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Dominion Diamond Corporation Reports Fiscal 2014 Fourth Quarter and Year-End Results (03. April 2014, 10:07 Uhr)

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Dominion Diamond Corporation Reports Fiscal 2014 Fourth Quarter and Year-End Results
Nachrichtenquelle: PR Newswire (engl.)
 |  03.04.2014, 10:07  | 
223 Aufrufe
 | 

 | 
tiffany TORONTO , April 3, 2014 /PRNewswire/ --
tiffany co Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the "Company") today announced its Fiscal 2014 Fourth Quarter and Year-End results for the period ended January 31, 2014 .

tiffany co Robert Gannicott , Chairman and Chief Executive Officer, stated: "Our early experience at Ekati continues to exceed our expectations while Diavik also outperforms its planned targets. The diamond market has improved, both in pricing and volume of demand, as the important diamond consuming economies, led by the US, maintain momentum."
tiffany co Corporate  
tiffany silver Fiscal 2014 was a year during which the Company transitioned into one of the world's largest pure play diamond mining companies. During this period, the Company completed the sale of the Harry Winston luxury brand segment at an enterprise value of $1 billion (including the assumption of $250 million of pro forma net debt) and the acquisition of the Ekati Diamond Mine from a global mining company for whom diamonds were non longer a core asset. The Company paid a total of $553 million , for its interest in the Ekati Diamond Mine, which included $62 million of cash, $154 million of rough diamond inventory and $165 million of supplies (fuel, cement and other mining supplies).
tiffany co The Diavik Diamond Mine, which is one of the highest grade diamond mines in the world, continues to deliver excellent results.
The Company's senior management is completely focused on delivering value from the Ekati Diamond Mine, and the benefits of having the senior management team on hand in Yellowknife are already being demonstrated. Grade recovered is ahead of plan, and cash cost of production for the period from April 10, 2013 , to January 31, 2014 , which were originally forecast at $320 million , came in at $303 million .
At the beginning of calendar year 2016, the capital spending on the pushback at the Misery Main Pipe will be completed and this pipe will come into production; at over 4 carats per tonne at an average price of approximately $105 per carat, Misery Main is one of the richest kimberlite ore bodies in the world.
During this fiscal year the Company has expensed $10.1 million on the Jay Project which involves the development of the largest diamondiferous resource in North America . It has the potential to extend the operating life of the Ekati Diamond Mine in the order of 10 to 20 years beyond the currently scheduled closure in 2019. The development and mining of this kimberlite is the cornerstone of the Company's strategy for building a long-term, sustainable Canadian diamond business.
We are pleased to welcome Fiona Perrot-Humphrey to our board of directors. Dr Perrot-Humphrey has a long history as a mining equity analyst in both South Africa and then London . She is currently a senior advisor to N.M. Rothschild in London .
Diamond Market  
The first three months of calendar 2014 has seen an upturn in rough diamond prices of just over 7%. This growth is primarily the result of restocking in the US, the world's largest market for diamond jewelry, following strong demand in the important US holiday season and strong demand in China , the world's second largest consumer of diamond jewelry, in the period running up to Chinese New Year . Evidence suggests that jewelry sales are also increasing in India , another major consumer of diamond jewelry where sales had been weak in the past two years.
Fourth Quarter Summary  
For the fourth quarter, Ekati recorded sales of $114.0 million , and incurred cash costs of production of $101.3 million . Total cost of sales for Ekati for the fourth quarter were $114.3 million .
For the fourth quarter, Diavik recorded sales of $119.2 million , and incurred cash costs of production of $43.3 million . Total cost of sales for Diavik for the fourth quarter were $87.7 million .
As at January 31 2014, the Company held cash and cash equivalents of $224.8 million and restricted cash of $113.6 million .
Consolidated rough diamond sales from the Company's ownership in the Diavik and Ekati Diamond Mines for the fourth quarter were $233.2 million compared to $110.1 million for the comparable quarter of the prior year. This resulted in an operating profit from continuing operations of $21.0 million , consistent with the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $76.2 million compared to $45.3 million in the comparable quarter of the prior year.
Sales from the Diavik Diamond Mine were $119.2 million generating EBITDA of $59.3 million and EBITDA margins of approximately 50% for the fourth quarter.
Sales from the Ekati Diamond Mine were $114.0 million generating EBITDA of $24.4 million and EBITDA margins of approximately 21% for the fourth quarter. However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes, which material was excavated during the pre-stripping operations of the Misery Main pipe, for estimated proceeds of $10.8 million . During pre-production, sales of diamonds recovered from the Misery South and Southwest material have been applied as a reduction of mining assets. The Company estimates that the EBITDA margin would have been approximately 26% if the Misery South and Southwest pipes had been in commercial production during the quarter, therefore allowing the sales of carats from such material to be recognized as revenue.
Included in the exploration costs of $3.3 million for the quarter was $3.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine.
The Company recorded a net foreign exchange loss of $7.9 million during the fourth quarter related to the weakening in the Canadian dollar versus the US dollar. This compared to a gain of $0.1 million in the comparable quarter of the previous year.
The Company recorded a net income tax expense of $19.0 million during the fourth quarter which includes $13.5 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the fourth quarter, substantially all of which was non-cash tax expense. This is compared to a net income tax expense of $7.0 million in the comparable quarter of the previous year with a much less significant impact of foreign exchange.
The Company recorded a consolidated net loss from continuing operations of $7.8 million or $(0.09) per share for the quarter compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter in the previous year.
At the end of the quarter, the Company held rough diamond inventory with an approximate market value of $205 million , of which $40 million of rough diamond inventory had been held as strategic stock from sale as at January 31 .
Detailed life of mine plans for both the Ekati Diamond Mine and the Diavik Diamond Mine based on reserves only were published on February 3, 2014 .
