannot be quantified at this time, the likely effect will be to increase costs for fossil fuels, electricity and transportation; restrict industrial emission levels; impose added costs for emissions in excess of permitted levels; and increase costs for monitoring and reporting. Compliance with these initiatives could have a material adverse effect on the Company's results of operations.

Resource and Reserve Estimates
The Company's figures for mineral resources and ore reserves on the Diavik group of mineral claims are estimates, and no assurance can be given that the anticipated carats will be recovered. The estimation of reserves is a subjective process. Forecasts are based on engineering data, projected future rates of production and the timing of future expenditures, all of which are subject to numerous uncertainties and various interpretations. The Company expects that its estimates of reserves will change to reflect updated information as well as to reflect depletion due to production. Reserve estimates may be revised upward or downward based on the results of current and future drilling, testing or production levels, and on changes in mine design. In addition, market fluctuations in the price of diamonds or increases in the costs to recover diamonds from the Diavik Diamond Mine may render the mining of ore reserves uneconomical.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty that may attach to inferred mineral resources, there is no assurance that mineral resources at the Diavik property will be upgraded to proven and probable ore reserves.

Insurance
The Company's business is subject to a number of risks and hazards, including adverse environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological conditions, risks relating to the physical security of diamonds held as inventory or in transit, changes in the regulatory environment, and natural phenomena such as inclement weather conditions. Such occurrences could result in damage to the Diavik Diamond Mine, personal injury or death, environmental damage to the Diavik property, delays in mining, monetary losses and possible legal liability. Although insurance is maintained to protect against certain risks in connection with the Diavik Diamond Mine and the Company's operations, the insurance in place will not cover all potential risks. It may not be possible to maintain insurance to cover insurable risks at economically feasible premiums.

Fuel Costs
The Diavik Diamond Mine's expected fuel needs are purchased periodically during the year for storage, and transported to the mine site by way of the winter road. These costs will increase if transportation by air freight is required due to a shortened "winter road season" or unexpected high fuel usage.

The cost of the fuel purchased is based on the then prevailing price and expensed into operating costs on a usage basis. The Diavik Diamond Mine currently has no hedges for its future anticipated fuel consumption.

Reliance on Skilled Employees
Production at the Diavik Diamond Mine is dependent upon the efforts of certain skilled employees of DDMI. The loss of these employees or the inability of DDMI to attract and retain additional skilled employees may adversely affect the level of diamond production from the Diavik Diamond Mine.

The Company's success in marketing rough diamonds is dependent on the services of key executives and skilled employees, as well as the continuance of key relationships with certain third parties, such as diamantaires. The loss of these persons or the Company's inability to attract and retain additional skilled employees or to establish and maintain relationships with required third parties may adversely affect its business and future operations in marketing diamonds.

Cybersecurity
The Company and certain of its third-party vendors receive and store personal information in connection with human resources operations and other aspects of the business. Despite the Company's implementation of security measures, its IT systems are vulnerable to damage from computer viruses, natural disasters, unauthorized access, cyber attack and other similar disruptions. Any system failure, accident or security breach could result in disruptions to the Company's operations. A material network breach in the security of the IT systems could include the theft of intellectual property or trade secrets. To the extent that any disruption or security breach results in a loss or damage to the Company's data, or in inappropriate disclosure of confidential information or financial data, such disruption or breach could cause significant damage to the Company's reputation, affect its relationships with its customers, lead to claims against the Company and ultimately harm its business. In addition, the Company may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. Although the Company believes that it has robust information security procedures and other safeguards in place, as cyber threats continue to evolve, the Company may be required to expend additional resources to continue to enhance its information security measures and/or to investigate and remediate any information security vulnerabilities.

