Botswana Diamonds plc ("Botswana Diamonds" or "BOD")
Interim Results
v Botswana Diamonds has emerged from the successful sale of African Diamonds to Lucara v The venture contains all of the assets of African Diamonds apart from the AK6 mine v Botswana, the worlds biggest diamond producer, is the focus of an aggressive 2011 exploration campaign v Exploration is fully funded to 2012
Lucara Diamonds, a Canadian listed company, acquired African Diamonds, then AIM listed, in late 2010.

Lucara wanted only the AK6 diamond discovery.

The management of African Diamonds created Botswana Diamonds to hold the remaining exploration assets.

Each share of African Diamonds was bought for 0.8 of a Lucara share and one Botswana Diamonds share.

The Company listed on AIM on February 2nd 2011.

Consequently this report covering the period to December 31st 2010 has little relevance as it covers a dormant period.

Note 8 to the accounts below details the financial position of the company.
Specifically, Botswana Diamonds acquired almost $2m in cash, interests in three prospecting licenses in Botswana, a small stake (< 1%) in Stellar Diamonds and 35% of Bugeco, a private company with exploration interests in the Democratic Republic of the Congo (DRC).

The value of the assets in Botswana Diamonds was estimated at GBP �7m, equivalent to about GBP �0.07 per share.
The directors of the company decided to list Botswana Diamonds on AIM and in Botswana.

The AIM listing occurred on February 2nd 2011 and the Botswana listing is pending.

Since listing at 7p a share, the price has fallen to 4.25p.

This unsatisfactory performance is due largely to a sell out of Botswana Diamonds by three arbitrage funds.

Let me explain.

Arbitrageurs bought African Diamonds shares in the London market at 40p each, to get a Lucara share at the equivalent of CAN $0.73.

This, at a time when the Lucara share traded around CAN $0.95 and CAN $1.20.

Up to fifteen million African Diamonds shares were bought by these investors.

They found themselves owning large quantities of Botswana Diamonds shares.

As financial speculators they have little or no interest in diamond exploration so they have been selling their shares on the market.

The share price will remain weak until the overhang is gone.
Operations:
We are active in three areas � Botswana � Cameroon � Zimbabwe
In Botswana, BOD is undertaking a 5,500 tonne bulk sample from the BK5 kimberlite in the Orapa area.

Earlier work produced a grade of up to seven carats per hundred tonnes (cpht) from a kimberlite estimated to be between five and seven hectares in size.

The current work is to establish the value of a tonne of ore in the ground.

The quality of the diamonds is paramount.

Scoping studies suggest that USD $12 a tonne of ore could be viable as a satellite supplier to one of the existing mines in Botswana.

Contractors are appointed, a processing plant is near final refurbishment and environmental regulations have been met.

The work will take a number of months with first results expected by June.
Following the BK5 work it is proposed to take samples of 1,000 tonnes from each of AK8 and AK9 which are close to the AK6 and Letlhakane mines.

Here again the objective is to prove the value of a tonne of kimberlite ore in the ground.

AK8 has a near surface, approximately two hectares in size, southern lobe containing between three and seven carats per hundred tonnes, while AK9 is a three hectare pipe with grades of up to eight carats per hundred tonnes.

The cost of the full programme is USD $1 million.
In Cameroon, BOD has been awarded an 85% interest in 8,087 square kilometre reconnaissance licence in eastern Cameroon.

The ground lies to the south and west of the Mobilong diamond discovery.

Though little has been made public of Mobilong, it is thought by some to be a paleo placer deposit, similar to the new diamond fields in Marange, Zimbabwe.

What is known is that a Korean / Cameroon company, C&K Mining, is building a mine which is expected to come on stream in 2011 / 2012.

It is reported that the mine will have an initial output of one million carats a year, a figure which, it is said will grow to 6 million carats a year.
Botswana Diamonds geologists have visited our area in Cameroon and have seen diamonds purported to come from the concession area.

We have an agreed twelve month programme of satellite image analysis, mapping, and sampling work to identify the distribution of diamond bearing host rock.

On the basis of this work, we will select a 1,000 square kilometre area over which we will hold a three year exploration licence.

I must emphasize how early stage this licence is.

Cameroon is not known as a diamond producer.

Neither are Korean companies renowned as diamond miners.

But it is a fact that diamonds have been discovered, a mine is being built.

The reported reserves are very big.
Zimbabwe is fast becoming the stand out story of the diamond industry.

It is believed that the Marange area will soon rank in the top three world diamond producers.