Annual Results Summary  
For the period from April 10, 2013 to January 31, 2014 , Ekati recorded sales of $399.6 million and incurred cash costs of production of $303.9 million . Total cost of sales for Ekati for the period were $392.9 million .
For the fiscal year, Diavik recorded sales of $352.3 million and incurred cash costs of production of $162.6 million . Total cost of sales for Diavik for the fiscal year were $257.9 million .
Consolidated sales from continuing operations totaled $751.9 million for the year ended January 31, 2014 , compared to $345.4 million compared to the prior year resulting in an operating profit of $51.6 million compared to an operating profit of $47.7 million in the prior year.
Sales from the Diavik Diamond Mine were $352.3 million generating an EBITDA margin of approximately 49% for the year.
Sales from the Ekati Diamond Mine were $399.6 million generating EBITDA of $59.6 million and EBITDA margin of approximately 15% for the period from April 10, 2013 to January 31, 2014 . However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes excavated during the pre-stripping operations of the Misery Main pipe for estimated proceeds of $14.3 million . EBITDA was also impacted by the sale of inventory that was recorded at market value as a result of the acquisition of the Ekati Diamond Mine. The Company estimates that the EBITDA margin would have been approximately 27% if the effect of the market value adjustment to inventory made as part of the acquisition of the Ekati Diamond Mine was excluded and the carats sold from material excavated from the Misery South & Southwest pipes were recognized as revenue.
Gross margin increased 30% to $101.1 million from $77.8 million in the prior year. Consolidated EBITDA from operations was $191.7 million compared to $127.9 million in the prior year.
Exploration expense of $14.6 million was incurred during the year which compares to $1.8 million in the prior year. Included in the exploration costs for fiscal 2014 are $10.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine and $4.5 million of exploration work on the Company's claims in the Northwest Territories .
The Company recorded a foreign exchange loss of $8.9 million during the year related to the weakening in the Canadian dollar versus the US dollar. This is compared to a gain of $0.5 million in the prior year.
The Company recorded a net income tax expense of $35.5 million during the year which includes $20.7 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the period, substantially all of which was non-cash tax expense. This is compared to a net income tax expense of $15.3 million in the prior year with a much less significant impact of foreign exchange.
Included in the fiscal 2014 financial results are $3.2 million (after tax) of restructuring costs at the Antwerp, Belgium , office as a result of the integration of Dominion Diamond and Ekati's sales teams, $11.4 million (after tax) of Ekati acquisition costs and $10.6 million (after tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine acquisition.
The Company recorded a consolidated net loss from continuing operations attributable to shareholders of $23.0 million or $(0.27) per share.
The Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share excluding the following:
the restructuring costs at the Antwerp, Belgium office;
the expenses related to the cancellation of the credit facilities related to the Ekati Acquisition;
Ekati Acquisition transaction costs; and
the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales.
Diavik Diamond Mine  
The fourth calendar quarter at the Diavik Diamond Mine saw continued strong performance, producing (on a 100% basis) 2.1 million carats from 0.54 million tonnes of ore processed compared to production of 1.9 million carats from 0.47 million tonnes of ore processed in the comparable quarter of the prior year. This was a result of the improvements in the mining rates as the underground ramp-up progressed throughout the year to full production from all three pipes.
During the fourth quarter, the Company sold approximately 1.0 million carats from the Diavik Diamond Mine for a total of $119.2 million for an average price per carat of $114 .
Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $119 per carat based on the prices achieved in the January 2014 sale.
During the year ended January 31, 2014 , the Company sold approximately 3.0 million carats from the Diavik Diamond Mine for a total of $352 million for an average price of $118 per carat, compared to 3.2 million carats for an average price per carat of $109 in the comparable period in the prior year.
At January 31, 2014 , the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million .
The Diavik management team continues to focus on maximizing production and lowering costs.
Ekati Diamond Mine  
The Ekati Diamond Mine is performing well. A series of initiatives has been undertaken aimed at optimizing operations since the Company's senior management team took control. Mining at the open pit Fox pipe will be completed ahead of schedule. During the fourth fiscal quarter, approximately 917,500 tonnes of ore (on a 100% basis) was processed yielding approximately 481,000 carats.
During the fourth quarter, the Company sold approximately 0.4 million carats for a total of $114.0 million for an average price per carat of $276 . Not included in this figure are sales of approximately $10.8 million from carats produced during the processing of satellite material from the Misery South and Southwest satellite pipes.
Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $287 based on the prices achieved in the January 2014 sale.
At January 31, 2014 , the Company had 0.5 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $140 million .
During the period from April 10, 2013 to January 31, 2014 , the Ekati Diamond Mine produced (on a 100% basis) 1.65 million carats from the processing of approximately 3.4 million tonnes, of which 2.3 million tonnes of ore was sourced from the Fox pipe, approximately 0.4 million tonnes was sourced from Koala Underground, and 0.28 million tonnes was sourced from Koala North. In addition, as at January 31, 2014 , the Company had processed approximately 0.25 million tonnes of kimberlite material excavated from the Misery South and Southwest pipes, which achieved an overall grade of 1.4 carats per tonne, as well as 78,000 tonnes of Coarse Ore Rejects which achieved an average grade of 0.4 carats per tonne. These diamond recoveries are not included in the Company's reserves and resources statement and are therefore considered incremental to production
Jay Pipe Development  
The Company's work on the Jay Project is proceeding on schedule. The winter 2014 drilling program is well underway at the Jay pipe and along the proposed dike alignments associated with the project. To date, 20 sonic drill holes and 16 diamond drill holes have been completed along four potential dike emplacements and geotechnical drilling is underway at the Jay pipe. The drilling program will extend into late April.