Risks relating to the Ekati Diamond Mine Acquisition
On November 13, 2012, the Company entered into share purchase agreements with respect to the Ekati Diamond Mine Acquisition. The closing of the Ekati Diamond Mine Acquisition is subject to the satisfaction of typical closing conditions, including the receipt of competition and antitrust law approvals and other regulatory approvals required in connection with the transfer of operatorship and ownership of the Core Zone and the Buffer Zone interests of the Ekati Diamond Mine. In connection with the Ekati Diamond Mine Acquisition, the Company has arranged new secured credit facilities with The Royal Bank of Canada and Standard Chartered Bank. These new facilities are subject to customary closing conditions, including closing of the Core Zone acquisition. There can be no assurances that all of the closing conditions to the Core Zone acquisition will be satisfied and accordingly, that the new facilities become available to the Company, and there can be no assurances that all of the closing conditions to the Ekati Diamond Mine Acquisition will be satisfied.

Completion of the Ekati Diamond Mine Acquisition and the integration of the Ekati Diamond Mine into the Company's operations will require significant management time and resources.

Disclosure Controls and Procedures
The Company has designed a system of disclosure controls and procedures to provide reasonable assurance that material information relating to Dominion Diamond Corporation, including its consolidated subsidiaries, is made known to the management of the Company by others within those entities, particularly during the period in which the Company's annual filings are being prepared. In designing and evaluating the disclosure controls and procedures, the management of the Company recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The management of Dominion Diamond Corporation was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The result of the inherent limitations in all control systems means no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

The management of Dominion Diamond Corporation has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by the Annual Report. Based on that evaluation, management has concluded that these disclosure controls and procedures, as defined in Canada by Multilateral Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings, and in the United States by Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), are effective as of January 31, 2013, to ensure that information required to be disclosed in reports that the Company will file or submit under Canadian securities legislation and the Exchange Act is recorded, processed, summarized and reported within the time periods specified in those rules and forms.

Internal Control over Financial Reporting
The certifying officers of the Company have designed a system of internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS and the requirements of the US Securities and Exchange Commission, as applicable. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, including its consolidated subsidiaries.

Management has evaluated the effectiveness of internal control over financial reporting using the framework and criteria established in the Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that internal control over financial reporting was effective as of January 31, 2013.

Changes in Internal Control over Financial Reporting
During the fourth quarter of fiscal 2013, there were no changes in the Company's disclosure controls and procedures or internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's disclosure controls and procedures or internal control over financial reporting.

Critical Accounting Estimates
Management is often required to make judgments, assumptions and estimates in the application of IFRS that have a significant impact on the financial results of the Company. Certain policies are more significant than others and are, therefore, considered critical accounting policies. Accounting policies are considered critical if they rely on a substantial amount of judgment (use of estimates) in their application, or if they result from a choice between accounting alternatives and that choice has a material impact on the Company's financial performance or financial position. The following discussion outlines the accounting policies and practices that are critical to determining Dominion Diamond Corporation's financial results.

Significant Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities and contingent liabilities at the date of the consolidated financial statements, and the reported amounts of sales and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is as follows:

a. Significant Judgments in Applying Accounting Policies

Recovery of deferred tax assets
Judgment is required in determining whether deferred tax assets are recognized in the consolidated balance sheet. Deferred tax assets, including those arising from un-utilized tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted income from operations and the application of existing tax laws in each jurisdiction. To the extent that future taxable income differs significantly from estimates, the ability of the Company to realize the deferred tax assets recorded at the consolidated balance sheet date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Company operates could limit the ability of the Company to obtain tax deductions in future periods.

Commitments and contingencies 
The Company has conducted its operations in the ordinary course of business in accordance with its understanding and interpretation of applicable tax legislation in the countries where the Company has operations. The relevant tax authorities could have a different interpretation of those tax laws that could lead to contingencies or additional liabilities for the Company. The Company believes that its tax filing positions as at the balance sheet date are appropriate and supportable. Should the ultimate tax liability materially differ from the provision, the Company's effective tax rate and its profit or loss could be affected positively or negatively in the period in which the matters are resolved.