Currently, there is major political and legal uncertainty in the country.

Until these areas are clarified, development will be slow.

It is likely that the alluvial diamond concessions will be wholly state owned while the hard rock concessions will be majority Zimbabwean owned.

Your directors have long experience in Zimbabwe.

They have been attempting to create joint ventures with locals and state companies.

There is no indication of success but the objective is worth the effort.
Future This is a very good time to be in diamonds.

Demand is strong, particularly from the emerging markets.

Supply is at best, flat.

The consequence is strong prices.

Rough diamond prices are above the peaks reached in 2008.


Diamonds are very hard to find.

Of 7,000 plus kimberlites ever discovered, less than 700 have diamonds and less than 5% of that number contain or contained commercial levels of stones.

Botswana Diamonds has properties in the best diamond address in the world.

We have diamonds in three kimberlites.

Our immediate task is to see if we can commercialise these discoveries.
While Botswana is the best place to find diamonds, having five producing diamond mines, including the biggest in the world (Orapa) and the richest mine in the world (Jwaneng), their supremacy is being threatened by newcomers Zimbabwe and Cameroon.

Reports from existing and planned operations in Zimbabwe talk of extremely high grade, up to 5,000 cpht, resources of lower quality diamonds.

The resources are both alluvial and hard rock paleo placer deposits.

There is uncertainty over title so development is being stunted.

Botswana Diamonds has applied for concessions.
Cameroon is an early stage exciting play.

The licence area obtained by Botswana Diamonds, over 8,000 square kilometres is huge.

It is the first task of our staff to identify the most prospective ground.

This could prove a very significant asset.
We have good ground, a good team and the necessary finance.

We are well positioned.
Enquiries: Botswana Diamonds PLC John Teeling, Chairman +353 1 833 2833 Andre Fourie +27 (83) 463 2455
finnCap - Nominated Adviser & Broker Matthew Robinson +44 (0) 20 7600 1658 Henrik Persson
College Hill Nick Elwes +44(0) 20 7457 2020
Botswana Diamonds plc
Financial Information (Unaudited)
Condensed Consolidated Statement of 22 Sep 2010
Comprehensive Income (Date of Incorporation) to 31 Dec 2010
unaudited
�000
Revenue -
Cost of sales -
Gross Profit -
Administrative costs (5)
Operating Loss (5)
Finance costs (1)
Profit/(Loss) on investment held at fair value 44
Profit for the period 38
Exchange differences on translation of foreign operations (21)
Total comprehensive income for the period 17
Profit per share 0.64p
Condensed Consolidated Balance Sheet 31 Dec 2010
unaudited
�000
Non Current Assets
Intangible assets 5,479
Financial assets 108
Investments 200
5,787
Current Assets
Receivables and prepayments 148
Cash and cash equivalents 1,367
1,515
Total Assets 7,302
Liabilities
Current Liabilities
Trade and other payables (248)
Net Current Liabilities 1,267
Net Assets 7,054
Equity
Share capital 7,037
Reserves 17
Total Equity 7,054
Condensed Consolidated Statement of Changes in Shareholders Equity
Share Share Translation Retained Total
Capital Premium Reserves Losses Equity
�000 �000 �000 �000 �000
As at 22 September 2010 0 0 - 0 0
Shares issued during the period 1,005 6,032 0 0 7,037
Exchange difference arising from translation of foreign operations 0 0 (21) 0 (21)
Profit/(Loss) for the period 0 38 38
As at 31 December 2010 1,005 6,032 (21) 38 7,054
Condensed Consolidated Cash Flow 22 Sep 2010
(Date of Incorporation) to 31 Dec 2010
uaudited
�000
Cash Flows from Operating Activities
Profit for the period 38
Finance cost 1
Exchange movement (21)
Fair value on investments (44)
Cash used by Operations (26)
Decrease in trade and other payables (24)
(Increase)/Decrease in receivables 0
Net cash used in operating activities (50)
Finance costs (1)
Net Cash used in Operating Activities (51)
Cash Flow from Investing Activities
Payment for intangible assets 0
Cash acquired on acquisition 1,418
Net Cash used in Investing Activities 1,418
Cash Flow from Financing Activities
Proceeds from issue of equity shares 0
Net Increase in Cash and Cash Equivalents 1,367
Cash and Cash Equivalents at beginning of the period 0
Effect of exchange rate changes on cash held in foreign currencies 0
Cash and Cash Equivalents at end of the period 1,367
Notes:
1.