Permitting update  
The scoping sessions for the Jay Project were held in January, 2014. All parties were then asked to comment on a draft Terms of Reference for the project and the Mackenzie Valley Review Board (Board) published a final Terms of Reference and interim draft work plan for the environmental assessment of the Jay pipe on February 21, 2014 . The Company is now working to submit a Developer's Assessment Report to the Board in Q3 2014. The analytical and hearing phases of the Environmental Review are estimated to take 10-12 months. The Board will then make a recommendation to the Minister with a decision expected in Q3 2015.
Lynx Project  
The permitting for the Lynx pipe expansion is entering its final phase. The Company anticipates having all permits in hand well before the planned development of the project in 2015. Ore production is scheduled for 2016.
Administration of Land, Water and Resources in the Northwest Territories  
The Government of Canada will be transferring responsibility for managing public land, water and resources in the Northwest Territories to the Government of the Northwest Territories (GNWT) on April 1, 2014 . The Company is preparing for this transfer by working with the GNWT to strengthen our working relationship and to ensure the schedule for the Jay review is maintained.
Conference Call and Webcast
Beginning at 8:30AM (ET) on Thursday, April 3rd , 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 web site at http://www.ddcorp.ca or by dialing 800-706-7741 within North America or 617-614-3471 from international locations and entering passcode 21447206.
An online archive of the broadcast will be available by accessing the Company's web site at http://www.ddcorp.ca. A telephone replay of the call will be available one hour after the call through 11:00PM (ET) , Thursday, April 17th, 2014 by dialing 888-286-8010 within North America or 617-801-6888 from international locations and entering passcode 35806731.
About Dominion Diamond Corporation
Dominion Diamond Corporation is a Canadian diamond mining company with ownership interests in two major producing diamond mines. Both mines are located in the low political risk environment of the Northwest Territories in Canada .  
The Company operates the Ekati Diamond Mine through its 80 per cent ownership as well as a 58.8% ownership in the surrounding areas containing additional resources, and also owns 40% of the Diavik Diamond Mine. It supplies rough diamonds to the global market through its sorting and selling operations in Canada , Belgium and India and is the world's fourth largest producer of rough diamonds by value.  
For more information, please visit  http://www.ddcorp.ca
Highlights 
(ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED)
FOURTH QUARTER RESULTS
Dominion Diamond Corporation (the "Company") recorded a consolidated net loss attributable to shareholders of $7.8 million or $(0.09) per share for the quarter, compared to a net profit attributable to shareholders of $14.9 million or $0.18 per share in the fourth quarter of the prior year. Net loss from continuing operations attributable to shareholders (which represents the Diavik and Ekati mining segments) was $7.8 million or $(0.09) per share, compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter of the prior year. Included in net loss from continuing operations was $7.9 million related to a foreign exchange loss compared to a $0.1 million gain related to foreign exchange in the fourth quarter of the prior year, due to the weakening of the Canadian dollar. The net loss from continuing operations for the quarter also included $13.5 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense. This compares to a $0.2 million of tax expense related to the impact of foreign exchange in the comparable quarter of the prior year.
Consolidated sales from continuing operations were $233.2 million for the quarter, compared to $110.1 million for the comparable quarter of the prior year, resulting in an operating profit of $21.0 million , compared to an operating profit of $21.0 million in the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $76.2 million compared to $45.3 million in the comparable quarter of the prior year.
During the fourth quarter, the Company recorded sales from the Diavik Diamond Mine of $119.2 million compared to $110.1 million in the comparable quarter of the prior year. The Company sold approximately 1.0 million carats from the Diavik Diamond Mine for an average price per carat of $114 , compared to 0.8 million carats for an average price per carat of $133 in the comparable quarter of the prior year. The 27% increase in volume of Diavik Diamond Mine carats sold versus the comparable quarter of the prior year resulted primarily from the sale during the fourth quarter of inventory held back from sale in the prior quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India . The 14% decrease in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the fourth quarter of the prior year resulted primarily from a change in the sales mix of product sold, partially offset by an increase in market prices for rough diamonds in the fourth quarter compared to the prior year. The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 26.4% and 50%, respectively, compared to 28.2% and 48%, respectively, in the comparable quarter of the prior year. At January 31, 2014 , the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million .
During the fourth quarter, the Ekati Diamond Mine recorded sales of $114.0 million and sold approximately 0.4 million carats for an average price per carat of $276 . Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes as this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Ekati Diamond Mine generated gross margins and EBITDA margins of (0.3)% and 21%, respectively. The Company estimates that gross margins and EBITDA margins would have been approximately 7.0% and 26.0%, respectively if the carats sold from material excavated from the Misery South & Southwest kimberlite pipes were recognized as revenue. During pre-production, sales of Misery South and Southwest carats have been applied as a reduction of mining assets. At January 31, 2014 , the Company had 0.5 million carats of Ekati Diamond Mine produced inventory with an estimated market value of approximately $140 million .
The Corporate segment, which includes all costs not specifically related to the operations of the Diavik and Ekati mines, recorded selling, general and administrative expenses of $7.9 million , compared to $8.2 million in the comparable quarter of the prior year.
ANNUAL RESULTS
During the year, the Company completed the acquisition of the Ekati Diamond Mine and the sale of Harry Winston, Inc. (the "Luxury Brand Segment") to Swatch Group. The acquisition of the Ekati Diamond Mine (the "Ekati Diamond Mine Acquisition") was completed on April 10, 2013 . As a result of the Ekati Diamond Mine Acquisition, the Company acquired an 80% interest in the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as a 58.8% interest in the Buffer Zone, an adjacent area hosting kimberlite pipes with both development and exploration potential. The sale of the Luxury Brand Segment was completed on March 26, 2013 and as a result of the sale, the Company's corporate group underwent name changes to remove references to "Harry Winston". See "Discontinued Operations". Accordingly, the Company's consolidated results from continuing operations are for the Diavik Diamond Mine and the Ekati Diamond Mine (from April 10th , the date of acquisition by the Company). Continuing operations 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.