b. Significant Estimates and Assumptions in Applying Accounting Policies

Mineral reserves, mineral properties and exploration costs
The estimation of mineral reserves is a subjective process. The Company estimates its mineral reserves based on information compiled by an appropriately qualified person. Forecasts are based on engineering data, projected future rates of production and the timing of future expenditures, all of which are subject to numerous uncertainties and various interpretations. The Company expects that its estimates of reserves will change to reflect updated information. Reserve estimates can be revised upward or downward based on the results of future drilling, testing or production levels, and diamond prices. Changes in reserve estimates may impact the carrying value of exploration and evaluation assets, mineral properties, property, plant and equipment, mine rehabilitation and site restoration provision, recognition of deferred tax assets, and depreciation charges. Estimates and assumptions about future events and circumstances are also used to determine whether economically viable reserves exist that can lead to commercial development of an ore body.

Estimated mineral reserves are used in determining the depreciation of mine-specific assets. This results in a depreciation charge proportional to the depletion of the anticipated remaining life of mine production. A units-of-production depreciation method is applied, and depending on the asset, is based on carats of diamonds recovered during the period relative to the estimated proven and probable reserves of the ore deposit being mined or to the total ore deposit. Changes in estimates are accounted for prospectively.

Impairment of long-lived assets
The Company assesses each cash-generating unit at least annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value of an asset less costs to sell and its value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Financial results as determined by actual events could differ from those estimated.

Mine rehabilitation and site restoration provision
The mine rehabilitation and site restoration provision has been provided by management of the Diavik Diamond Mine and is based on internal estimates. Assumptions, based on the current economic environment, have been made which DDMI management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly by management of the Diavik Diamond Mine to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future costs for the necessary decommissioning work required, which will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the Diavik Diamond Mine ceases to produce at economically viable rates. This, in turn, will depend upon a number of factors including future diamond prices, which are inherently uncertain.

Changes in Accounting Policies
The International Accounting Standards Board ("IASB") has issued a new standard, IFRS 9, "Financial Instruments" ("IFRS 9"), which will ultimately replace IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39"). IFRS 9 provides guidance on the classification and measurement of financial assets and financial liabilities. This standard becomes effective for the Company's fiscal year end beginning February 1, 2015. The Company is currently assessing the impact of the new standard on its financial statements.

IFRS 10, "Consolidated Financial Statements" ("IFRS 10"), was issued by the IASB on May 12, 2011, and will replace the consolidation requirements in SIC-12, "Consolidation - Special Purpose Entities" and IAS 27, "Consolidated and Separate Financial Statements". The new standard establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and provides guidance to assist in the determination of control where it is difficult to assess. IFRS 10 is effective for the Company's fiscal year end beginning February 1, 2013, with early adoption permitted. The Company is currently assessing the impact of IFRS 10 on its consolidated financial statements.

IFRS 11, "Joint Arrangements" ("IFRS 11"), was issued by the IASB on May 12, 2011 and will replace IAS 31, "Interest in Joint Ventures". The new standard will apply to the accounting for interests in joint arrangements where there is joint control. Under IFRS 11, joint arrangements are classified as either joint ventures or joint operations. The structure of the joint arrangement will no longer be the most significant factor in determining whether a joint arrangement is either a joint venture or a joint operation. For a joint venture, proportionate consolidation will no longer be allowed and will be replaced by equity accounting. IFRS 11 is effective for the Company's fiscal year end beginning February 1, 2013, with early adoption permitted. The Company is currently assessing the impact of IFRS 11 on its results of operations and financial position.

IFRS 13, "Fair Value Measurement" ("IFRS 13"), was also issued by the IASB on May 12, 2011. The new standard generally makes IFRS consistent with generally accepted accounting principles in the United States ("US GAAP") on measuring fair value and related fair value disclosures. The new standard creates a single source of guidance for fair value measurements. IFRS 13 is effective for the Company's fiscal year end beginning February 1, 2013, with early adoption permitted. The Company is currently assessing the impact of IFRS 13 on its consolidated financial statements.

The International Financial Reporting Interpretations Committee ("IFRIC") issued IFRIC 20, "Stripping Costs in the Production Phase of a Surface Mine" ("IFRIC 20"), on October 19, 2011. IFRIC 20 clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognized as an asset, how the asset is initially recognized, and subsequent measurement. IFRIC 20 is effective for the Company's fiscal year end beginning February 1, 2013. The Company is currently assessing the impact of IFRIC 20 on its consolidated financial statements.

