BlueRock Diamonds : News Release

BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources

7 September 2022

BlueRock Diamonds Plc ("Bluerock" or the "Company")

Interim Results

BlueRock Diamonds, the AIM listed diamond mining company, which owns and operates the Kareevlei Diamond Mine ('Kareevlei') in the Kimberley region of South Africa, is pleased to announce its interim results for the six months ended 30 June 2022.

OVERVIEW - June 2022 versus June 2021

Operational Results

• 18% increase in tonnes processed to 260k
• 20% decrease in grade to 3.22 cpht
• 7% decrease in carats produced to 8,214
• 48% increase in sales price to US$629 per carat

Capital Projects

• Development to open up the Main Pit at depth continued with 1.1 million tonnes ('Mt') of waste mined, up 78% year-on-year ('yoy')
• Commissioned the new plant at the end of 2021 with a gradual build-up of production volumes
• High-LevelReview undertaken in June recommending changes to further de-risk mining and plant in the wet season

Financials

• 45% increase in revenue to £4,079,000 (2021: £2,817,000) driven by higher diamond prices
• Operating loss of £783,000 (2021: £539,000), a result of reduced production and higher costs
• Loss before taxation was £23,000 (2021: £513,000)

CHAIRMAN'S STATEMENT

The key drivers for the first half of the year were to continue with the increased mining development in the Main Pit (KV1 and KV2) and to ramp up production in the expanded 1 million tonne per annum ('Mtpa') processing plant, which had been largely commissioned in late 2021. Unfortunately, the mine experienced extreme weather conditions for the first five months of the year, the third year in a row that Kareevlei has had rainfall significantly above the long-term average (+214%). Consequently, management is now considering how to mitigate against what appears to be extreme changes in the environment.

To complicate matters further, the wet season extended into May and June 2022 with rainfall of 106mm; in past years these have been dry months. As a consequence, although the total development tonnes were materially up on 2021, they were significantly down on target, which resulted in the operation having limited

tonnage of pure kimberlite and having to feed lower grade and difficult to handle material throughout the period under review.

The market remained robust with a major spike in the prices in Q1, due mainly to the concerns on the rough diamond supply side driven by the war in Ukraine. It appears to have stabilised in Q2 with the retail side influenced by the impact of inflation on disposable income and the Covid shutdowns in China, however, we are still seeing very positive prices and it is forecast the supply side will remain tight for the foreseeable future.

Despite a drop off in the recovery of larger diamonds, which we would associate with the poorer feed, the Company has averaged US$629 per carat (HY 2021: $436 per carat) in the period under review. Pleasingly, post period end in Q3 we are seeing an increase in the recovery of high-value stones.

The financial results and cash position, despite the much-improved prices and higher revenue, have been negatively influenced by the poor operational results and the necessity to press on with the large spend on development mining and a material increase in a number of costs areas.

As per earlier announcements, ongoing discussions have taken place with the Teichmann Group involving both financing and the management of the Kareevlei operation; these will hopefully be concluded at the AGM with shareholder approval.

On the management front, a High-Level Review, at the request of the Teichmann Group, was completed by a team of experienced consultants. The results highlighted a need for a further review of the mine plan and the possibility of fast-tracking the development mining to further de-risk the operation against extreme weather and to optimise the mining fleet on site, although this will increase cash outflow in the short term. In addition, certain changes to the plant were recommended that would further de-risk this operation in the wet season and enhance throughput and potentially diamond recovery. The management and Board have been working closely with the Teichmann Group in progressing a number of areas and will report back to shareholders once the evaluation work is completed.

Mining
Mining (in tonnes '000)	H1 2022	H1 2021	Increase
Waste (development)	1,149	646	78%
Ore	321	289	11%
Total	1,470	935	57%

Total mined tonnes in H1 2022 were 57% up on H1 2021. It is particularly important to note that the large increase in the waste mining should be seen as an investment for the future as a lot of development work is to prepare the Main Pit to mine efficiently at deeper levels than was originally anticipated and to deal with inclement weather. The strip ratio in H1 2022 was 3.6, which is significantly higher than the life of mine strip ratio for the Main Pit of 1.8 and a strip ratio of 2.2 in 2021. The cash cost of the excess waste mining in H1

2022 was £1.35m (ZAR 27m) (2021: £0.26m (ZAR 5m)), which was capitalised and will be amortised over the life of the Main Pit.

Management continues to review the life of mine plan with a view to opening up KV3 in 2023 to provide more flexibility in the mining operation as the Main Pit is mined at deeper levels.