The Company recorded a consolidated net profit attributable to shareholders of $479.7 million or $5.64 per share for the year, compared to a consolidated net income attributable to shareholders of $34.7 million or $0.41 per share in the prior year. Net loss from continuing operations attributable to shareholders was $23.0 million or $(0.27) per share compared to net profit from continuing operations attributable to shareholders of $22.3 million or $0.26 per share in the prior year. Included in the consolidated net loss attributable to shareholders for the year was $3.2 million (after-tax) of restructuring costs at the Antwerp, Belgium office, $10.6 million (after-tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition and $11.4 million (after-tax) of Ekati acquisition costs. Excluding these items and the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales, the Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share. The net loss from continuing operations for the year also included $20.7 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense. This compares to a $0.7 million of tax expense related to the impact of foreign exchange 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 $751.9 million for the year compared to $345.4 million for the prior year, resulting in an operating profit of $51.6 million compared to an operating profit of $47.7 million in the prior year. Gross margin increased 30% to $101.1 million from $77.8 million in the prior year. Consolidated EBITDA from operations was $191.7 million compared to $127.9 million in the prior year.
During the year, the Company recorded sales from the Diavik Diamond Mine of $352.3 million compared to $345.4 million in the prior year. The Company sold approximately 3.0 million carats from the Diavik Diamond Mine for an average price per carat of $118 , compared to 3.2 million carats for an average price per carat of $109 in the prior year. The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 26.8% and 49%, respectively, compared to 22.5% and 44% in prior year.
During the year, the Company recorded sales from the Ekati Diamond Mine of $399.6 million and sold approximately 1.3 million carats for an average price per carat of $301 . Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes, this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Ekati segment generated gross margins and EBITDA margins as a percentage of sales of 1.7% and 15%, respectively. The Company estimates that gross margins and EBITDA margins would have been approximately 8.2% and 27%, respectively if the effect of the market value adjustment to inventory made as part of the Ekati Diamond Mine Acquisition was excluded and the carats sold from material excavated from the Misery South & Southwest kimberlite pipes were recognized as revenue.
The net earnings during the year from discontinued operations of $502.7 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)
Basis of Presentation
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, 2014 , and its financial position as at January 31, 2014 . This MD&A is based on the Company's unaudited consolidated financial statements. 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, 2014 .
Caution Regarding Forward-Looking Information
Certain information included in this MD&A constitutes forward-looking information within the meaning of Canadian and United States securities laws. Forward-looking information can generally be identified by the use of terms such as "may", "will", "should", "could", "expect", "plan", "anticipate", "foresee", "appears", "believe", "intend", "estimate", "predict", "potential", "continue", "objective", "modeled", "hope", "forecast" or other similar expressions concerning matters that are not historical facts. Forward-looking information relates to management's future outlook and anticipated events or results, and can include statements or information regarding plans for mining, development, production and exploration activities at the Company's mineral properties, projected capital expenditure requirements, liquidity and working capital requirements, estimated production from the Ekati Diamond mine and Diavik Diamond Mine, expectations concerning the diamond industry, and expected cost of sales and cash operating costs. Forward-looking information included in this MD&A includes the current production forecast, cost of sales and cash cost of production estimates and planned capital expenditures for the Diavik Diamond Mine and other forward-looking information set out under "Diavik Operations Outlook", and the current production forecast, cost of sales and cash cost of production estimates and planned capital expenditures for the Ekati Diamond Mine and other forward-looking information set out under "Ekati Operations Outlook".
Forward-looking information is based on certain factors and assumptions described below and elsewhere in this MD&A including, among other things, the current mine plans for each of the Ekati Diamond Mine and the Diavik Diamond Mine; mining, production, construction and exploration activities at the Company's mineral properties; currency exchange rates; and world and US economic conditions. While the Company considers these assumptions to be reasonable based on the information currently available to it, they may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what the Company currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, 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 Company's mineral property sites, risks resulting from the Eurozone financial crisis and macroeconomic uncertainty in other financial markets, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate and cash flow and liquidity risks. Please see page 21 of this MD&A, as well as the Company's current Annual Information Form, available at http://www.sedar.com and http://www.sec.gov, respectively, for a discussion of these and other risks and uncertainties involved in the Company's operations. Actual results may vary from the forward-looking information.
Readers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this 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 currently 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.
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 operation of the Ekati Diamond Mine (in which it owns a controlling interest) and its 40% ownership interest in the Diavik Diamond Mine. Both mineral properties are located at Lac de Gras in Canada's Northwest Territories .
The Company has a controlling interest in the Ekati Diamond Mine as well as the associated diamond sorting and sales facilities in Yellowknife, Canada , and Antwerp, Belgium . The Company acquired its interest in the Ekati Diamond Mine on April 10, 2013 . The Ekati Diamond Mine consists of the Core Zone (in which the Company has an 80% interest), which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone (in which the Company has a 58.8% interest), an adjacent area hosting kimberlite pipes having both development and exploration potential, such as the Jay and Cardinal kimberlite pipes and the Lynx kimberlite pipe. The Company controls and consolidates the Ekati Diamond Mine and minority shareholders are presented as non-controlling interests in the consolidated financial statements.
The Company has an ownership interest in the Diavik group of mineral claims. The Diavik Joint Venture (the "Diavik Joint Venture") is an unincorporated joint arrangement between Diavik Diamond Mines (2012) Inc. ("DDMI") (60%) and Dominion Diamond Diavik 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. Both DDMI and DDDLP are headquartered in Yellowknife, Canada . DDMI is a wholly owned subsidiary of Rio Tinto plc of London, England . The Company receives 40% of the diamond production from the Diavik Diamond Mine.