Amendments to IAS 19, "Employee Benefits" ("IAS 19"), was issued by the IASB on June 11, 2011. The amended standard eliminates the option to defer the recognition of actuarial gains and losses through the "corridor" approach, revises the presentation of changes in assets and liabilities arising from defined benefit plans and enhances the disclosures for defined benefit plans. IAS 19 is effective for the Company's fiscal year end beginning February 1, 2013, with early adoption permitted. The Company is currently assessing the impact of IAS 19 on its consolidated financial statements.

Outstanding Share Information

Additional Information
Additional information relating to the Company, including the Company's most recently filed Annual Information Form, can be found on SEDAR at www.sedar.com, and is also available on the Company's website at www.ddcorp.ca.

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Notes to Consolidated Financial Statements

JANUARY 31, 2013 (UNAUDITED) WITH COMPARATIVE FIGURES
(TABULAR AMOUNTS IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT AS OTHERWISE NOTED)

Note 1:
Nature of Operations and Subsequent Events

Effective March 26, 2013, Harry Winston Diamond Corporation changed its name to Dominion Diamond Corporation ("Dominion Diamond Corporation" or the "Company") and its common shares now trade on both the Toronto and New York stock exchanges under the symbol "DDC". Dominion Diamond Corporation is focused on the mining and marketing of rough diamonds to the global market.

The Company is incorporated and domiciled in Canada and its shares are publicly traded on the Toronto Stock Exchange and the New York Stock Exchange. The address of its registered office is Toronto, Ontario.

The Company's mining asset is an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines Inc. ("DDMI") (60%) and Dominion Diamond Diavik Limited Partnership (formerly known as Harry Winston Diamond Limited Partnership) ("DDDLP") (40%) where DDDLP holds an undivided 40% ownership interest in the assets, liabilities and expenses of the Diavik Diamond Mine. DDMI is the operator of the Diavik Diamond Mine. DDMI and DDDLP are headquartered in Yellowknife, Canada. DDMI is a wholly owned subsidiary of Rio Tinto plc of London, England, and DDDLP is a wholly owned subsidiary of Dominion Diamond Corporation of Toronto, Canada.

On November 13, 2012, the Company entered into share purchase agreements with BHP Billiton Canada Inc. and various affiliates to purchase all of BHP Billiton's diamond assets, including its controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium (the "Ekati Diamond Mine Acquisition"). The Ekati Diamond Mine consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential. The agreed purchase price, payable in cash, is $400 million for the Core Zone interest and $100 million for the Buffer Zone interest, subject to adjustments in accordance with the terms of the share purchase agreements. The share purchase agreements include typical closing conditions. Each of the Core Zone and the Buffer Zone is subject to a separate joint venture agreement. BHP Billiton holds an 80% interest in the Core Zone and a 58.8% interest in the Buffer Zone, with the remainder held by the Ekati minority joint venture parties. BHP Billiton has advised the Company that all of the minority joint venture partners have agreed to waive their rights of first refusal to purchase the interests in the Buffer Zone and Core Zone that they do not own, as applicable, pursuant to the terms of their respective joint venture agreements. Closing of the Ekati Diamond Mine Acquisition is currently expected to occur on April 10, 2013. In connection with the Ekati Diamond Mine Acquisition, the Company has arranged new secured credit facilities consisting of a $400 million term loan, a $100 million revolving credit facility (of which $50 million will be available for purposes of funding the Ekati Diamond Mine Acquisition) and a $140 million letter of credit facility (expandable to $265 million in aggregate). These new facilities will be secured and will replace the Company's current $125 million facility with Standard Chartered Bank.

On March 26, 2013, the Company completed the sale of the Luxury Brand Segment to Swatch Group (the "Luxury Brand Divestiture"). As a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston".

