Burgundy Diamond Mines : Annual Report to Shareholders

Annual Report

For the period ended 31 December 2023

Contents

Corporate Directory .................................................................................................................................................................... 2

Managing Directors' Report ...................................................................................................................................................... 3

Directors' Report ......................................................................................................................................................................... 5

Lead Auditor's Independence declaration ............................................................................................................................... 23

Financial Statements .................................................................................................................................................................. 24

Consolidated Statement of Loss and Other Comprehensive Loss ............................................................................. 25

Consolidated Statement of Financial Position .............................................................................................................. 26

Consolidated Statement of Changes in Equity ............................................................................................................. 27

Consolidated Statement of Cash Flows ......................................................................................................................... 28

Notes to the Consolidated Financial Statements ................................................................................................................... 29

Directors' Declaration ................................................................................................................................................................. 73

Independent Auditor's Report .................................................................................................................................................. 74

Corporate Governance Statement ........................................................................................................................................... 81

ASX Additional Information ....................................................................................................................................................... 82

Corporate Directory

Board of Directors

Telephone:	08 6313 3945
Website:	www.burgundydiamonds.com
Email:	[e-mail]

Michael O'Keeffe Kim Truter

Marc Dorion Stephen Dennis Trey Jackson

Company Secretary Brad Baylis Registered Office

Level 25

South32 Tower

108 St Georges Terrace Perth WA 6000

Executive Chair

Chief Executive Officer and Managing Director Non-Executive Director

Non-Executive Director (Appointed 30 January 2024) Non-Executive Director (Appointed 30 January 2024)

Stock Exchange Listing

Listed on the Australian Securities Exchange (ASX Code: BDM)

Auditors

KPMG Australia

235 St Georges Terrace Perth WA 6000

Share Registry

Automic Share Registry

Level 5, 191 St Georges Terrace Perth WA 6000

Telephone: [phone]

Managing Directors' Report

On behalf of the Board of Directors, I am pleased to present the Company's Annual Report for the financial period ended 31 December 2023 ("FY2023").

The year was a landmark for the company as we pivoted from a modest-sized exploration company into a globally significant diamond producer. Burgundy is now the world's leading publicly listed end-to-end diamond company, and the biggest diamond producer in Canada and the Group of 7 nations ("G7") worldwide.

In the early half of the year, as the transaction to acquire the Arctic Canadian Diamond Company Ltd. ("ACDC") and Arctic Canadian Diamond Marketing N.V. ("ACDM NV") was underway, we took the time to thoroughly review our portfolio of projects across globe. As a result of this review, we ceased diamond exploration in Botswana, Namibia, and curtailed activities in Chile. We carry 40% stake in the Naujaat project in Nunavut, Canada. We also made the difficult decision to withdraw from the Ellendale alluvial project in Western Australia. The primary reason for these decisions was to focus on the transformational acquisition of Ekati Diamond Mine ("Ekati") in the Northwest Territories of Canada a tier one jurisdiction. Ekati is the seventh largest diamond producer globally and has the third largest diamond endowment. Apart from these characteristics the asset has excellent infrastructure, people, and a plethora of high-quality development options at very low capital cost. This is unique in the industry and speaks to the quality of this asset which has a long history (25 years) of production and has many more years to offer. This asset now forms the benchmark for our growth aspirations.

We successfully completed the Ekati acquisition on 1 July 2023, and we successfully integrated the Burgundy teams throughout Canada, Belgium and Australia. We have continued to enhance our operations and improve the performance across all business units, centred primarily on our Ekati Diamond Mine in Canada's Northwest Territories and our selling activities in Antwerp, Belgium. Our manufacturing facilities in Perth, Australia also produced some of the finest polished fancy diamonds from our very own supply in Canada, ensuring provenance throughout.

I have been pleased to see the entire Burgundy team integrate and engage as one unified organisation under one global brand. Our people have been unwavering in their commitment and professionalism throughout what has been an immense period of change and growth. I would like to thank our people for their endurance, expertise and commitment.

We have worked hard during the year to meet with stakeholders, including investors, customers, contractors, senior government officials and community leaders. We strongly believe that a key to our success will be to treat all stakeholders with respect, as equals and as a valued part of our business. We also hosted some key investors, customers, and stakeholders on a site visit to Ekati mine in November last year, giving them first-hand experience and insight into our world class operations. The feedback from those who attended was extremely positive, in line with the effort and energy of our teams on site.