MARKET COMMENTARY
After an exuberant start to fiscal 2014 the rough diamond market slowed in the second quarter as both tight liquidity and problems with a fluctuating rupee in India dampened market sentiment amongst diamond manufacturers. The diamond market was also impacted by a decrease in retail activity in China , which had propelled the diamond market in fiscal 2013, as political reforms slowed luxury spending.
The market regained its composure in the fourth quarter of fiscal 2014 as more positive demand was evident in the lead up to the traditionally busy year-end holiday season in the US and the Lunar New Year in China . It soon became evident that the world's largest jewelry market, the USA , was in a positive mood and also the lead up to the Chinese New Year was increasingly robust. The mood in the Indian retail market improved as the rupee steadied but it was still a frustrating season there as local economic woes, and a substantial increase in the duty on gold, dampened any enthusiasm for jewelry.
The tightening of liquidity by the banks caused many (mainly India ) manufacturers to take a more pragmatic approach to their business; in particular with respect to their stock levels and the length of their supply chain and its impact on cash flow. Whilst this was a painful exercise, it put the business in a far better shape to capitalize on the sound market at the year's end. This assurance has allowed manufacturers to restock with confidence driving a positive start to fiscal 2015.
CONSOLIDATED FINANCIAL RESULTS
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 Company's Luxury Brand Segment, which it disposed of on March 26, 2013 , are treated as discontinued operations for accounting and reporting purposes and current and prior period results have been recast accordingly.
The following is a summary of the Company's consolidated quarterly results for the eight quarters ended January 31, 2014 . As a result of retrospective adjustments made reflecting the final purchase price allocation of the Ekati Diamond Mine and adjustments for Misery South & Southwest pre-production revenue, the prior quarters have been recast.
(expressed in thousands of United States dollars except per share amounts and where
otherwise noted)
(unaudited)
2014 2014 2014 2014 2013 2013
Q4 Q3 Q2 Q1 Q4 Q3
Sales $ 233,163 $ 148,138 $ 261,803 $ 108,837 $ 110,111 $ 84,818
Cost of sales 202,030 136,221 231,086 81,535 79,038 71,663
Gross margin 31,133 11,917 30,717 27,302 31,073 13,155
Gross margin (%) 13.4% 8.0% 11.7% 25.1% 28.2% 15.5%
Selling, general and
administrative expenses 10,117 7,408 15,056 16,843 10,086 7,581
Operating profit (loss)
from continuing operations 21,016 4,509 15,661 10,459 20,987 5,574
Finance expenses (3,553) (3,136) (17,921) (2,742) (2,382) (2,308)
Exploration costs (3,290) (7,074) (3,145) (1,039) (306) (673)
Finance and other income 491 825 1,032 804 601 60
Foreign exchange gain (loss) (7,917) 1,122 (2,814) 732 116 (301)
Profit (loss) before income
taxes from continuing
operations 6,747 (3,754) (7,187) 8,214 19,016 2,352
Income tax expense (recovery) 19,018 2,792 8,655 5,042 6,977 1,583
Net profit (loss) from
continuing operations $ (12,271) $ (6,546) $ (15,842) $ 3,172 $ 12,039 $ 769
Net profit (loss) from
discontinued operations - - - 502,656 2,802 3,245
Net profit (loss) $ (12,271) $ (6,546) $ (15,842) $505,828 $ 14,841 $ 4,014
Net profit (loss) from
continuing operations
attributable to
Shareholders $ (7,802) $ (4,794) $ (13,884) $ 3,504 $ 12,146 $ 152
Non-controlling interest (4,469) (1,752) (1,958) (332) (107) 617
Net profit (loss) attributable
to Shareholders $ (7,802) $ (4,794) $ (13,884) $506,160 $ 14,948 $ 3,397
Non-controlling interest (4,469) (1,752) (1,958) (332) (107) 617
Earnings (loss) per share
- continuing operations
Basic $ (0.09) $ (0.06) $ (0.16) $ 0.04 $ 0.14 $ 0.00
Diluted $ (0.09) $ (0.06) $ (0.16) $ 0.04 $ 0.14 $ 0.00
Earnings (loss) per share
Basic $ (0.09) $ (0.06) $ (0.16) $ 5.96 $ 0.18 $ 0.04
Diluted $ (0.09) $ (0.06) $ (0.16) $ 5.89 $ 0.18 $ 0.04
Cash dividends declared
per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Total assets (i) $ 2,305 $ 2,305 $ 2,299 $ 2,412 $ 1,710 $ 1,733
Total long-term
liabilities (i) $ 691 $ 688 $ 694 $ 695 $ 269 $ 682
Operating profit (loss)
from continuing operations $ 21,016 $ 4,509 $ 15,661 $ 10,459 $ 20,987 $ 5,574
Depreciation and
amortization (ii) 55,228 31,978 32,644 20,211 24,346 20,588
EBITDA from continuing
operations (iii) $ 76,244 $ 36,487 $ 48,305 $ 30,670 $ 45,333 $ 26,162
Table cont'd.