Processing

Tonnes '000	H1 2022	H1 2021	Increase
Processed	260	221	18%
Grade	3.22	4.1	-20%
Carats Produced	8,214	8,949	-7%

The increase in tonnage in H1 2022, although disappointing and a lost opportunity with the buoyant market, has to be viewed against a background of over 600mm of rain and 40 production days lost (2021 Q2: 2 days, vs 2022 Q2: 13 days). In addition, whilst the plant was operating the feed was largely a wet low-grade material, which hosted a high percent of fines and clay. With the grade being down 20%, the carats produced were 7% down on 2021. Accordingly, we have downgraded our guidance for 2022, as set out below. The ore mining operation is now below the high clay low grade kimberlite zone and should be supplying a better feed going forward.

The wet season has highlighted that, while improvements have been made to enable the new plant to perform better in wet conditions, it still has vulnerabilities. Management is now looking at a wet screening circuit at the front end of the plant to remove a large percent of smaller sized material, which clogs up the circuit, and treating this product through one line and by doing so free up the secondary crushing circuit. There is also a review of the Cone Crushers, with test work ongoing, as it is believed a more modern crusher together with the wet screening would enhance production and improve diamond recovery. These improvements if implemented need to be in place before the 2023 wet season.

It is pleasing to note that with the drier conditions since July the processed tonnes are improving but the plant is yet to achieve its design capacity. This is partly due to the mine still not being able to feed it with a high percentage of kimberlite, which impacts on "tonne per hour" achievable on each line and a number of ongoing teething issues, which have impacted on the plant operating time.

Sales

Sales	H1 2022	H1 2021	Increase
Carats	8,580	9,115	-5%
USD/Carat	629	436	44%

Carats sold in H1 2022 were 5% down on H1 2021 due to the operational issues explained above.

The market has been strong throughout H1 with prices up 44% on the same period in 2021. The average price for the six months has been influenced by a spike in prices in early Q1 but overall, we have seen a step change in prices versus 2021 and an ongoing high demand for the Kareevlei diamonds.

The tenders in Kimberley where Kareevlei diamonds are sold have been well supported with the opening up of travel to South Africa following the Covid restrictions.

Mining Licence

An application for the renewal of the current Mining Licence has been submitted to the Department of Mineral Resources & Energy in South Africa. As at the date of approval of this report the outcome of this application has not yet been received. The Group has approval to continue mining until such time as the application has been processed. The Directors are of the opinion that there is no reason to believe that the approval will not be obtained.

Market Overview /Outlook

The supply side of rough diamonds has remained under pressure and is expected to continue to do so whilst the conflict around Ukraine exists. It is anticipated that the retail market could soften with the impact of inflation on disposable income, however, the Kareevlei's high-quality diamonds remains sought after and prices achieved in July and August have been encouraging.

Large Stones

Kareevlei continues to produce high value diamonds as detailed below. We are particularly encouraged with the year-to-date numbers when one considers the lower grade feed for much of the year with 17 high value diamonds recovered versus 8 for same period last year.

Date sold 2022	Carats	Value	Value per carat
		USD000	USD000
August	11.62	84	7.2
	10.02	81	8.1
	9.04	76	8.4
	6.77	52	7.6
	6.88	52	7.5
	10.35	50	4.8
July	5.97	55	9
	7.4	67	9
March	19.3	116	6
	12.7	128	10
	8.7	104	12
	6.6	63	9.5
February	11.9	211	17.6

	8.3	96	8.3
	13.6	78	5.8
	7.5	75	10
January	6.8	63	9.3

Note: It is the Company policy to announce all stones sold with a value of in excess of USD50k.

Financials

In the first half of 2022, the Company made an operating loss of £783,000 on turnover of £4,079,000, compared with a loss of £539,000 on turnover of £2,817,000 in the first half of 2021. Loss before taxation was £23,000 compared to £513,000 in 2021.

The increase in turnover reflects the increase in prices in rough diamonds seen over the period.

The increase in the operating loss despite the increase in turnover reflects the reduction in grades achieved whilst the mine development has been taking place, together with rising costs. Diesel fuel, which is used extensively in the mining operation and to provide generated power to the plant, has increased by 53% and certain explosive costs have almost doubled. In addition, the mine has higher staff/employee costs in anticipation of the step up in production. Depreciation has had a major impact on the operating loss and has increased from £161,000 to £488,000, as the new plant is depreciated from the date it was brought into use.

Unrestricted cash at 30 June 2022 was £429,000.

Financing

In March 2022, the Company raised gross proceeds of £2.1 million by way of a placing and subscription, as well as settling £580,000 of creditors through issuing shares.

The funding was required to provide additional working capital to the Company in order to:

1. implement its upgraded mining plan to ensure consistent supply of quality ore to the processing plant - optimising the throughput of the new 1 million tonne per annum ('Mtpa') plant, while maximising the economic life of the mine; and
2. pay its mining contractor, Teichmann SA Limited ("TSA"), in order to accommodate the impact of the two operation shutdowns experienced in Q4 2021.

In addition, since the period end the Company has entered into agreements with the Teichmann Group as described further in the Post Balance Sheet Events section below to provide up to £1,950,157 and ZAR30m of additional funding before costs.

Guidance