Importantly, during the year we worked hard to improve and evolve our operations, while maintaining safety as our top priority amid seeking extension of the life of mine at Ekati as well as looking at other growth opportunities. A landmark milestone of 25 years of production and 95 million carats produced was achieved at Ekati in October 2023. This is a terrific achievement and a testament to the quality of this asset, which still contains one of the largest undeveloped diamond resources in the world. We improved and stabilised mining production and consistently achieved mine planning targets each month in the back half of 2023, helping us to achieve the highest tonnage processed in the plant since 2013.

A key focus has been on identifying options to extend the mine life at Ekati. This work started early in the year and were able to develop an exciting new conceptual life of mine plan for Ekati, that will potentially extend operations towards 2040. This will be achieved through the extension of Misery underground, moving underground at Sable, developing an underground mine at Fox, processing a remnant stockpile at Fox, optimising the Point Lake project, and implementing the underwater remote mining project if trials are successful.

We also spent a lot of time reviewing the diamond sales process and diamond inventory pipeline. Whilst there is always room to improve, a key feature of our rough diamond sales process is the proprietary and company owned and managed auction platform. Our team in Antwerp, Belgium manage this process which is high valued and respected in the industry. The system allows full transparency, is competitive and fair to all customers. Most importantly it ensures we receive the most competitive market prices for our diamonds. As a result, we achieved excellent sales results despite a softer market in the second half of the year. This performance clearly demonstrates the strength of the Ekati asset performance, the value of Canadian provenance and how well our proprietary company auction process is managed in Belgium. Furthermore, we sold all available rough diamond inventory by the end of the year.

We are pleased that the global diamond market is also showing resilience and greater opportunities over the short to medium terms thanks, in part, to the responsible actions taken by the industry to manage the supply chain and the support we have received from our existing and new customers. As such, we are very confident in the strength of the natural diamond industry fundamentals where long-term demand is expected to outstrip supply.

In 2024 we will build on our success as we strengthen the long-term production plan at Ekati, further enhance our sales efforts and continue to advance value accretive growth opportunities to cement our position as the leading end to end listed diamond company.

Thank you again for all your support of Burgundy as we continue to grow the business and assert our position as the largest list pure play diamond company in the world.

Kim Truter

Chief Executive Officer and Managing Director

DIRECTORS' REPOR

Directors' Report

The Directors of Burgundy Diamond Mines Limited ("BDM" or "the Company") present their report, together with the financial statements of the consolidated entity consisting of Burgundy Diamond Mines Limited and its controlled entities for the financial period ended 31 December 2023 ("FY2023").

Directors

The names and particulars of the Company's directors in office during the financial period and at the date of this report are as follows. Directors held office for this entire period unless otherwise stated.

Michael O'Keeffe (Executive Chair, appointed 15 June 2017)

Mr. O'Keeffe was the Managing Director of Glencore Australia Limited from 1995-2004 and was Executive Chair of Riversdale Mining Limited prior to that company being acquired by Rio Tinto PLC in 2011. Mr. O'Keeffe is currently the Executive Chair and former Chief Executive Officer of Champion Iron Limited which operates an iron ore project in Canada. Mr. O'Keeffe is a significant shareholder holding 4.78% of the ordinary share capital of the Company.

Current and former directorships of listed entities in the last three years:

Executive Chair of Champion Iron Limited (current)

Non-Executive Director of Mont Royal Resources Limited (current)

Special responsibilities:

Chair of the Board.

Interest in securities:

67,903,535 ordinary shares 5,000,000 convertible notes

Kim Truter (Chief Executive Officer & Managing Director, appointed 17 November 2022 and previously non-executive director, appointed 22 September 2020)

Mr. Truter was most recently the Chief Executive Officer of De Beers Canada from 2015 to 2019. During his tenure he led the successful completion and ramp-up to full production of the $1.0 billion Gahcho Kué diamond project in Canada, as well as the value-adding acquisition of the former Peregrine Diamonds assets. He was also a member of the De Beers Group executive team, driving global business performance across operations, sales, and marketing.

Previously, Mr. Truter served as Chief Operating Officer of Rio Tinto Diamonds, managing their global portfolio in Australia, Canada and Zimbabwe. He also served as Managing Director of Argyle Diamond Mines Pty Limited in Australia and as the President and Chief Operating Officer of Diavik Diamond Mines Inc in Canada.

Mr. Truter brings over 30 years of mining experience in both surface and underground operations and large-scale project development across multiple geographies. He has substantial diamond experience, providing executive global leadership in Canada, Australia and Africa; often in complex, remote and challenging operating environments. He has worked extensively with communities and governments to ensure that local benefits are sustainably established. His proven leadership capabilities include a very strong dedication to safety, productivity and financial performance improvement.

Current and former directorships of listed entities in the last three years:

None.

Special responsibilities: None.

Interest in securities:

527,000 ordinary shares 15,048,526 unlisted options

Marc Dorion (Non-Executive Director, appointed 5 July 2020)

Mr. Dorion is a partner in the Business Law Group of prominent Canadian law firm McCarthy Tétrault, based in Montreal, where he supervises the natural resources group in Québec. He received his LLL from the Université de Sherbrooke, Quebec, Canada then did post graduate studies in corporate taxation at Osgoode Hall Law School, York University. His practice focuses on development, financing, construction and operation of major projects in the natural resources, energy, infrastructure and industrial sectors. He received the titles of Advocate Emeritus from the Quebec Bar and also of Queen's Counsel.

Current and former directorships of listed entities in the last three years:

None.

Special responsibilities:

Chair of the Human Resources and Compensation Committee and member of the Audit and Risk Committee

Interest in securities: 12,541,667 ordinary shares

Stephen Dennis (Non-Executive Director, appointed 30 January 2024)

Mr. Dennis has experience in the resource industry spanning over 35 years during which he held various joint venture roles and senior management positions in Australia and internationally. He has been involved in all aspects of the mining and resources business throughout his career, including the financing and development of major mine projects with strong track record of achieving positive results. He has held senior operational and commercial positions in MIM Holdings Limited, where he spent four years based at Mount Isa Mines operations, CBH Resources Limited, Brambles Australia Limited and Minara Resources Limited.

Current and former directorships of listed entities in the last three years:

Non-Executive Chair of Rox Resources Limited (current)

Non-Executive Chair of Marvel Gold Limited (current)

Non-Executive Director of Evolution Energy Minerals Limited (current)

Special responsibilities:

Chair of the Audit and Risk Committee and member of the Human Resources and Compensation Committee.

Interest in securities: 2,100,000 ordinary shares

Trey Jackson (Non-Executive Director, appointed 30 January 2024)

Mr. Jackson has more than 25 years of experience in the metals & mining and energy sectors as a private equity investor and executive in the US, Canada, Europe, and Australia, including numerous board appointments to private and public companies.

Mr. Jackson was an executive with The Cline Group from 2011 to 2019 as part of the team that built Foresight Energy from a greenfield development into a public company. While at The Cline Group, Mr. Jackson was the Chief Commercial Officer during the period the company developed the Coalspur and Donkin mines in Canada. He also led the acquisition, expansion, and divestment of Cline's subsidiary Convent Marine Terminals and served as company president during his tenure there.

Currently, Mr. Jackson serves as a co-founder of PBE Mining, a mining technology company with global patents and operations in Australia, and Tetra Resources, an Australian mining operator. With his experience serving on boards, including a prior Director role for a NYSE listed company, he brings a depth of experience and knowledge.

Current and former directorships of listed entities in the last three years:

None.

Special responsibilities:

Member of the Audit and Risk committee and member of Human Resources and Compensation Committee.

Interest in securities:

None.

Chief Financial Officer & Company Secretary Brad Baylis (appointed on 26 April 2023)

Mr. Baylis has more than 25 years of experience in the energy and mining sectors in leadership roles spanning commercial, corporate, and operational finance. Mr. Baylis was most recently the Chief Financial Officer for Air Tindi, a regional airline based in Yellowknife in the Northwest Territories of Canada. Previous roles include the Chief Financial Officer of De Beers Canada and the Chief Financial Officer of Riverdale Resources.

Interest in securities:

None.

Principal Activities

The principal activities during the financial year were the operation of the 100% owned world class Ekati diamond mine located in Canada's Northwest Territories, sale of rough diamonds through auctions held in Antwerp Belgium and sale of polished diamonds manufactured in Burgundy's cutting and polishing facility in Perth Australia.

Review of Operations

During the period ended 31 December 2023, the focus of the Company was the integration of the transformational purchase of 100% interest in Ekati mine into the Burgundy portfolio. Specific activities focused on optimising Ekati's current mine performance and extending mine life through underwater remote mining, assessment of the Jay deposit and Fox and Sable Underground opportunities, and systematic exploration using newly applied machine learning (artificial intelligence) technology.

For the purpose of providing comparable information for the period 1 July 2022 to 31 December 2022, the Group has presented tonnes mined, ore processed, carats recovered, carat inventory on hand and carats sold by ACDC and ACDM NV for the period prior to acquisition by Burgundy.

During the period, a total of 9.2 million tonnes were mined, down 28% over the same period in 2022 (July to December 2022: 12.8 million tonnes) due to lower waste movement requirements in 2023. Whereas a total of 2.3 million tonnes of ore were mined, up 77% over the same period in 2022 (July to December 2022: 1.3 million tonnes).

A total of 2.1 million tonnes of ore was processed through the process plant during the period up 8% from the same period in 2022 (July to December 2022: 2.0 million tonnes). The plant performed extremely well in 2023 with the ore processed through the plant for the year was the most since 2014.

During the period, 2.6 million carats were recovered, up 27% versus the same period in 2022 (July to December 2022: 2.0 million carats). Carats recovered were higher than previous period due to better plant performance and improved grade. The Group ended the year with 1.3 million carats in ending inventory up 43% versus ending inventory in 2022 (0.9 million carats). The ending inventory represents the normal work in progress and finished goods inventory based on the current sales cycle.

Capturing incremental margins along the diamond value chain by cutting and polishing coloured Ekati diamonds at Burgundy's commercial facilities in Perth and leveraging collaborative sales agreements with international jewellers remains a key focus.

Further, the Group continues actively assessing merger and acquisition ("M&A") opportunities to build out a balanced portfolio of diamond projects in Tier 1 jurisdictions.

Sales and Marketing

During the period, the Group held seven rough diamonds auctions in our Antwerp office. Out of the seven auctions, five were for regular stones and the remaining two auctions were for special stones (stones over 10.8 carats).

During the period, 2.6 million carats were sold, up 18% over the same period in 2022 (July to December 2022: 2.2 million carats) for total proceeds of $257.5 million up 28% over the same period in 2022 (July to December 2022: $201.5 million). Despite the extremely challenging rough diamond market the Group was able to sell all available product as Ekati Canadian natural diamonds provide customers with sustainably produced high-value diamonds with low fluorescence, optimal assortment, and unique fancy colours.

During the period, the Group's cutting and polishing facilities in Perth continued to operate at full capacity, refining third-party rough diamonds purchased in 2022 and 2023. The Group is developing its channel strategy and anticipates further sales collaborations in 2024.

Corporate

Board and Executive Appointments

On 30 January 2024, the company announced that Mr. Stephen Dennis and Mr. Trey Jackson were joining the board of Burgundy Diamond Mines.

Mr. Dennis, who previously served as Burgundy Chair, re-joined the board as a non-executive independent director and will now also be the Chair of the Audit and Risk Committee. Mr. Dennis is based in Australia and is a highly experienced director who serves on various resource company boards. Prior to his board appointments, Mr. Dennis had a long and illustrious career in the resource industry spanning over 35 years during which he held various senior management positions both in Australia and internationally.

Mr. Jackson, previously served on the board of directors for Arctic Canadian Diamond Company Ltd (subsidiary acquired by Burgundy), joined the board as a non-executive independent director. Mr. Jackson has more than 25 years of experience in the metals & mining and energy sectors as a private equity investor and executive in the US, Canada, Europe, and Australia, including numerous board appointments to private and public companies.

Change of Financial Year-End and Reporting Currency

On 30 November 2023, the Company changed the financial year-end from 30 June to 31 December to align with the operations in Canada. In addition, the Company changed its reporting currency from Australian dollars to US dollars.

Capital Raising

As part of the consideration transferred for the acquisition of Arctic Companies, on 1 July 2023, the Company issued 278,829,226 fully paid ordinary shares escrowed to 1 July 2024, to Arctic Canadian Diamond Holding LLC and 2L Loan Lenders.

Issue of Unlisted Options

On 21 November 2023, the Company issued 10,000,000 unlisted options to the Chief Executive Officer with exercise price of AUD0.30.

On 1 December 2023, the Company issued 12,065,136 options to senior executives including the Chief Executive Officer and Chief Financial Officer with exercise price of AUD0.1764.

Results of Operations

The net loss of the Group for the period ended 31 December 2023 was $0.7 million (30 June 2023: net loss of $17.8 million). The significant decrease in net loss reflects the income generated primarily from sale of rough diamonds recovered from Ekati Diamond Mine during the period, whereas prior year net loss arose from loss on sale of polished diamonds and polished diamond inventory write-down, impairment of Ellendale Diamond Project and transaction costs incurred in acquisition of Arctic Companies.