(expressed in thousands of United States dollars except per share amounts and where
otherwise noted)
(unaudited)
2013 2013 2014 2013 2012
Q2 Q1 Total Total Total
Sales $ 61,473 $ 89,009 $ 751,942 $ 345,411 $ 290,114
Cost of sales 46,784 70,099 650,872 267,584 227,951
Gross margin 14,689 18,910 101,070 77,827 62,163
Gross margin (%) 23.9% 21.2% 13.4% 22.5% 21.4%
Selling, general and
administrative expenses 5,750 6,739 49,425 30,156 24,589
Operating profit (loss) from
continuing operations 8,939 12,171 51,645 47,671 37,574
Finance expenses (2,151) (2,242) (27,351) (9,083) (10,787)
Exploration costs (568) (254) (14,550) (1,801) (1,770)
Finance and other income 67 52 3,153 780 462
Foreign exchange gain (loss) 1,048 (370) (8,879) 493 834
Profit (loss) before income taxes
from continuing operations 7,335 9,357 4,018 38,060 26,313
Income tax expense (recovery) 3,386 3,330 35,505 15,276 9,007
Net profit (loss) from
continuing operations $ 3,949 $ 6,027 $ (31,487) $ 22,784 $ 17,306
Net profit (loss) from
discontinued operations 804 5,583 502,656 12,434 8,137
Net profit (loss) $ 4,753 $ 11,610 $ 471,169 $ 35,218 $ 25,443
Net profit (loss) from continuing
operations attributable to
Shareholders $ 3,951 $ 6,027 $ (22,974) $ 22,276 $ 17,317
Non-controlling interest (2) - (8,513) 508 (11)
Net profit (loss) attributable to
Shareholders $ 4,755 $ 11,610 $ 479,682 $ 34,710 $ 25,454
Non-controlling interest (2) - (8,513) 508 (11)
Earnings (loss) per share
- continuing operations
Basic $ 0.05 $ 0.07 $ (0.27) $ 0.26 $ 0.20
Diluted $ 0.05 $ 0.07 $ (0.27) $ 0.26 $ 0.20
Earnings (loss) per share
Basic $ 0.06 $ 0.14 $ 5.64 $ 0.41 $ 0.30
Diluted $ 0.06 $ 0.14 $ 5.59 $ 0.41 $ 0.30
Cash dividends declared per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Total assets (i) $ 1,660 $ 1,716 $ 2,305 $ 1,710 $ 1,607
Total long-term liabilities (i) $ 461 $ 472 $ 691 $ 269 $ 641
Operating profit (loss) from
continuing operations $ 8,939 $ 12,171 $ 51,645 $ 47,671 $ 37,574
Depreciation and amortization (ii) 13,160 22,172 140,061 80,266 78,761
EBITDA from continuing
operations (iii) $ 22,099 $ 34,343 $ 191,706 $127,937 $ 116,335
(i) Total assets and total long-term liabilities are expressed in millions of United
States dollars.
(ii) Depreciation and amortization included in cost of sales and selling, general and
administrative expenses.
(iii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
"Non-IFRS Measures" on page 20.
Three Months Ended January 31, 2014 , Compared to Three Months Ended January 31, 2013  
CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a fourth quarter consolidated net loss attributable to shareholders of $7.8 million or $(0.09) per share, compared to a net profit attributable to shareholders of $14.9 million or $0.18 per share in the fourth quarter of the prior year. Net loss from continuing operations attributable to shareholders was $7.8 million or $(0.09) per share, compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter of the prior year. Included in net loss from continuing operations was a $7.9 million related to foreign exchange loss compared to a $0.1 million gain related to foreign exchange in the fourth quarter of the prior year, due to the weakening of the Canadian dollar. The net loss from continuing operations for the quarter also included $13.5 million of income tax expense related to the weakening of the Canadian dollar, substantially all of which is non-cash tax expense. This compares to a $0.2 million of tax expense related to the impact of foreign exchange in the comparable quarter of the prior year.
Discontinued operations represented $nil of net profit compared to $2.8 million or $0.04 share in the fourth quarter of the prior year.
CONSOLIDATED SALES
Consolidated sales for the fourth quarter totalled $233.2 million , consisting of Diavik rough diamond sales of $119.2 million and Ekati rough diamond sales of $114.0 million . This compares to sales of $110.1 million in the comparable quarter of the prior year (Diavik rough diamond sales of $110.1 million and Ekati rough diamond sales of $nil).
The Company expects that results for its mining operations will fluctuate depending on the seasonality of production at its mineral properties, 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 Company's mineral properties and sold by the Company in each quarter. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED COST OF SALES AND GROSS MARGIN
The Company's fourth quarter cost of sales was $202.0 million resulting in a gross margin of 13.4%, compared to a cost of sales of $79.0 million and a gross margin of 28.2% for the comparable quarter of the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED INCOME TAXES
The Company recorded a net income tax expense of $19.0 million during the fourth quarter, compared to a net income tax expense of $7.0 million in the comparable quarter of the prior year. The Company's combined federal and provincial statutory income 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 and unrecognized tax benefits. 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 Canadian dollar significantly weakened against the US dollar. As a result, the Company recorded an unrealized foreign exchange gain of $14.6 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability. This compares to an unrealized foreign exchange loss of $0.3 million in the comparable quarter of the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the fourth quarter, the Company also recognized a deferred income tax expense of $23.5 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 $0.9 million recognized in the comparable quarter of the prior year. The recorded tax provision during the quarter also included a net income tax expense of $1.3 million relating to foreign exchange differences between income in the currency of the country of origin and US dollars. This compares to net income tax recovery of $1.1 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 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The principal components of selling, general and administrative ("SG&A") expenses include expenses for salaries and benefits, professional fees, consulting and travel. The Company incurred SG&A expenses of $10.1 million for the fourth quarter, consistent with the comparable quarter of the prior year. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expense for the fourth quarter was $3.6 million , compared to finance expense of $2.4 million for the comparable quarter of the prior year. The increase was due primarily to accretion expense associated with the future site restoration liability at the Ekati Diamond Mine, which was not present in the comparable quarter of the prior year. Accretion expense was $2.8 million (three months ended January 31, 2013 - $0.6 million ) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.
CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $3.3 million was incurred during the fourth quarter, compared to $0.3 million in the comparable quarter of the prior year. Included in exploration expense for the fourth quarter is $3.1 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $0.2 million of exploration work on the Company's claims in the Northwest Territories .
CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $0.5 million was recorded during the fourth quarter, compared to $0.6 million in the comparable quarter of the prior year.
CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange loss of $7.9 million was recognized during the fourth quarter, compared to a net foreign exchange gain of $0.1 million in the comparable quarter of the prior year, due to the weakening of the Canadian dollar. The Company does not currently have any significant foreign exchange derivative instruments outstanding.
Year Ended January 31, 2014 , Compared to Year Ended January 31, 2013  
CONSOLIDATED NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The Company recorded a consolidated net profit attributable to shareholders of $479.7 million or $5.64 per share for the year ended January 31, 2014 , compared to a net profit attributable to shareholders of $34.7 million or $0.41 per share in the prior year. Included in this amount is a $502.9 million gain on the sale of the Luxury Brand Segment on March 26, 2013 . Net loss from continuing operations attributable to shareholders was $23.0 million or $(0.27) per share, compared to a net profit from continuing operations attributable to shareholders of $22.3 million or $0.26 per share in the prior year. Included in the consolidated net loss attributable to shareholders for the year was $3.2 million (after-tax) of restructuring costs at the Antwerp, Belgium office, $10.6 million (after-tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition and $11.4 million (after-tax) of Ekati acquisition costs. Excluding these items and the impact of the sale of opening acquisition inventory that was included at market value in Ekati cost of sales, the Company's estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or $0.18 per share. Discontinued operations represented $502.6 million of net profit or $5.91 per share, compared to $12.4 million or $0.15 per share in prior year.
CONSOLIDATED SALES
Consolidated sales totalled $751.9 million for the year ended January 31, 2014 , consisting of Diavik rough diamond sales of $352.3 million and Ekati rough diamond sales of $399.6 million . This compares to sales of $345.4 million in the prior year (Diavik rough diamond sales of $345.4 million and Ekati rough diamond sales of $nil). The Ekati rough diamond sales are for the period from April 10, 2013 , which was the date the Ekati Diamond Mine Acquisition was completed, to January 31, 2014 .
The Company expects that results for its mining operations will fluctuate depending on the seasonality of production at its mineral properties, the number of sales events conducted during the period, rough diamond prices and the volume, size and quality distribution of rough diamonds delivered from the Company's mineral properties and sold by the Company in each quarter. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED COST OF SALES AND GROSS MARGIN
The Company's cost of sales was $650.9 million for the year ended January 31, 2014 , resulting in a gross margin of 13.4%, compared to a cost of sales of $267.6 million and a gross margin of 22.5% for the prior year. The Company's cost of sales includes costs associated with mining and rough diamond sorting activities. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED INCOME TAXES
The Company recorded a net income tax expense of $35.5 million during the year ended January 31, 2014 , compared to a net income tax expense of $15.3 million in the prior year. The Company's combined federal and provincial statutory income tax rate for the year ended January 31, 2014 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 and unrecognized tax benefits. 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, 2014 , the Canadian dollar significantly weakened against the US dollar. The Company recorded an unrealized foreign exchange gain of $24.1 million on the revaluation of the Company's Canadian dollar denominated deferred income tax liability during the year ended January 31, 2014 . This compares to an unrealized foreign exchange loss of $1.1 million recorded in the prior year. The unrealized foreign exchange gain is recorded as part of the Company's deferred income tax recovery, and is not taxable for Canadian income tax purposes. During the year ended January 31, 2014 , the Company recognized a deferred income tax expense of $40.4 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 $4.4 million recognized in the prior year. The recorded tax provision during the year ended January 31, 2014 included a net income tax expense of $0.7 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 $5.2 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 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company incurred SG&A expenses of $49.4 million during the year ended January 31, 2014 , compared to $30.2 million in the prior year. The increase from the prior year was primarily due to $11.2 million of transaction costs and $4.9 million of restructuring costs at the Antwerp, Belgium office, related in each case to the Ekati Diamond Mine Acquisition. See "Segmented Analysis" on page 9 for additional information.
CONSOLIDATED FINANCE EXPENSES FROM CONTINUING OPERATIONS
Finance expenses were $27.4 million for the year ended January 31, 2014 , compared to $9.1 million for the prior year. The increase was due primarily to the expensing of approximately $14.0 million relating to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine Acquisition. The Company ultimately determined to fund the Ekati Diamond Mine Acquisition by way of cash on hand and did not draw on these credit facilities, which were subsequently cancelled. Also included in consolidated finance expense is an accretion expense of $9.3 million (year ended January 31, 2013 - $2.4 million ) related to future site restoration liabilities at the Diavik Diamond Mine and the Ekati Diamond Mine.
CONSOLIDATED EXPLORATION EXPENSE FROM CONTINUING OPERATIONS
Exploration expense of $14.6 million was incurred during the year ended January 31, 2014 , compared to $1.8 million in the prior year. Included in exploration expense for the current year is $10.1 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati Diamond Mine and $4.5 million of exploration work on the Company's claims in the Northwest Territories .
CONSOLIDATED FINANCE AND OTHER INCOME FROM CONTINUING OPERATIONS
Finance and other income of $3.2 million was recorded during the year ended January 31, 2014 , compared to $0.8 million in the prior year.
CONSOLIDATED FOREIGN EXCHANGE FROM CONTINUING OPERATIONS
A net foreign exchange loss of $8.9 million was recognized during the year ended January 31, 2014 , compared to a net foreign exchange gain of $0.5 million in the prior year. The Company does not currently have any significant foreign exchange derivative instruments outstanding.
Segmented Analysis 
The operating segments of the Company include the Diavik Diamond Mine, the Ekati Diamond Mine and the Corporate segment. The Corporate segment captures costs not specifically related to operating the Diavik and Ekati mines.
Diavik Diamond Mine
This segment includes the production, sorting and sale of rough diamonds from the Diavik Diamond Mine.
(expressed in thousands of United States dollars)
(unaudited)
2014 2014 2014 2014 2013 2013
Q4 Q3 Q2 Q1 Q4 Q3
Sales
North America $ 511 $ - $ - $ 6,179 $ 4,604 $ 7,697
Europe 112,001 45,088 80,530 61,642 84,346 57,438
India 6,704 7,818 10,737 21,095 21,161 19,683
Total sales 119,216 52,906 91,267 88,916 110,111 84,818
Cost of sales 87,690 40,018 68,328 61,888 79,038 71,663
Gross margin 31,526 12,888 22,939 27,028 31,073 13,155
Gross margin (%) 26.4% 24.4% 25.1% 30.4% 28.2% 15.5%
Selling, general and
administrative expenses 1,122 1,123 1,409 1,110 1,860 1,279
Operating profit $ 30,404 $ 11,765 $ 21,530 $ 25,918 $ 29,213 $ 11,876
Depreciation and amortization
(i) 28,885 12,434 21,768 19,906 24,042 20,283
EBITDA (ii) $ 59,289 $ 24,199 $ 43,298 $ 45,824 $ 53,255 $ 32,159
Table cont'd.

(expressed in thousands of United States dollars)
(unaudited)
2013 2013 2014 2013 2012
Q2 Q1 Total Total Total
Sales
North America $ 2,269 $ 7,432 $ 6,690 $ 22,002 $ 15,018
Europe 50,514 54,370 299,262 246,668 231,722
India 8,690 27,207 46,355 76,741 43,374
Total sales 61,473 89,009 352,307 345,411 290,114
Cost of sales 46,784 70,099 257,924 267,584 227,951
Gross margin 14,689 18,910 94,383 77,827 62,163
Gross margin (%) 23.9% 21.2% 26.8% 22.5% 21.4%
Selling, general and administrative
expenses 1,050 972 4,763 5,161 3,907
Operating profit $ 13,639 $ 17,938 $ 89,620 $ 72,666 $ 58,256
Depreciation and amortization (i) 12,874 21,876 82,993 79,075 77,529
EBITDA (ii) $ 26,513 $ 39,814 $ 172,613 $ 151,741 $ 135,785
(i) Depreciation and amortization included in cost of sales and selling, general and
administrative expenses.
(ii) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). See
"Non-IFRS Measures" on page 20.
Three Months Ended January 31, 2014 , Compared to Three Months Ended January 31, 2013  
DIAVIK SALES
During the fourth quarter, the Company sold approximately 1.0 million carats from the Diavik Diamond Mine for a total of $119.2 million for an average price per carat of $114 , compared to 0.8 million carats for a total of $110.1 million for an average price per carat of $133 in the comparable quarter of the prior year. The 27% increase in volume of carats sold versus the comparable quarter of the prior year resulted primarily from the sale during the fourth quarter of inventory held back from sale in the prior quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India . The 14% decrease in the Company's achieved average rough diamond prices for the Diavik Diamond Mine as compared to the fourth quarter of the prior year resulted primarily from a change in the sales mix of product sold, partially offset by an increase in market prices for rough diamonds in the fourth quarter compared to the prior year. At January 31, 2014 , the Company had 0.4 million carats of Diavik Diamond Mine produced inventory with an estimated market value of approximately $65 million , compared to 0.5 million carats with an estimated market value of approximately $65 million in the comparable quarter of the prior year.
Had the Company sold only the last production shipped in the fourth quarter, the estimated achieved price would have been approximately $119 per carat based on the prices achieved in the January 2014 sale.
DIAVIK COST OF SALES AND GROSS MARGIN
The Company's fourth quarter cost of sales for the Diavik Diamond Mine was $87.7 million resulting in a gross margin of 26.4%, compared to a cost of sales of $79.0 million and a gross margin of 28.2% in the comparable quarter of the prior year. Cost of sales for the fourth quarter included $28.9 million of depreciation and amortization, compared to $23.6 million in the comparable quarter of the prior year. The increase in depreciation and amortization is due primarily to the sale during the fourth quarter of inventory held back from sale in the third quarter due to a weakening of the rough diamond market resulting from macroeconomic uncertainty in India . The Diavik segment generated gross margins and EBITDA margins of 26.4% and 50%, respectively, compared to 28.2% and 48%, respectively, 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 incurred at the Diavik Diamond Mine. During the fourth quarter, the Diavik cash cost of production was $43.3 million compared to $44.8 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 Diavik Diamond Mine's cost of sales disclosed for the three months ended January 31, 2014 and 2013.
(expressed in thousands of United States Three months ended Three months ended
dollars) January 31, 2014 January 31, 2013
Diavik cash cost of production $ 43,284 $ 44,764
Private royalty 2,287 2,040
Other cash costs 1,270 1,272
Total cash cost of production 46,841 48,076
Depreciation and amortization 24,121 20,182
Total cost of production 70,962 68,258
Adjusted for stock movements 16,725 10,780
Total cost of sales $ 87,687 $ 79,038
DIAVIK SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses for the Diavik Diamond Mine segment during the quarter was $1.1 million , compared to $1.9 million in the comparable quarter of the prior year.
Year Ended January 31, 2014 , Compared to Year Ended January 31, 2013  
DIAVIK SALES
During the year ended January 31, 2014 , the Company sold approximately 3.0 million carats from the Diavik Diamond Mine for a total of $352.3 million for an average price per carat of $118 compared to 3.2 million carats for a total of $345.4 million for an average price per carat of $109 in the comparable period of the prior year. The 8% increase in the Company's achieved average rough diamond prices and the 6% decrease in volume of carats sold resulted primarily from the sale during the first quarter of the prior year of almost all of the remaining lower priced goods originally held back in inventory by the Company at October 31, 2011 due to an oversupply in thetiffany co jewelry
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