Information
The financial information for the period 22 September 2010 (date of incorporation) to 31 December 2010 are unaudited.

The financial information above does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006.
The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.


2.

No dividend is proposed in respect of the period.
3.

Profit per share
Basic profit per share is computed by dividing the profit after taxation for the period available to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year.


Diluted profit per share is computed by dividing the profit after taxation for the period by the weighted average number of ordinary shares is issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.
The following table sets forth the computation for basic and diluted earnings per share (EPS):
31 Dec 2010
� Numerator
For basic and diluted EPS retained profit
38,696
Denominator
Weighted average number of ordinary shares
6,076,127
Basic and diluted EPS
0.64p
4.

Profit/(loss) on investment held at fair value
31 Dec 2010 �000
Fair value profit/(loss) on financial asset
44
Profit or losses arise from the subsequent measurement of financial assets at fair value through the profit and loss account in relation to the groups interest in Stellar Diamonds Plc.
5.

Intangible Assets
31 Dec 2010 Exploration and evaluation assets:
�000 Cost
At 22 September 2010
0 Assets acquired (see Note 8)
5,479 Additions
0 At 31 December 2010
5,479
Exploration and evaluation assets relates to expenditure incurred in mineral exploration in Botswana.
The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation, and therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation assets.


The realisation of these intangible assets is dependent on the successful discovery and development of economic resources, and is subject to a number of significant potential risks including;
� Price fluctuations; � Foreign exchange rates; � Uncertainties over development and operational costs; � Political and legal risks, including arrangements with governments for licences, profit sharing and taxation; � Currency exchange fluctuations and restrictions; and � Foreign investment risks including increases in taxes, royalties and renegotiation of contracts;
Should these prove unsuccessful the value included in the balance sheet would be written off to the income statement.


Having reviewed the exploration and evaluation expenditure at 31 December 2010, the directors are satisfied that the value of the intangible asset is not less than carrying value.


6.

Financial Assets
Financial assets carried at fair value through profit or loss (FVTPL):
31 Dec 2010 �000 Non-derivative financial assets designated as at FVTPL
107
African Diamonds plc purchased 5,000,000 shares (�1,000,000) in Stellar Diamonds plc (formerly West African Diamonds plc) in January 2007.

On 20 December 2010 this investment was acquired by Botswana Diamonds plc as detailed in Note 8.

At the period end this investment represented 0.03% of the issued share capital of Stellar Diamonds plc.

In the opinion of the directors, the company does not have significant influence over Stellar Diamonds plc.
7.

Share Capital
31 Dec 2010
�000 Issued and fully:
Opening balance - 2 shares of �0.01 each
0 Shares issued - 100,532,265 shares of �0.01 each
1,005 Closing balance - 100,532,267 shares of �0.01 each
1,005
Movement in issued share capital
On 20 December 2010, the company issued 100,532,265 shares at a price of �0.07 per share as part of the acquisition costs for the demerged assets from African Diamonds plc (See Note 8).
8.

Acquisitions
On 20 December 2010, the company completed the acquisition of all mining interests and other assets and liabilities of African Diamonds plc and its subsidiaries, Atlas Minerals (Botswana) (Pty) Ltd and Kukama Mining & Exploration (Pty) Ltd, except for its interests in the AK6 diamond resource in Botswana.

The cost of this acquisition was satisfied by the issue of shares in Botswana Diamonds plc to the African Diamonds plc shareholders on a one-for-one basis in respect of each share acquired.

The fair value of the assets at the date of acquisition was equivalent to the value of the shares issued being �7,037,259.
Analysis of assets and liabilities at the date of acquisition:
*Other Assets
Kukama Mining
Atlas Minerals
Total
�000
�000
�000
�000 Non Current Assets
Exploration & evaluation expenditure 4,563
773
143
5,479 Investments 264
0
0
264 Amount due from group subsidiaries 1,045
(924)
(121)
0 Current Assets
Trade and other receivables 59
83
6
148 Cash and cash equivalent 1,341
76
1
1,418 Current Liabilities
Trade and other payables (235)
(8)
(29)
(272)
7,037
0
0
7,037
*Other Assets relates to assets held in the parent company African Diamonds plc
9.

The Interim Report for the period to 31 December 2010 was approved by the Directors on 23rd March 2011.
10.

Copies of this announcement will be sent to shareholders and will be available for inspection at the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS.

The Interim Report may also be viewed at Botswana Diamonds plcs website at www.botswanadiamonds.co.uk