Note 2:
Basis of Preparation

• financial instruments held for trading are measured at fair value through profit and loss
• liabilities for Restricted Share Unit and Deferred Share Unit plans are measured at fair value

Note 3:
Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Company entities.

Note 4:
Cash and Cash Equivalents

Short-term investments are held in overnight deposits and money market instruments with a maturity of 30 days.

Note 5:
Accounts Receivable

The Company's exposure to interest rate risk and sensitivity analysis is disclosed in Note 22.

Note 6:
Inventory and Supplies

Total inventory and supplies is net of a provision for obsolescence of $0.4 million ($3.1 million at January 31, 2012). Cost of sales from continuing operations includes inventory of $262.7 million sold during the year (2012 - $207.3 million), with another $4.9 million of non-inventoried costs (2012 - $20.6 million).

Note 7:
Other Current Assets

Note 8:
Assets Held for Sale (Discontinued Operations)
On March 26, 2013, the Company completed the sale of the Luxury Brand Segment to Swatch Group (the "Luxury Brand Divestiture"). As a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston".  The Company's name has now been changed to "Dominion Diamond Corporation" and its common shares trade on both the Toronto and New York stock exchanges under the symbol "DDC".

The major classes of assets and liabilities of the discontinued operations were as follows:

Results of the discontinued operations are presented separately as net profit from discontinued operations in the consolidated income statements, and comparative periods have been adjusted accordingly.

Note 9:
Property, Plant and Equipment

Depreciation expense for continuing operations for 2013 was $72.3 million (2012 - $75.0 million).

Note 10:
Diavik Joint Venture
The following represents DDDLP's 40% proportionate interest in the Joint Venture as at December 31, 2012 and December 31, 2011:

DDDLP is contingently liable for DDMI's portion of the liabilities of the Joint Venture, and to the extent DDDLP's participating interest has increased because of the failure of DDMI to make a cash contribution when required, DDDLP would have access to an increased portion of the assets of the Joint Venture to settle these liabilities. Additional information on commitments and contingencies related to the Diavik Joint Venture is found in Note 22.

During fiscal 2012, the Company recognized a non-cash $13.0 million charge in cost of sales related to the de-recognition of certain components of the backfill plant (the "Paste Plant") associated with paste production at the Diavik Diamond Mine. The original mine plan envisioned the use of blasthole stoping and underhand cut and fill underground mining methods for the Diavik ore bodies using paste to preserve underground stability. It is now expected that the higher velocity and lower cost sub-level retreat mining method, which does not require paste, will be used for both the A-154 South and A-418 underground ore bodies. As a result, certain components of the Paste Plant necessary for the production of paste will no longer be required and accordingly were de-recognized during the year.

Note 11: 
Other Non-Current Assets

Note 12:
Trade and Other Payables

Note 13:
Employee Benefit Plans
The employee benefit obligation reflected in the consolidated balance sheet is as follows:

The amounts recognized in the consolidated income statement in respect of employee benefit plans are as follows:

Employee benefit plan expense has been included in the consolidated income statement as follows:

Note 14:
Income Taxes

The deferred income tax asset of the Company is $4.1 million. Included in the deferred tax asset is $0.3 million that has been recorded to recognize the benefit of $1.2 million of net operating losses that the Company has available for carry forward to shelter income taxes for future years. Certain net operating losses are scheduled to expire between 2027 and 2031.

The deferred income tax liability of the Company is $181.4 million. The Company's deferred income tax asset and liability accounts are revalued to take into consideration the change in the Canadian dollar compared to the US dollar and the unrealized foreign exchange gain or loss is recorded as part of deferred tax expenses for each year.

(a) The income tax provision consists of the following:

Tax expense from continuing operations excludes tax expense from discontinued operations of $4.2 million (2012 - $5.2 million).

(b) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at January 31, 2013 and 2012 are as follows:

(a) There was an out-of-period reclassification in the prior year of deferred income tax assets to deferred income tax liabilities, including future site restoration costs, related to income taxes levied by the same tax jurisdiction.

Movement in net deferred tax liabilities: