40-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 40-F

¨ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

x Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2018 Commission File Number: 00132468

MOUNTAIN PROVINCE DIAMONDS INC.
(Exact name of registrant as specified in its charter)

N/A
(Translation of Registrant's name into English (if applicable))

Canada
(Province or other jurisdiction of incorporation or organization)

1499
(Primary Standard Industrial Classification Code Number (if applicable))

N/A
(I.R.S. Employer Identification Number (if applicable))

TD Canada Trust Tower – Brookfield Place
161 Bay Street, Suite 1410
Toronto, Ontario, M5J 2S1
Tel: 416 361 3562
(Address and telephone number of Registrant's principal executive offices)

Registered Agent Solutions Inc.

99 Washington Avenue, Suite 1008

Albany, New York 12260

Tel: 888 705 7274
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Common Shares	NASDAQ

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
(Title of Class)

For annual reports, indicate by check mark the information filed with this Form:

x Annual information form x Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

The number of common shares of the issuer outstanding as of December 31, 2018 was 210,102,476.

Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the filing number assigned to the Registrant in connection with such Rule.

Yes      ¨ NO      x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes      x NO      ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes      ¨ NO       ¨

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company ¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

EXPLANATORY NOTE

Mountain Province Diamonds Inc. (the “Registrant”) is a Canadian issuer eligible to file its annual report pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Registrant is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Equity securities of the Registrant are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3.

NOTICE TO UNITED STATES READERS

DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES

The Registrant is permitted, under the multi-jurisdictional disclosure system adopted by the United States Securities and Exchange Commission (the “Commission”) and certain Canadian securities regulators, to prepare this annual report in accordance with Canadian disclosure requirements, which are different from those of the United States. The Registrant has prepared its financial statements, which are filed as Exhibit 99.2 to this annual report on Form 40-F, in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board (“IFRS”). Financial statements prepared in accordance with IFRS may differ from financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and they may not be comparable to financial statements of United States companies.

Unless otherwise indicated, all dollar amounts in this annual report on Form 40-F are in Canadian dollars. The exchange rate of Canadian dollars into U.S. dollars, on March 19, 2019, based upon the closing rate published by the Bank of Canada, was U.S.$1.00=CDN$1.3292. Bank of Canada exchange rates are nominal quotations and are not buying or selling rates. These rates are intended for statistical or analytical purposes. Rates available from financial institutions will differ. Rates are expressed in Canadian dollars, converted from U.S. dollars.

FORWARD-LOOKING INFORMATION

Certain information included in this annual report and the exhibits attached hereto, along with other documents the Registrant has publicly filed on SEDAR and with the Commission may constitute forward-looking information within the meaning of Canadian and U.S. securities laws, including Section 21E of the Securities Act of 1933, as amended (the “Securities Act”), the U.S. Private Securities Litigation Reform Act of 1995 (the “PSLRA”), or in releases made by the Commission, all as may be amended from time to time. The following cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws.

In some cases, 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, timelines and targets for mining, development, production and exploration activities at the Registrant’s mineral property held through a joint venture with De Beers Canada Inc. (“De Beers”) (51% De Beers and 49% the Registrant), projected capital expenditure requirements, liquidity and working capital requirements, estimated reserves and resources at, and production from, the Gahcho Kué Diamond Mine (“GK Diamond Mine”), exploration activities at the Kennady North Project (“KNP”), and expectations concerning the diamond industry, and expected cost of sales and operating costs. Forward-looking information included in this annual report on Form 40-F and exhibits attached hereto, include the current production forecast for the GK Diamond Mine, estimated reserves and resources at the GK Diamond Mine, and plans, timelines and targets for mining, development, permitting, production and exploration activities at the Registrant’s mineral property. The timing and quantum will depend on a number of factors including production ramp-up, the production profile and realized diamond prices.

3

Forward-looking information is based on certain factors and assumptions regarding, among other things, the current mine plans for the GK Diamond Mine; mining, production and exploration activities at the Registrant’s mineral property; currency exchange rates; required operating and capital costs, labour and fuel costs, world and United States economic conditions, future diamond prices, and the level of worldwide diamond production. While the Registrant 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 Registrant currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with joint venture operations, including risks associated with the inability to control the timing and scope of future capital expenditures, variations in mineral resource and mineral reserve estimates, grade estimates or expected recovery rates, failure of plant, equipment or processes to operate as anticipated, risks associated with regulatory requirements and the ability to obtain all necessary regulatory approvals, modifications to existing practices so as to comply with any future permit conditions that may be imposed by regulators, the risk of fluctuations in diamond prices and changes in United States and world economic conditions, uncertainty as to whether dividends will be declared by the Registrant’s Board of Directors, the risk of fluctuations in the Canadian/U.S. dollar exchange rate and cash flow and liquidity risks. See “Risk Factors” in the Registrant’s Annual Information Form attached hereto as Exhibit 99.1 for additional material risk factors that could cause actual results to differ materially 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 Annual Report, 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 Annual Report, actual events may differ materially from current expectations. The Registrant 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 Registrant, and cautions readers that the information may not be appropriate for other purposes. While the Registrant may elect to, it is under no obligation and does not undertake to update or revise any forward-looking information, whether as a result of new information, future events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Registrant’s filings with Canadian and United States securities regulatory authorities and can be found at www.sedar.com and www.sec.gov, respectively.

4

RESOURCE AND RESERVE ESTIMATES

The Registrant’s Annual Information Form for the fiscal year ended December 31, 2018, attached as Exhibit 99.1 to this annual report on Form 40-F, and incorporated by reference herein, has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) — CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the Commission’s Industry Guide 7 (“Industry Guide 7”) under the Exchange Act. Under Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the Commission. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.

Accordingly, information contained in this report and the documents incorporated by reference herein containing descriptions of our mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

PRINCIPAL DOCUMENTS

The following documents have been filed as part of this annual report on Form 40-F:

A. Annual Information Form

The Registrant’s Annual Information Form for the fiscal year ended December 31, 2018 is attached as Exhibit 99.1 to this annual report on Form 40-F, and is incorporated by reference herein.

5

B. Audited Annual Financial Statements

The Registrant’s consolidated audited annual financial statements as at and for the years ended December 31, 2018 and 2017, including the report of the independent registered public accounting firm with respect thereto, are included in Exhibit 99.2 attached to this annual report on Form 40-F and are incorporated by reference herein.

C. Management’s Discussion and Analysis

The Registrant’s management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2018 is included in Exhibit 99.2 attached to this annual report on Form 40-F and is incorporated by reference herein.

TAX MATTERS

Purchasing, holding or disposing of securities of the Registrant may have tax consequences under the laws of the United States and Canada that are not described in this annual report on Form 40-F.

DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision, and with the participation, of the Registrant’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Registrant’s design and operation of its disclosure controls and procedures as of the end of the period covered by this annual report on Form 40-F. Based upon that evaluation, and incorporated by reference herein, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date. The Registrant’s Management's Annual Report on Internal Control Over Financial Reporting as of December 31, 2018, is included in Exhibit 99.2 attached to this annual report on Form 40-F.

6

MANAGEMENT’S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

The Registrant’s management’s annual report on internal control over financial reporting as of December 31, 2018, is included in Exhibit 99.2 attached to this annual report on Form 40-F and is incorporated by reference herein.

ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM

The Company’s auditor has attested to internal control over financial reporting for the past fiscal year. The auditor’s attestation immediately precedes the audited consolidated financial statements of the Company in Exhibit 99.2 and is incorporated by reference in this AIF.

7

NOTICES PURSUANT TO REGULATION BTR

There were no notices required by Rule 104 of Regulation BTR that the Registrant sent during the year ended December 31, 2018 concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.

CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER, OFFICERS, DIRECTORS AND EMPLOYEES

The Registrant has adopted a written “code of ethics” (as defined by the rules and regulations of the Commission), entitled “Code of Ethics and Business Conduct” that applies to each director, officer and employee, including the Registrant’s Chief Executive Officer, Chief Financial Officer and principal accounting officer.

The code is attached hereto as Exhibit 99.12 to this annual report on Form 40-F. The code may also be obtained from SEDAR at www.sedar.com or free of charge upon request from Investor Relations of the Registrant at Suite 1410, 161 Bay Street, Toronto, Ontario, M5J 2S1, (416) 361-3562, or by viewing the Registrant’s web site at www.mountainprovince.com under the tab entitled “Company/Governance”.

There were no amendments to the code, and no waivers of the code with respect to any director, executive officer or principal financial and accounting officers.

CORPORATE GOVERNANCE GUIDELINES

The Registrant has adopted corporate governance guidelines and established committees and charters for its Audit Committee, Nominating & Corporate Governance Committee and Compensation Committee regarding such matters as, but not limited to, the Audit Committee, director qualification standards and responsibilities, director compensation and management succession. These guidelines and charters are available on the Registrant’s website at www.mountainprovince.com under the tab entitled “Company/Governance”.

8

AUDIT COMMITTEE

The Board of Directors of the Registrant has a separately designated standing Audit Committee. The members of the Audit Committee are:

Chair:	David Whittle
Members:	Bruce Dresner
	Peeyush Varshney

Bruce Dresner was the Chairman of the Audit Committee for 2018 and David Whittle was appointed to the Audit Committee and assumed the role of Chairman effective January 1, 2019.

All members of the Audit Committee are financially literate and independent, as that term is defined by the NASDAQ’s corporate governance listing standards applicable to the Registrant and as determined under Rule 10A-3 of the Exchange Act.

AUDIT COMMITTEE FINANCIAL EXPERT

The Registrant’s Board of Directors has determined that it has two Audit Committee financial experts serving on its Audit Committee. Bruce Dresner and David Whittle has been determined by the Board of the Registrant to be an “audit committee financial expert” as that term is defined by the rules and regulations of the Commission and are independent, as that term is defined by applicable securities laws and the NASDAQ (“NASDAQ”) listing standards applicable to the Registrant. The Commission has indicated that the designation of directors as audit committee financial experts does not (i) make them an “expert” for any purpose, (ii) impose any duties, obligations or liability on them that are greater than those imposed on members of the Audit Committee and Board of Directors who do not carry this designation, or (iii) affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors of the Registrant.

Mr. Dresner is a Chartered Financial Analyst and holds a Master of Business Administration and a Bachelor of Arts (Economics).

Mr. Whittle is a Chartered Professional Accountant, Chartered Accountant and holds a Bachelor of Commerce (Finance).

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed for professional services rendered by KPMG LLP to the Registrant and its subsidiaries for the years ended December 31, 2018 and December 31, 2017 totaled $691,378 and $481,411, respectively, as detailed in the following table:

Auditor’s Fees	2018 CAD$		% of Total Fees		2017 CAD$		% of Total Fees
Audit Fees:
Audit		520,000		89.8		526,050		72.8
Audit related		36,400		6.3		165,759		22.9
Total Audit and Audit Related Fees		556,400		96.1		691,809		95.7
Tax Fees:
Planning and advice		9,623		1.7		11,244		1.6
Compliance		13,142		2.3		19,667		2.7
Total Tax Fees		22,765		3.9		30,911		4.3
Total Fees		579,165		100.0		722,720		100.0

9

Tax Fees

Tax fees were for tax compliance, tax advice and tax planning professional services. These services consisted of: tax compliance including the review of tax returns, and tax planning and advisory services.

PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES PROVIDED BY
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

It is within the mandate of the Registrant’s Audit Committee to approve all audit and non-audit related fees and accordingly 100% of the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees were approved by the Audit Committee. The charter of the Audit Committee requires the Audit Committee to review and approve the engagement of the external auditors to perform non-audit services, together with the fees therefore, and the impact thereof, on the independence of the external auditors.

The Registrant’s Audit Committee has implemented a policy restricting the services that may be provided by the Registrant’s auditors and the fees paid to the Registrant’s auditors. Prior to the engagement of the Registrant’s auditors to perform both audit, and non-audit services, the Audit committee pre-approves the provision of the services. In making their determination regarding non-audit services, the Audit Committee considers compliance with the policy and the provision of non-audit services in the context of avoiding an adverse impact on auditor independence. All audit and non-audit fees paid to KPMG LLP, for the financial year ended December 31, 2018, were pre-approved by the Registrant’s Audit Committee and none were approved on the basis of the de minimis exemption set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X. Based on the Audit Committee’s discussions with management and the independent auditors, the Audit Committee is of the view that the provision of non-audit services by KPMG LLP described above is compatible with maintaining the firm’s independence from the Registrant.

OFF-BALANCE SHEET ARRANGEMENTS

The Registrant currently has no off-balance sheet arrangements.

10

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table lists as of December 31, 2018, information with respect to the Registrant’s known contractual obligations in Canadian dollars:

	Less than			1 to 3		4 to 5		After 5
	1 Year			Years		Years		Years		Total
Operating lease obligations	$	231		$	471	$	473	$	79	$	1,254
Gahcho Kué Diamond Mine commitments		1,578			-		-		-		1,578
Gahcho Kué Diamond Mine operating lease obligations		798			806		190		-		1,794
Revolving credit facility stand by charges		843			808		-		-		1,651
Notes payable - Principal		-			-		422,262		-		422,262
Notes payable - Interest		34,250			68,594		34,250		-		137,094
Forward Exchange Contracts:
(Inflows)		(33,500	)		-		-		-		(33,500	)
Outflows		34,060			-		-		-		34,060
	$	38,260		$	70,679	$	457,175	$	79	$	566,193

For further information on the tabular disclosure of contractual obligations, see page 22 of the management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2018 of the Registrant, incorporated by reference and included herein as Exhibit 99.2 of this annual report on Form 40-F.

COMPLIANCE WITH NASDAQ
CORPORATE GOVERNANCE RULES

The Company’s common shares are quoted for trading on the NASDAQ under the symbol “MPVD”. NASDAQ Rule 5615(a)(3) permits a foreign private issuer to follow its home country practice in lieu of the NASDAQ corporate governance requirements if such issuer, amongst other requirements, makes appropriate disclosure in its annual report filed with the SEC relating to each requirement of Rule 5600 that it does not follow including a brief statement of the home country practice it follows in lieu of such Nasdaq corporate governance requirements.

The Registrant has reviewed the NASDAQ corporate governance requirements. Except as described below, the Registrant is in compliance with the NASDAQ corporate governance standards in all significant respects:

Approval of Equity Compensation Plans

Section 5635 the NASDAQ Marketplace Rules requires shareholder approval to be obtained in connection with the undertaking of certain actions. The circumstances under which shareholder approval is required under the NASDAQ Marketplace Rules are not identical to the circumstances under which shareholder approval is required under Canadian and Toronto Stock Exchange (the “TSX”) requirements. For example, but without limitation, Section 5635 requires shareholder approval of most equity compensation plans and material revisions to such plans. This requirement covers plans that provide for the delivery of both newly issued and treasury securities. The TSX rules provide that only the creation of or certain material amendments to equity compensation plans that provide for new issuances of securities are subject to shareholder approval. The Registrant follows the TSX rules with respect to the requirements for shareholder approval of potential transactions, including, without limitation, shareholder approval of equity compensation plans and material revisions to such plans.

11

Compensation Committee Independence

The Registrant has elected not to follow Section 5605(d) NASDAQ Marketplace Rules applicable to charters and independence of Compensation Committee members and advisors for United States domestic issuers. As a foreign private issuer, the Registrant is not required to comply with these rules and follows the TSX rules.

Further information about the Registrant’s governance practices is included on the Registrant’s website at www.mountainprovince.com.

MINE SAFETY DISCLOSURE

Not applicable.

UNDERTAKING

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

ADDITIONAL INFORMATION

Additional information relating to the Registrant may be found on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on the Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system at www.sec.gov.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

DATED the 20th day of March, 2019.

MOUNTAIN PROVINCE DIAMONDS INC.
(Registrant)

By:	/s/ STUART BROWN
Name: Stuart Brown

12

EXHIBIT INDEX

EXHIBIT	DESCRIPTION OF EXHIBIT
99.1	The Registrant’s Annual Information Form for the fiscal year ended December 31, 2018
99.2	Management’s Annual Report on Internal Control Over Financial Reporting, Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, Independent Auditors’ Report on the Consolidated Financial Statements and Independent Auditors’ Report on Internal Control Over Financial Reporting and Management's Discussion and Analysis for the year ended December 31, 2018
99.3	Certification by the Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) or 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.4	Certification by the Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) or 15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.5	Certification by the Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.6	Certification by the Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.7	Consent of KPMG LLP, Independent Registered Public Accountants
99.8	Consent of Kevyan Salehi, P. Eng, MBA, in connection with the “Mineral Reserve Statement Estimate” with information effective as of December 31, 2018
99.9	Consent of Tom McCandless, P. Eng, in connection with the “Mineral Resource Statement” with information effective as of December 31, 2018
99.10	Consent of Gary Vivian, M.Sc., P. Geo. in connection with the “2016 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” and “2017 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31st, 2018.
99.11	Consent of Tom E. Nowicki, Ph.D., P. Geo. in connection with the “2016 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” and “2017 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31st, 2018.
99.12	Code of Ethics and Business Conduct

13

EX-99.1

Exhibit 99.1

MOUNTAIN PROVINCE DIAMONDS INC.

Annual Information Form

For the

Year Ended December 31, 2018

March 20, 2019

MOUNTAIN PROVINCE DIAMONDS INC.

TABLE OF CONTENTS

CORPORATE STRUCTURE	2
NAME, ADDRESS AND INCORPORATION	2
INTERCORPORATE RELATIONSHIPS	3
GENERAL DEVELOPMENT OF THE BUSINESS	4
THREE YEAR HISTORY	4
DESCRIPTION OF THE BUSINESS	6
GENERAL	6
Principal Markets and Distribution	6
Competitive Conditions	7
Employees	8
Specialized Skills and Knowledge	8
Environmental Protection	8
MINERAL PROPERTIES	8
The Gahcho Kué Diamond Mine	9
Property Location, Access and Infrastructure	9
Overall Site Plan	10
History	10
Mineral Tenure and Royalties	11
Permits and Agreements	11
Geology	12
Exploration	12
Drilling	12
Sampling and Analyses	13
Mineral Reserve and Mineral Resource Estimates	13
Mining Method	15
Recovery Methods	15
Underground Mining	15
Capital and Operating Costs	16
Capital Cost Estimate	16
Operating Cost Estimate	16
Other Relevant Data and Information	17
Social and Environmental Policies	17
Aboriginal Issues and Local Resources at the GK Diamond Mine	17
Environmental Requirements for the GK Diamond Mine	17
The Kennady North Project	18
Property Location, Access and Infrastructure	19
History	19
Mineral Tenure	19
Geological Setting and Deposit Type	20
Drilling	20
Sampling and Analyses	21
Mineral Resource Estimates	21
RISKS FACTORS	22
DIVIDENDS	27
DESCRIPTION OF CAPITAL STRUCTURE	27
MARKET FOR SECURITIES	29
DIRECTORS AND OFFICERS	30
AUDIT COMMITTEE	35
LEGAL PROCEEDINGS	36
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	36
TRANSFER AGENT AND REGISTRAR	36
INTERESTS OF EXPERTS	37
MATERIAL CONTRACTS	37
ADDITIONAL INFORMATION	38
APPENDIX 1: AUDIT COMMITTEE CHARTER	38
APPENDIX 2: GLOSSARY OF TERMS USED FREQUENTLY IN THIS DOCUMENT	41

Currency

Unless otherwise specified, all dollar references are to Canadian dollars. On March 19, 2019, one Canadian dollar was worth approximately $0.7523 in United States currency, based on the noon exchange rate of the Bank of Canada.

Caution Regarding Forward-Looking Information

This Annual Information Form (“AIF”) contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian and United States securities laws concerning the business, operations and financial performance and condition of Mountain Province Diamonds Inc. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and mine life of the project of Mountain Province; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; the future price of diamonds; the estimation of mineral reserves and resources; the ability to manage debt; capital expenditures; the ability to obtain permits for operations; liquidity; tax rates; and currency exchange rate fluctuations. Except for statements of historical fact relating to Mountain Province, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be”, “potential” and other similar words, or statements that certain events or conditions “may”, “should” or “will” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of Mountain Province and there is no assurance they will prove to be correct.

Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include variations in ore grade or recovery rates, changes in market conditions, changes in project parameters, mine sequencing; production rates; cash flow; risks relating to the availability and timeliness of permitting and governmental approvals; supply of, and demand for, diamonds; fluctuating commodity prices and currency exchange rates, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated.

These factors are discussed in greater detail in this AIF and in Mountain Province's most recent MD&A filed on SEDAR, which also provide additional general assumptions in connection with these statements. Mountain Province cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Mountain Province believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this AIF should not be unduly relied upon. These statements speak only as of the date of this AIF.

1

Although Mountain Province has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Mountain Province undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve and resource estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the mineralization that will be encountered as the property is developed.

Further, Mountain Province may make changes to its business plans that could affect its results. The principal assets of Mountain Province are administered pursuant to a joint venture under which Mountain Province is not the operator. Mountain Province is exposed to actions taken or omissions made by the operator within its prerogative and/or determinations made by the joint venture under its terms. Such actions or omissions may impact the future performance of Mountain Province. Under its current note and revolving credit facilities Mountain Province is subject to certain limitations on its ability to pay dividends on common stock. The declaration of dividends is at the discretion of Mountain Province’s Board of Directors, subject to the limitations under the Company’s debt facilities, and will depend on Mountain Province’s financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

CORPORATE STRUCTURE

Name, Address and Incorporation

Mountain Province Diamonds Inc., formerly Mountain Province Mining Inc., was formed on November 1, 1997 by the amalgamation of Mountain Province Mining Inc. ("Old MPV") and 444965 B.C. Ltd. ("444965"). The Company changed its name from Mountain Province Mining Inc. to Mountain Province Diamonds Inc. effective October 16, 2000. It commenced trading under its new name on the Toronto Stock Exchange (the “TSX”) on October 25, 2000.

Pursuant to an arrangement agreement (the "Arrangement Agreement") with Glenmore Highlands Inc. (“Glenmore”) dated May 10, 2000, Glenmore was amalgamated with a wholly owned subsidiary of the Company to form a new wholly-owned subsidiary ("Mountain Glen") of the Company. Glenmore had two wholly-owned subsidiaries, Baltic Minerals BV, incorporated in the Netherlands, and Baltic Minerals Finland OY, incorporated in Finland. Pursuant to the Arrangement Agreement, these companies became wholly-owned subsidiaries of the Company.

Pursuant to an Assignment and Assumption Agreement dated March 25, 2004 between the Company and Mountain Glen, Mountain Glen distributed its property and assets in specie to the Company. Mountain Glen was voluntarily dissolved on August 4, 2004. Baltic Minerals BV and its subsidiary Baltic Minerals Finland OY were voluntarily dissolved in 2006.

On September 20, 2005, the Company continued incorporation under the Business Corporations Act (Ontario).

On October 1, 2014, Camphor Ventures Inc. (formerly Sierra Madre Resources Inc.) and the Company were amalgamated under the name “Mountain Province Diamonds Inc.”

On October 2, 2014, 2435386 Ontario Inc. was incorporated as a wholly owned subsidiary of the Company. At the request of the project debt facility lenders, the participating interest of the Company in the Gahcho Kué Project was transferred to 2435386 Ontario Inc. in exchange for common shares of 2435386 Ontario Inc.

2

On October 3, 2014, 2435572 Ontario Inc. was incorporated as a wholly owned subsidiary of the Company.

On October 3, 2014, the Company transferred the shares of 2435386 Ontario Inc. to 2435572 Ontario Inc. in exchange for common shares of 2435572 Ontario Inc.

On April 13, 2018, the Company acquired all of the outstanding common shares of Kennady Diamonds Inc. in exchange for common shares of Mountain Province Diamonds Inc.

The names of the Company's subsidiaries, their dates of incorporation and the jurisdictions in which they were incorporated as at the date of filing of this AIF, are as follows:

Name of Subsidiary	Date of Incorporation	Jurisdiction of Incorporation
2435386 Ontario Inc.	October 2, 2014	Ontario Canada
2435572 Ontario Inc.	October 3, 2014	Ontario Canada
Kennady Diamonds Inc.	February 27, 2012	Ontario Canada

The Company's registered, records, administrative, and executive office is at 161 Bay Street, Suite 1410, PO Box 216, Toronto, Ontario, Canada M5J 2S1, the telephone number is (416) 361-3562, and the fax number is (416) 603-8565.

The Company is a reporting issuer in every province of Canada other than Quebec, and the common shares of the Company are listed and posted for trading on the TSX and NASDAQ under the symbol “MPVD”.

Intercorporate Relationships

As at March 20, 2019, Mountain Province’s corporate structure was as follows:

 

3

GENERAL DEVELOPMENT OF THE BUSINESS

Mountain Province Diamonds Inc. 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 49% ownership interest in the Gahcho Kué diamond mine (the “GK Diamond Mine”. The GK Diamond Mine is located in Canada’s Northwest Territories.

The Company acquired its interest in the mineral claims and properties that were developed into the GK Diamond Mine in August 1992. The GK Diamond Mine was built and is operated by a joint venture (the “Gahcho Kué Joint Venture”) in which the Company has an undivided 49% interest. The other joint venture participant, De Beers Canada Inc. (“De Beers”), has an undivided 51% interest.

Three Year History

Fiscal 2016

During 2016, the construction of the GK Diamond Mine was substantially completed and during June 2016 the Company announced that the GK Diamond Mine had achieved mechanical completion of the primary crusher and that commissioning of the process plant was progressing well. On August 3, 2016, the Company announced that commissioning of the Gahcho Kué diamond plant had been completed ahead of schedule, that ramp up to commercial production had commenced and that the GK Diamond Mine remained on track to achieve commercial production on schedule during the first quarter of 2017. On March 2, 2017, the Company announced that it had declared commercial production on March 1, 2017.

During 2016, the Company through its subsidiary 2435386 Ontario Inc. signed agreements with Diamond Manufacturing Management and Consultancy Ltd. (“DMMC”), a company incorporated in Mauritius, Worldwide Diamond Manufacturers Pvt Ltd. (“WDM”), a company incorporated in India, and with Bonas-Couzyn (Antwerp) N.V. (“Bonas”), a Company incorporated in Belgium to provide consultancy, cleaning and sorting services and marketing of the diamonds respectively.

DMMC is a diamond consulting company and has technical experts who are assisting in overseeing the sorting and pricing of the rough diamonds before they are sent to WDM to be cleaned and sorted into saleable parcels. On completion of the cleaning and sorting the rough diamonds are sent to Bonas based in Antwerp where they are presented to purchasers selected by Bonas and 2435386 Ontario Inc. for sale by open tender.

Fiscal Year 2017

On March 1, 2017, De Beers as Operator of the GK Diamond Mine determined that over a 30-day period, approximately 70% of the designed production capacity among other criteria had been achieved, and commercial production was declared for financial reporting purposes.

Under the Gahcho Kué Joint Venture Agreement (see Mineral Properties – History on page 8), commercial production for sunk cost repayment purposes is based on the first day after 30 days (excluding maintenance days) of achieving and maintaining 70% of designed production capacity. For royalty purposes for the Government of the Northwest Territories, commercial production is based on the first day after 90 days of achieving 60% of designed production capacity.

During 2017, the GK Diamond Mine recovered approximately 5.9 million carats of diamonds on a 100% basis and the Company received its 49% share or approximately 2.9 million carats. During 2017, the Company sold approximately 2.7 million carats of diamonds, including pre-commercial production sales. The Company conducted ten sales during 2017.

4

In December 2017, the Company through its subsidiary 2435386 Ontario Inc. renewed agreements with DMMC, WDM and Bonas for 12 months to December 31, 2018.

On December 11, 2017, Mountain Province closed a private offering of US$330,000,000 senior secured second lien notes due December 15, 2022 (the "Notes"). The Notes accrue interest at a coupon rate of 8.0% per year, payable semi-annually in arrears. Pursuant to an indenture, dated December 11, 2017, between Mountain Province, the guarantors and Computershare Trust Company, N.A. (the "Mountain Province Indenture"), the Notes are initially guaranteed on a senior secured basis by all of Mountain Province's existing subsidiaries and thereafter by all of Mountain Province's restricted subsidiaries (as such term is defined in the Mountain Province Indenture). The Notes and the guarantees are secured on a second-priority basis by substantially all of the assets of Mountain Province and the guarantors, including diamonds in inventory, equity interests in the guarantors and the assignment and pledge of Mountain Province's participation interests and rights in the Gahcho Kué Joint Venture, subject to certain customary exceptions.

Mountain Province used the net proceeds from the offering of the Notes, together with cash on its balance sheet, to fully repay and terminate its US$370 million project loan facility (of which US$357 million was outstanding as of September 30, 2017), to fully repay amounts owing to De Beers for historic sunk costs related to the development of the mine (of which approximately C$48.5 million of costs and accumulated interest was outstanding as of September 30, 2017), and to pay related fees and expenses of the offering of the Notes and the entry into the Revolving Credit Agreement (defined below). The Mountain Province Indenture agreement can be viewed at www.SEDAR.com filed on December 21, 2017 under ‘Material Documents’.

Concurrently with the closing of the Notes offering, Mountain Province entered into an undrawn US$50 million first lien revolving credit facility agreement, dated December 11, 2017, among 2435572 as borrower, Mountain Province and 2435386 as guarantors, Scotiabank as administrative agent, and Scotiabank and Nedbank Limited, London Branch as lenders (the "Revolving Credit Agreement"). The liens securing the Notes are junior to liens securing the Revolving Credit Agreement.

The Revolving Credit Agreement contains customary covenants for such facility and financial maintenance covenants, including total leverage ratio and interest coverage ratio. The Revolving Credit Agreement also restricts Mountain Province's ability to make certain payments and distributions, including dividend payments, except where no default or event of default has occurred or would result and certain threshold tests of financial health are met.

Fiscal Year 2018

During 2018, the GK Diamond Mine recovered approximately 6.9 million carats of diamonds on a 100% basis and the Company received its 49% share or approximately 3.4 million carats. During 2018, the Company sold approximately 3.3 million carats of diamonds. The Company conducted ten sales during 2018.

During the year ended December 31, 2018, the Company repurchased $26.4 million (US$20.1 million) of outstanding secured notes.

In the year ended December 31, 2018, the Company declared and paid a dividend of $0.04 per common share totaling $8.4 million.

5

On January 29, 2018, Mountain Province and Kennady jointly announced that they had entered into a definitive arrangement agreement dated January 28, 2018 (the "Kennady Arrangement Agreement"), whereby, subject to the terms and conditions of the Kennady Arrangement Agreement, Mountain Province acquired all of the issued and outstanding common shares of Kennady Diamonds Inc. ("Kennady") by way of a statutory plan of arrangement (the "Kennady Arrangement") under the Business Corporations Act (Ontario). Under the terms of the Kennady Arrangement, shareholders of Kennady received, in exchange for each common share of Kennady held at the effective time of the Kennady Arrangement, 0.975 of a common share of Mountain Province. The Kennady Arrangement constitutes a "related party transaction" for purposes of Multilateral Instrument 61-101, because (i) Kennady is a "related party" of the Company by virtue of Mr. Dermot Fachtna Desmond, together with Bottin (International) Investments Ltd., a corporation controlled by him, being a "control person" (as defined in section 1(1) of the Securities Act (Ontario)) of both the Company and Kennady, and (ii) the Arrangement resulted in the Company acquiring Kennady through an arrangement.

Concurrently with the signing of the Kennady Arrangement Agreement, the Company entered into voting and support agreements (the "Kennady Voting and Support Agreements") with certain Kennady shareholders, namely Mr. Desmond, Bottin (International) Investments Ltd., and all of the directors and officers of Kennady, pursuant to which, and subject to the terms of which, they agreed, among other things, to vote their common shares of Kennady in favour of the Kennady Arrangement resolution.

On March 16, 2018, the Company announced it had signed a non-binding memorandum of understanding (“MoU”) with De Beers. The MoU contemplates a framework under which properties owned by Kennady would be incorporated into the Gahcho Kué joint venture, in the event that the Company’s proposed acquisition of Kennady is approved.

The Kennady Arrangement Agreement can be viewed at www.sedar.com, filed on February 7, 2018 under 'Material Documents'. The Kennady Arrangement became effective on April 13, 2018.

Fiscal Year 2019

During 2019, the GK Diamond Mine operational plan anticipates total ore processing of approximately 3.1 million to 3.2 million tonnes, recovering between 6.6 million and 6.9 million carats (100% basis) and reflecting a recovered grade of between 2.12 cpt and 2.16 cpt. The Company expects to conduct ten sales during 2019.

DESCRIPTION OF THE BUSINESS

General

The Company is focused on the mining and marketing of rough diamonds to the global market. The Company’s participation in the mining sector of the diamond industry is through its ownership interest in 2435386 Ontario Inc., which is a 49% participant in the Gahcho Kué Joint Venture which owns and operates the GK Diamond Mine in the Northwest Territories.

The Company is also engaged in diamond exploration in an area of interest immediately adjacent to the Gahcho Kué Joint Venture through its wholly-owned subsidiary, Kennady Diamonds Inc.

Principal Markets and Distribution

The Company markets its 49% share of production from the GK Diamond Mine by sorting and valuing diamonds that are then sold through the facilities of the international diamond market in Antwerp, Belgium.

6

Competitive Conditions

The Global Diamond Industry Report 2018 published by Bain & Company Inc. (the “Bain Report”), reported that after a period of high volatility, every segment of the value chain improved in 2017, with industry revenue growing around 2%. For 2018, Bain & Company expects diamond industry revenues to continue to trend upward, and projects accelerated growth in the mining and jewelry sectors.

According to the Bain Report, rough diamond producers delivered production growth of nearly 20% by volume in 2017. Mining company revenues grew by 2% overall, indicating a positive trajectory for the second year in a row, but a lower average price per carat of goods recovered. Some of the major producers reported margin pressure from unfavourable exchange rates in 2017, however the profitability of mining companies rebounded in the first half of 2018.

The long term outlook for the diamond market, as stated in the Bain Report, remains positive. The report states that rough diamond supply peaked in 2017 with projected future output expected to remain stable at best. Rough supply growth is forecast to be negative 1% to 1% annually in volume terms, with demand for natural diamonds expected to grow up to 2% per annum in real terms over the next decade. Bain & Company's outlook reflects long-term supply and demand factors and takes into account possible demand substitution from lab-grown diamonds. The long term outlook is backed by strong fundamentals in the US, the world’s largest diamond jewelry market, and the continued growth of the middle class in China and India.

Midstream players’ profitability remained positive with margins between 1 to 3%. Midstream inventories increased in 2017 and 2018, particularly in lower quality and smaller size assortments.

The Bain Report states that global retail sales of diamond jewelry increased in 2017 due to a strong U.S. economy, a resurgence of luxury spending among Chinese millennials, and increasing sales in the self-purchase category in China.

According to the Bain Report, there are three challenges and trends shaping the future of the diamond industry: advancements in digital technologies, the development of lab-grown diamonds and generational shifts in consumer preferences.

Digital technologies are improving transparency and operational performance across all segments of the value chain. Mining companies are using predictive maintenance, real-time controls and artificial intelligence to mitigate rising operating costs. Polished manufacturers are seeking advancements in digital mapping, modelling and automated manufacturing. 2018 saw the launch of blockchain platforms that securely track diamonds from the mine to the end consumer. Blockchain technology is expected to improve value chain efficiencies, provide greater visibility and transparency for lenders and ultimately, improve consumer confidence in the end product. Digital technologies are also changing consumer behaviour and redefining the business models of diamond jewelry retailers.

The second trend noted in the Bain Report is the growing presence of lab-grown diamonds, the impact of which on natural diamond demand and price will depend on consumers’ perceptions and preferences. In 2018, De Beers launched a lab-grown fashion jewelry retailer called Lightbox Jewelry, with the aim of creating a differentiated market segment for mass-produced, lab-grown diamonds. In the short to medium term, growth of lab-grown diamonds is expected to be limited by manufacturing capacity, access to technology and intellectual property, and availability of funding. Bain & Company expects that over time, lab-grown diamonds may become more accessible to a wider consumer audience, potentially increasing demand for diamonds in general.

7

The third trend noted in the Bain Report is the shifting preferences of younger generations of consumers. The purchasing preferences of this increasingly important demographic are causing industry players to adjust their marketing strategies and distribution models. The self-purchase product category continues to grow through the rising spending power of female millennial and Generation Z consumers. Younger generations are also heavily influenced by social networks, which are enabling and influencing new direct-to-consumer and online sales models.

Employees

As at March 20, 2019, the Company had 11 employees and retained no part-time consultants.

Persons employed at the GK Diamond Mine are employees of De Beers, the operator of the GK Diamond Mine.

Specialized Skills and Knowledge

The Company’s success at marketing diamonds is dependent on the services of key executives and skilled employees, and the continuance of key relationships with certain third parties, such as diamantaires for the marketing of rough diamonds. The Company competes for these skilled employees with other diamond producers.

De Beers, as operator of the GK Diamond Mine, is responsible for ensuring that it has the mining engineers and skilled miners required to mine the diamonds and process the diamond production from the GK Diamond Mine. De Beers competes for these skilled employees with other mines in the Northwest Territories and elsewhere in Canada. The Company is not responsible for the hiring or retention of these skilled employees.

Environmental Protection

The Gahcho Kué Diamond Mine is subject to environmental requirements and conditions of operation contained in several statutes and administered by Canadian federal and Northwest Territorial authorities. These requirements and conditions may change from time to time, and a breach of legislation may result in the imposition of fines or penalties. Environmental legislation continues to evolve in a manner such that standards, enforcement, fines and penalties for non-compliance are becoming stricter. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies, directors, officers and employees. The cost of compliance with changes in government regulations has the potential to reduce the profitability of future operations.

Northwest Territories’ requirements are administered by the various territorial government departments and Workers’ Safety and Compensation Commission-Prevention Services. Laws and regulations that might impact the Gahcho Kué Diamond Mine include those that protect heritage resources, wildlife and the environment and those that regulate workplace safety, mine safety, training in the handling of dangerous materials, road transportation, air quality, and the use of hazardous substances and pesticides.

Mineral Properties

The Company holds a 49% undivided interest in the Gahcho Kué Diamond Mine, and a 100% undivided interest in exploration mineral properties managed under its wholly-owned subsidiary, Kennady Diamonds Inc.

8

The Gahcho Kué Diamond Mine

Property Location, Access and Infrastructure

The GK Diamond Mine is located in the Northwest Territories (“NWT”) of Canada, in the District of Mackenzie, 300 km east-northeast of Yellowknife and 80 km east-southeast of the Snap Lake Mine (owned by De Beers and currently on care and maintenance). The site lies on the edge of the continuous permafrost zone in an area known as the barren lands. The surface is characterised as heath/tundra, with occasional knolls, bedrock outcrops, and localised surface depressions interspersed with lakes. A thin discontinuous cover of organic and mineral soil overlies primarily bedrock, which, occurs typically within a few metres of surface. Some small stands of stunted spruce are found in the area. There are myriad lakes in the area. Kennady Lake, under which the kimberlite pipes lie, is a local headwater lake with a minimal catchment area.

A winter road connects Yellowknife to the Snap Lake, Ekati, and Diavik mines during February and March each year (Figure 1-1). The road is operated under a Licence of Occupation by the winter road joint venture partners who operate the Ekati, Diavik, and Snap Lake mines (Snap Lake ceased operations in December 2015). The GK Diamond Mine became a winter road joint venture partner in 2013. The road passes within 70 km of the GK Diamond Mine, at Mackay Lake. A 120 km winter road spur has been established from Mackay Lake to the project site, and was open in 1999, 2001, 2002, 2006, 2013, 2014, 2015, 2016, 2017 and 2018. The 120 km winter road spur will be constructed each year to support the mining operation.

The GK Diamond Mine is typical of many northern Canadian mining operations that lack local and regional infrastructure such as permanent road access, navigable shipping routes and ports, and external utilities. Therefore, the Gahcho Kué site requires extensive infrastructure to sustain operations, including power generation, sewage and water treatment, personnel accommodation for 478 people, storage facilities for materials delivered on the limited annual winter ice road, and a 1600-meter-long gravel airstrip that can be accessed in both summer and winter months with small and large aircrafts during the day and at night to provide year-round cargo, food and passenger aircraft access.

9

Overall Site Plan

 

History

In August 1992, the Company acquired a 100% interest in the mineral properties upon which the GK Diamond Mine is situated. During 2002, the Company entered into the Gahcho Kué Joint Venture Agreement with De Beers and Camphor Ventures Inc. This agreement provided that De Beers could have earned up to a 55% interest in the project by funding and completing a positive definitive feasibility study.

The agreement also provided that De Beers could have earned up to a 60% interest in the project by funding development and construction of a commercial-scale mine. This Gahcho Kué Joint Venture Agreement was amended and restated in July 2009, pursuant to which the De Beers ownership interest was established at 51% of the GK Diamond Mine and the Company’s at 49%.

10

Mineral Tenure and Royalties

A royalty is payable to the government of the Northwest Territories (the “NWT Royalty”). The NWT Royalty is equal to the lesser of either (i) 13% of the output value of the mine, or (ii) an amount calculated based on a sliding scale of royalty rates dependent upon the value of output of the mine, that can range from 0% to 14%.

		Royalty Payable on that
	Dollar Value of the Output of the Mine*	Portion of the Value
1.	10,000 or less		0	%
2.	greater than 10,000 but not greater than 5 million		5	%
3.	greater than 5 million but not greater than 10 million		6	%
4.	greater than 10 million but not greater than 15 million		7	%
5.	greater than 15 million but not greater than 20 million		8	%
6.	greater than 20 million but not greater than 25 million		9	%
7.	greater than 25 million but not greater than 30 million		10	%
8.	greater than 30 million but not greater than 35 million		11	%
9.	greater than 35 million but not greater than 40 million		12	%
10.	greater than 40 million but not greater than 45 million		13	%
11.	greater than 45 million		14	%

*Output of the mine is defined as revenues less allowable deductions such as cost to sell diamonds, processing allowance and other operating costs.

The NWT Royalty is based on achieving an average of 60% of the GK Diamond Mine’s rated capacity in a 90-day period which was achieved in December 2016. The Company filed NWT Royalty returns for the very first time for fiscal 2016 which established opening balances and no sales were reported. In April 2018, the Corporation filed its second year of NWT Royalty return for fiscal 2017 and the first royalty payment to NWT occurred in the amount of $574,000. Although the Corporation had sufficient royalty tax pool deductions to allow the Corporation to file a nil return, the Corporation elected to pay a minimal amount of royalty tax, to take advantage of the lower royalty tax rates on the sliding scale. For fiscal 2018, the Corporation will continue to elect to pay a minimal amount of royalty tax of $574,000 to conserve the carry forward tax pools for when the output of the mine reaches a higher dollar value.

Permits and Agreements

Exploration programs to date were conducted under the permits obtained from the appropriate authority, including:

• Indian and Northern Affairs Canada – Type A Land Use Permit

• Indian and Northern Affairs Canada – Type B Water Licence

• Workers’ Compensation Board, Mine Health and Safety – Drilling Authorization

• Indian and Northern Affairs Canada – Quarry Permit

• Indian and Northern Affairs Canada – Registration of Fuel Storage Tanks

• Prince of Wales Northern Heritage Centre – Archaeology.

On August 12, 2014, De Beers and the Company announced that the Mackenzie Valley Land and Water Board had issued the Gahcho Kué Type A Land Use Permit and sent the Type A Water License for final approval to the Minister of Environment and Natural Resources (of the Government of the Northwest Territories.

11

On September 25, 2014, De Beers and the Company announced that the Gahcho Kué Project had received approval of the Type A Water License by the Minister of Environment and Natural Resources of the Government of the Northwest Territories.

Geology

The GK Mine covers a portion of the southeastern Slave Geological Province, an Archean terrane ranging in age from 4.03 Ga to 2.55 Ga. The area consists of granodiorite intrusions, high-grade gneisses and migmatites, along with volcanic and sedimentary supracrustal rocks typical of many greenstone belts in the Slave Province. The kimberlite bodies in the Gahcho Kué area were emplaced between 531-542Ma during the Cambrian Period. Erosional processes since emplacement may have been significant, stripping the kimberlites almost to their root zones but still preserving the hypabyssal and diatreme facies. The GK Mine property hosts six known kimberlites to date; Tuzo, 5034, Hearne, Curie, Tesla, and Dunn. The historic Wallace kimberlite to the southwest of 5034 has been confirmed through drilling to be part of 5034, and is now called the Southwest Corridor (‘SWC’). The historic North Pipe to the northeast of 5034 has also been confirmed through drilling to be part of 5034, and is now called the Northeast Extension (‘NEX’).

Exploration

In August 2018, a high-resolution aeromagnetic survey with a superconducting quantum interference device (‘SQUID’) was completed. The SQUID survey incorporated a total of 1,630 line kilometers with tie lines at 200 meters spacing and survey lines at 35 meter spacing. Data generated during the survey are undergoing quality assurance and interpretation with results expected in 2019.

Drilling

Core drilling conducted in 2018 focused on three objectives; drill test for extensions to the Hearne kimberlite between the north and south lobes, drill test the Southwest Corridor between 5034 and Hearne, drill test the Northeast Extension between 5034 and Tuzo, particularly around the North Pipe kimberlite, and drill test the Curie ground gravity target located between the Tesla and Tuzo kimberlites.

Drilling completed at Hearne confirmed that the north and south lobes of the body are connected by a kimberlite breccia. The kimberlite breccia is present at 40 metres depth vertically from the surface and extends vertically to at least as deep as 220 metres from surface. A total of six holes were completed at Hearne (1,947 meters).

The exploration drill program in the SWC was based on a 50 metre by 50 metre spacing plan and was commenced in November 2017. Kimberlite was intercepted at vertical depths from 16 to 230 meters with true thicknesses from 0.8 to 26 meters. A total of 18 holes were completed on the SWC (3,489 meters).

Drill testing of the NEX between 5034 and Tuzo has so far confirmed kimberlitic material between the north lobe of 5034 and the North Pipe, and east of the North Pipe, with intercepts up to 72 meters in true thickness. The kimberlitic material extends vertically from 248 meters to 350 meters depth. A total of seven holes were completed on the NEX (3,048 meters).

Drilling at the Curie target has identified a kimberlite body that is likely a blowout of the Dunn kimberlite sheet, which is located in an area of the northwest wall of the planned Tuzo pit towards the Tesla pipe. The Curie target has intercepts up to 52 meters with the kimberlite at a vertical depth of only 18 meters and the deepest intercept at 119 meters depth. The Curie kimberlite lies within the proposed open pit mine plan for the Tuzo kimberlite. Four holes were completed on the Curie kimberlite (934 meters).

12

Sampling and Analyses

Sampling and analyses in 2018 focused on core and pit samples from the SWC. Density measurements were conducted on the core to be used in concert with 3D modeling to determine tonnage in the SWC. Select intervals of core from drilling conducted in 2017 and 2018 were processed for microdiamond recovery by caustic fusion at SRC (Saskatoon, SK). SRC is an ISO/IEC 17025 accredited laboratory for caustic fusion analyses. A total of 3,289 diamonds with dimensions greater than a 0.075mm square mesh screen were recovered from 535 kilograms of kimberlite. These results were combined with historic microdiamond data to estimate diamond grade within the SWC. A focused mining sample (‘FMS’) of SWC kimberlite from the 5034 pit and nearest to the SWC was also processed through the Gahcho Kué Dense Media Separation facility to obtain a commercial diamond grade. A total of 19,567 carats (+1 DTC) were recovered from the 18,881 tonne FMS.

Mineral Reserve and Mineral Resource Estimates

The updated Mineral Reserve and Mineral Resource statements below are provided by De Beers as operators of the Gahcho Kué Mine. Portions of the SWC are included in Probable Reserves and incorporated into the Mineral Reserve and Mineral Resource Summaries in the tables below.

Mineral Reserves Summary (as of December 31, 2018) (Presented on a 100% basis)

Pipe	Classification	Tonnes (Mt)		Carats (Mct)		Grade (cpt)
5034	Probable		9.1		17.4		1.91
Hearne	Probable		4.4		8.7		1.98
Tuzo	Probable		16.6		19.9		1.20
In-Situ Total	Probable		30.1		46.0		1.53
Stockpile	Probable		1.0		1.9		2.04
Total	Probable		31.1		47.9		1.54

(1) Mineral Reserves are reported at a bottom cut-off of 1.0 mm

(2) Mineral Reserves have been depleted to account for mining and processing activity prior to Dec 31 2018.

(3) Q4 2017 depletion is based on forecast values and may differ slightly from actual depletion.

(4) Mineral Reserves are based upon an updated resource model and reflect any changes to the estimation of Tonnes, Grade and Contained Carats within that resource.

(5) Prices used to determine optimal pit shells have been escalated by factors varying by pit, which are indicative of the respective pits timing and duration.

13

Mineral Resources Summary (as of December 31, 2018) (Presented on a 100% basis)

Resource	Classification	Tonnes (Mt)		Carats (Mct)		Grade (cpt)
5034	Indicated		1.4		2.1		1.49
	Inferred		0.4		1.0		2.09
Hearne	Indicated		0.2		0.3		1.54
	Inferred		0.9		1.4		1.61
Tuzo	Indicated		0.2		0.1		0.57
	Inferred		10.8		14.6		1.35
Summary (In-Situ)	Indicated		1.8		2.5		1.41
	Inferred		12.1		17.0		1.40
Stockpiles	Indicated		0.0		0.0		0.0
	Inferred		0.0		0.0		0.0

(1) Mineral Resources are reported at a bottom cut-off of 1.0 mm. Incidental diamonds are not incorporated in grade calculations.

(2) Mineral Resources are not mineral reserves and do not have demonstrated economic viability.

(3) Tonnes and carats are rounded to the nearest 100,000.

(4) Tuzo tonnes exclude 0.6 Mt of a granite raft and CRX_BX.

(5) Resources are exclusive of indicated tonnages converted to probable reserves.

(6) Resources have been depleted of any material that was processed prior to and including Dec 31 2018.

The above tables were reviewed by Keyvan Salehi, P.Eng., MBA, and Tom E. McCandless, Ph.D., P.Geo., and the tables comply with CIM definitions and standards for an operating mine and with the standards of National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). At the time of this report, the mine is economically viable using current diamond prices and prevailing long-term price estimates. In compliance with Canadian reporting standards, Inferred or Indicated Mineral Resources that are not Mineral Reserves are not included in the Mine Plan. However, the project’s design contemplates the eventual mining of all NI 43-101 Mineral Resources over an extended mine life.

Cautionary Note to United States Investors Concerning Disclosure of Mineral Reserves and Resources:

The Company is organized under the laws of Canada. The mineral reserves and resources described herein are estimates, and have been prepared in compliance with NI 43-101. The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in the United States Securities and Exchange Commission (“SEC”) Industry Guide 7. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7, and normally are not permitted to be used in reports and registration statements filed with the SEC pursuant to SEC Industry Guide 7. Accordingly, information contained in this AIF containing descriptions of the GK Diamond Mine’s mineral deposits may not be comparable to similar information made public by US companies subject to the reporting and disclosure requirements of SEC Industry Guide 7. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists or is economically or legally mineable.

Inferred resources are not considered to have sufficient geological confidence to be converted into any reserve classification regardless of economic merit.

14

Mining Method

Open Pit Mining

The Gahcho Kué Diamond Mine employs conventional open pit mining methods. Waste and ore are blasted and loaded out using a fleet of diesel powered trucks, shovels, drills and ancillary equipment. Waste rock is stored in two surface mine rock piles and will be stored in two of the excavated pits at later stages of the mine life. Kimberlite ore is hauled to a run-of-mine storage pad where the ore is stockpiled and loaded into the primary crusher via a front end loader. Kimberlite processing creates two additional waste streams of coarse and fine processed kimberlite. Coarse processed kimberlite (“CPK”) is loaded into haul trucks and stacked in a pile North of the plant, while the fine processed kimberlite (“FPK”) is deposited via slurry into a settlement pond known as Area 2. Non-acid generating (“NAG”) and potentially-acid generating (“PAG”) waste rock is differentiated using an on-site sampling system of blast hole cuttings. PAG rock is encapsulated within the surface mine rock piles and below the restored final lake elevation of Kennady Lake during period of pit backfill.

The mine design and consequent mine plan considers conventional truck / shovel mining utilizing 29 m³ bucket diesel hydraulic front shovels, a 17 m³ front-end loader and 218 tonne class haulage trucks will be employed to mine the kimberlite and waste quantities. This large fleet will be augmented by 12 m³ bucket front-end loaders, scaling excavators and 100 tonne haul trucks. Production drill and blast activities will be supported by a fleet of rotary blast hole drills drilling 251mm holes. Pre-shear drilling will be supported with a pair of down the hole percussion drills drilling 171mm holes.

The three open pits are mined in a sequence which maximizes the value of the contained ore. The pre-strip sequence for the pits is 5034, Hearne and finally Tuzo, with production from all three pits overlapping at times. All three kimberlite deposits exist under Kennady Lake, and required substantial dewatering efforts prior to mining. Dewatering of the southern portion of Kennady Lake (Area 8, 7 and 6) was completed in 2015 along with construction of the primary dewatering infrastructure exposing the 5034 and Hearne deposits. Completion of the remaining dewatering dike network and substantial dewatering of Area 4 is planned for 2018 and 2019, which will expose the Tuzo mining area.

The Hearne pit will be used as a storage facility for processed kimberlite as well as waste mine rock upon depletion in 2022, and 5034 will be used as a waste rock storage facility for Tuzo mining operations from 2024 to the end of the mine life.

Recovery Methods

In the process plant, the ore is treated via crushing, screening, dense media separation and x-ray sorting, to produce a diamond rich concentrate that is sent to Yellowknife for final cleaning and Northwest Territories Government valuation. The processing plant targets the recovery of liberated diamonds in the 1 to 28 mm size range. The processing plant is designed for efficient diamond recovery over the mine’s twelve-year life.

Underground Mining

Underground mining is not currently part of the mine plan.

15

Capital and Operating Costs

Capital Cost Estimate

Table below is a summary of capital cost expenditures forecast for the fiscal year 2019:

2019 Capital Cost Forecast Summary in Canadian dollars and on 100% basis

Stay In Business Capital	(000’ C$)	C$/tonne of ore*	C$/carat*
Mining	11,312	3.59	1.69
Treatment	3,235	1.03	0.48
Other Infrastructure	5,229	1.66	0.78
SIB Total	19,776	6.28	2.95
Capitalized Waste	67,194	21.33	10.03
Total Capital Expenditure	86,970	27.61	12.98

*C$ tonne of ore and C$/carat are not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers

Operating Cost Estimate

Operating cost estimate inputs were originally provided by De Beers and are based on a detailed Life of Mine Plan study combined with historical production from operating experience at the Gahcho Kué Diamond Mine in 2018, the Snap Lake Mine in the NWT and the Victor Mine in Northern Ontario.

The following table is a summary of the operating costs forecasted for the Gahcho Kué Diamond Mine in 2019. The figures of the table below are on 100% basis for the mine.

2019 Operating Cost Forecast Summary in Canadian dollars and on 100% basis

Description	(000’ C$)	C$/tonne of ore*	C$/carat*
Mining Costs	105,996	33.65	15.82
Treatment Costs	38,287	12.15	5.72
Support Services
BU Management	4,809	1.53	0.72
Aboriginal Affairs	1,025	0.33	0.15
Eng. & Site Services	52,767	16.75	7.88
Supply Chain	28,981	9.20	4.33
Environmental Management	6,806	2.16	1.02
Finance	5,362	1.70	0.80
MRM	5,256	1.67	0.78
Human Resources	1,872	0.59	0.28
Protective Services	3,287	1.04	0.49
Diamond Liaison and Selling	4,351	1.38	0.65
Safety, Health & Risk	4,537	1.44	0.68
Other Services	949	0.30	0.14
Total Support Services	120,002	38.09	17.92
Environmental rehabilitation closure	2,771	0.88	0.41
ARO accretion – interest charge	3,832	1.22	0.57
Total Direct Fixed Costs	126,605	40.19	18.90
Total Production Costs (net of capitalized stripping)	270,888	85.99	40.44

*C$ tonne of ore and C$/carat are not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers

16

Other Relevant Data and Information

A full-time environmental staff is responsible for monitoring, directing and reporting environmental matters. The GK Diamond Mine has at all times since inception been in compliance with all permits and there are no outstanding liabilities or charges known at this time.

Ore produced from the mine is brought to the ore processing plant on site which has operated continuously since commencement of production and kept pace with demands.

The processing plant uses no chemicals or reagents. Gravity-based methods rely on the relatively heavier weight of diamonds to separate them. The process involves crushing, screening, separation in dense media (ferro-silicon) and x-ray sorting. The recovered diamonds are separated and packaged by size, weighed, secured in a vault to await transport, packed into a special container and flown discreetly to the high-security sorting facility in the city of Yellowknife.

In Yellowknife, the diamonds are cleaned, sorted and split into the Company’s 49% share and De Beer’s 51% share. The cleaning and sorting facility’s quality management earned ISO 9001 certification.

The Company’s share of the diamonds is transported from Yellowknife to WDM in India where the rough diamonds are cleaned and sorted into saleable packages before being sent to Bonas in Antwerp where the diamonds are sold.

Social and Environmental Policies

Aboriginal Issues and Local Resources at the GK Diamond Mine

The Gahcho Kué Diamond Mine employs approximately 360 full time employees (excluding long term contractors), 45% of whom reside in the north. Approximately 20% of the total are Aboriginal.

Ni Hadi Xa (“NHX”), the Aboriginal led environmental monitoring agreement for the Gahcho Kué Mine, is in its third year of operations. The group is comprised of 5 Aboriginal parties (LKDFN, DKFN, NWTMN, NSMA, and TG) and De Beers. There are 4 employees including an on-site Environmental Monitor, a Technical Coordinator, a Traditional Knowledge Administrator, and a Traditional Knowledge Monitor. 75% of NHX employees are Aboriginal and 100% are Northern residents. In 2016, NHX constructed a Traditional Knowledge cabin on the northern end of Fletcher Lake, approximately 30 km north of the mine. The cabin serves as the base for the full-time Traditional Knowledge monitors to observe the effects of the mine on the environment. In 2017, NHX launched the Family Culture Program, which involves community members from each of the 5 Aboriginal parties travelling to the cabin during the ice-free season to practice traditional methods of watching over the land. All observations collected will be shared with De Beers in an effort to ensure traditional knowledge is incorporated into mine planning and operations.

Environmental Requirements for the GK Diamond Mine

The GK Diamond Mine is subject to environmental requirements and conditions of operation contained in several statutes and administered by Canadian federal and Northwest Territorial authorities. In addition to federal and territorial requirements, the GK Diamond Mine must also comply with the Environmental Agreements. These requirements and conditions may change from time to time, and a breach of legislation may result in the imposition of fines or other penalties. Environmental legislation continues to evolve in a manner such that standards, enforcement, fines and other penalties for non-compliance are becoming stricter. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies, directors, officers and employees. The cost of compliance with changes in government regulations has the potential to reduce the profitability of future operations. To the best of the Company’s knowledge, the GK Diamond Mine is in compliance with environmental laws and regulations currently in effect in the Northwest Territories applicable to its operations.

17

Federal requirements are administered by Environment Canada, Fisheries and Oceans, the Department of Indian Affairs and Northern Development, Natural Resources Canada and Transport Canada. Environmental laws and regulations that have a potential impact on the GK Diamond Mine include those that protect air quality, water quality, archeological sites, migratory birds, animals and fish. Other important laws and regulations applicable to the GK Diamond Mine are those that regulate mine development, land use, water use and waste disposal, release of contaminants, water spills, spill responses, transportation of dangerous goods, explosives use and the maintenance of navigable channels. As a result of devolution of Northern governance, responsibility for the administration and management of public lands, water, mineral and other natural resources in the Northwest Territories transferred from the Government of Canada to the Government of Northwest Territories (“GNWT”) effective as of April 1, 2014. The GNWT became responsible for the management of onshore lands, the issuance of rights and interests with respect to onshore minerals, and collection of royalties in the Northwest Territories. The Government of Canada will retain responsibility for the remediation of existing contaminated waste sites, the administration of offshore lands and the negotiation of Aboriginal Rights agreements.

Northwest Territories’ requirements are administered by the various territorial government departments and Workers’ Safety and Compensation Commission-Prevention Services as well as by co-management Boards charged with regulating land and water use in designated areas. Laws and regulations that might impact the GK Diamond Mine include those that protect heritage resources, wildlife and the environment and those that regulate workplace safety, mine safety, training in the handling of dangerous materials, road transportation, air quality, and the use of hazardous substances and pesticides. De Beers holds a number of permits and licenses to address each of these areas and regularly reports on compliance obligations to the respective government departments or regulator. The primary environmental permits were issued on August 11, 2014 (Land Use Permit) and September 24, 2014 (Water License), respectively by the Mackenzie Valley Land and Water Board allowing for the construction and operation of the Gahcho Kué Diamond Mine.

The Environmental Agreement relating to the GK Diamond Mine requires that security be provided to cover estimated reclamation and remediation costs. During 2014, the Company reached an agreement with De Beers, the Operator of the Joint Venture whereby the Company was required to post its proportionate share of the security deposit used to secure the reclamation obligations for the GK Diamond Mine. Currently, De Beers, on behalf of the Joint Venture has provided letters of credit in the amount of $47,820,366 (100%) to the GNWT as security for the reclamation obligations for the GK Diamond Mine. The Company pays De Beers a fee of 3% on its proportionate share of the cost of securing the reclamation obligation.

Requirements in the Environmental Agreement are monitored by the Environmental Monitoring Advisory Board (“EMAB”), which was established as part of the agreement. EMAB includes board members from each of the signatories to the Environmental Agreement and operates at arm’s length and independent of the parties to the Environmental Agreement as a public watchdog of the regulatory process and implementation of the Environmental Agreement.

The Kennady North Project

The Kennady North Project is managed by the Company’s wholly-owned subsidiary; Kennady Diamonds Inc. (‘Kennady’ or the ‘subsidiary’). Kennady is an exploration company that relies on capital input from the Company to perform its exploration programmes. It is not a revenue-generating subsidiary of the Company. The objective of Kennady Diamonds is to explore for and discover kimberlites on the Kennady North Project, to assess those discoveries for economic potential, and to advance those with the greatest potential through to resource status. To date, Kennady has advanced the Kelvin kimberlite to indicated status, and portions of the Faraday 2 and Faraday 1-3 kimberlites to inferred status as described below.

18

The following details are derived from the Company’s Technical Reports filed on SEDAR under Kennady and titled as follows: “Project Exploration Update and Maiden Mineral Resource Estimate, Kennady North Project” and dated January 24^th, 2017 (with information effective as of January 24^th, 2016) (the “2016 Technical Report”); and “Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” and dated November 16^th, 2017) (with information effective as of November 16^th, 2017) (the “2017 Technical Report”). Both reports were prepared by Aurora Geosciences Ltd., and Mineral Services Canada Inc.

Property Location, Access and Infrastructure

The Kennady North Project (“KNP”) is located in the Northwest Territories approximately 300 kilometres east-northeast of Yellowknife, 80 kilometres east-southeast of the Snap Lake Mine and 100 kilometres north of the community of Łutsel K’e. The property is 25 km north of the tree line with no permanent road access. Centered geographically at 63°29’ North latitude and 109°11’ West longitude, the property covers an area roughly 30 km long and up to 30 km wide.

Access to the property is easiest via ski- and/or float-equipped fixed wing aircraft and helicopters. The Gahcho Kué Mine Site, just seven kilometres to the south, has a 120 kilometre long winter spur road, leading north to join the Tibbitt to Contwoyto Winter Road (TCWR) at MacKay Lake. KDI has an agreement in place with the Gahco Kué (GK) joint venture (DeBeers Canada and the Company) to use the spur road to access the Kennady North property. Annually, KDI builds a 10 km spur road from the Kelvin camp to access the GK spur road.

The Kennady North Project is typical of many northern Canadian exploration operations that lack local and regional infrastructure such as permanent road access, navigable shipping routes and ports, and external utilities. Two camps exist on the Kennady North project, Kelvin and Bob, and provide all room and board at site. A newly amended land use permit allows for 150 people at site with significant on-site equipment such as loaders, graders, trucks, etc.

History

Exploration on the KNP commenced in the late 1990’s and has since resulted in the discovery of the diamond-bearing Kelvin, Faraday, MZ and Doyle kimberlite occurrences. Significant discoveries subsequent to 2012 when Kennady Diamonds Inc. acquired the present-day area of the KNP include expansion of the Kelvin and Faraday kimberlites. The number of diamonds recovered from the Kelvin and Faraday kimberlites and their size-frequency distributions indicate that they may be comparable to the 5034 and Hearne kimberlites at the GK Mine.

Kennady completed a summer exploration programme on the property in 2018 and further exploration is planned for 2019.

Mineral Tenure

The property is comprised of 22 mining leases and 58 mineral claims, totaling 160,997.16 acres or 65,154.66 hectares. The claims cover an area roughly 30 kilometres long by 30 kilometres wide and are located on NTS map sheets 75N/06 and 75N/11. The property is 100% owned by Kennady Diamonds Inc. The map below indicates the location of the KNP relative to the Gahcho Kué Mine.

19

 

Geological Setting and Deposit Types

The Kennady North property covers a portion of the southeastern Slave Geological Province, an Archean terrane ranging in age from 4.03 Ga to 2.55 Ga. The area consists of granodiorite, high-grade gneiss and migmatite, along with volcanic and sedimentary supracrustal rocks typical of many greenstone belts in the Slave Province. The kimberlite bodies in the Kennady Lake / Gahcho Kué area were emplaced between 531-542Ma during the Cambrian Period. Erosional processes since emplacement may have been significant, stripping the kimberlites almost to their root zones but still preserving the hypabyssal and diatreme facies. The Kennady North property hosts five known kimberlites to date; Kelvin, Faraday 2, Faraday 1-3, MZ, and Doyle.

Drilling

The majority of drilling to define the Kelvin and Faraday resources was completed prior to acquisition of Kennady by the Company. Details of the historical drilling can be accessed in the 2016 Technical Report and 2017 Technical Report. Subsequent to the acquisition, delineation and geotechnical drilling at Faraday 2 that includes the northwest extension of Faraday 2 was completed. The northwest extension extends the Faraday 2 kimberlite by over 150 meters, with geologic units in the inferred resource continuing into the northwest extension. The completed drilling will advance the northwest portion of the Faraday 2 pipe shell model to an inferred level of confidence. A total of six holes (1,536 meters) were completed in 2018.

A single geotechnical hole (189 meters) at Faraday 1-3 was designed to test the geotechnical characteristics of the country rock for the purposes of open pit mine design and was not targeted to intersect kimberlite. A number of geophysically-defined exploration targets proximal to the Faraday and Kelvin kimberlites were also tested with a total of seventeen drillholes (2,369 meters). Kimberlite was intersected in all holes, consisting of kimberlite sheets with the longest intercept being 6.85 metres of coherent kimberlite. In every case the kimberlite sheets are intimately associated with greater zones of altered and brecciated country rock.

20

Sampling and Analyses

Drill core from the delineation and geotechnical program reported above and from an exploration programme conducted in 2017 at Faraday 2 was shipped to SRC (Saskatoon, SK) for caustic fusion recovery of microdiamonds. The samples weighed a combined total of 2.101 tonnes and generated 9,218 diamonds larger than a 0.106 mm square mesh screen. The microdiamond results generated 10.4 carats of commercial-sized diamonds (larger than a 0.85mm square mesh screen).

Aurora Geosciences Ltd. (with assistance from SRK Consulting), as operator of the KNP on behalf of Kennady implement a best practices protocol using standard operating procedures (SOPs) for all core and large diameter RC drilling including: core/chip logging, sampling for caustic fusion and dense media separation (DMS), downhole surveying, collar surveying, shipping, sample descriptions of kimberlite and database management. SRC has conducted all of the caustic fusion and dense media separation analyses since the KNP was initiated in 2012. SRC is an ISO/IEC 17025 accredited laboratory for caustic fusion analyses.

Mineral Resource Estimates

The Kelvin, Faraday 2 and Faraday 3 geological model domains have been adopted as the resource domains for the estimation of Mineral Resources. The volumes of these domains were combined with estimates of bulk density to derive tonnage estimates. Bulk sampling programmes using large diameter RC drilling were conducted to obtain grade and value information. Microdiamond data from drill core were used to forecast grades for the different kimberlite lithologies. Details of the modeling are available in the 2016 Technical Report and the 2017 Technical Report.

The work outlined in these reports has defined a total Indicated Mineral Resource for the Kelvin kimberlite of 8.5 million tonnes at an average grade of 1.6 carats per tonne (cpt). An Inferred Mineral Resource has been determined for portions of Faraday 2 and 1-3, totaling 3.27 million tonnes at an average grade of 1.54 cpt. Both estimates are on the basis of a 1mm bottom cut-off. Details are provided in the table below.

Resource	Classification	Tonnes (Mt)		Carats (Mct)		Grade (cpt)
Kelvin	Indicated		8.50		13.62		1.60
Faraday 2 and Faraday 1-3	Inferred		3.27		5.02		1.54

(1) Mineral Resources are reported at a bottom cut-off of 1.0 mm. Incidental diamonds are not incorporated in grade calculations.

(2) Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

Relevant parameters for two minor domains of the Faraday 2 and for all of the Faraday 1 kimberlite are not sufficiently well-constrained by available data to define Mineral Resources. These deposits are defined as Target for Further Exploration (TFFE) with estimates of the potential ranges of volume, tonnes and grade (where possible) provided in the table below.

21

	Volume (Mm3)				Tonnes (Mt)				Grade (cpt)
Resource	Low		High		Low		High		Low		High
Faraday 1-3		0.2		0.5		0.6		1.2		1.5		3.7
Faraday 2		0.01		0.02		0.01		0.04		—		—

(1) The estimate of a TFFE is conceptual in nature as there has been insufficient exploration to define a Mineral Reserve and it is uncertain if future exploration will result in the estimate being delineated as a Mineral Reserve.

Cautionary Note to United States Investors Concerning Disclosure of Mineral Reserves and Resources:

The Company is organized under the laws of Canada. The mineral reserves and resources described herein are estimates, and have been prepared in compliance with NI 43-101. The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in the United States Securities and Exchange Commission (“SEC”) Industry Guide 7. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7, and normally are not permitted to be used in reports and registration statements filed with the SEC pursuant to SEC Industry Guide 7. Accordingly, information contained in this AIF containing descriptions of the Company’s mineral deposits may not be comparable to similar information made public by US companies subject to the reporting and disclosure requirements of SEC Industry Guide 7. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists or is economically or legally mineable.

Inferred resources are not considered to have sufficient geological confidence to be converted into any reserve classification regardless of economic merit.

RISKS FACTORS

The Company is subject to a number of risks and uncertainties as a result of its operations. Readers should give careful consideration to the following risks, each of which could have a material adverse effect on the Company’s business prospects or financial condition.

Nature of Mining

The Company’s mining operation is subject to risks inherent in the mining industry, including variations in grade and other geological differences, unexpected problems associated with required water retention dikes, water quality, surface and underground conditions, processing problems, equipment performance, accidents, labour disputes, risks relating to the physical security of the diamonds, force majeure risks and natural disasters.

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

22

Joint Ventures

The Company’s participation in the mining sector of the diamond industry is through its ownership interest in the GK Diamond Mine group of mineral claims. The GK Diamond Mine is a joint arrangement between De Beers (51%) and the Company (49%).

The Company’s joint venture interest in the GK Diamond Mine is subject to the risks normally associated with the conduct of joint ventures, including: (i) disagreement with a joint venture partner about how to develop, operate or finance operations; (ii) that a joint venture partner may not comply with the underlying agreements governing the joint ventures and may fail to meet its obligations thereunder to the Company or to third parties; (iii) that a joint venture partner may at any time have economic or business interests or goals that are, or become, inconsistent with the Company’s interests or goals; (iv) the possibility that a joint venture partner may become insolvent; and (v) the possibility of litigation with a joint venture partner.

Diamond Prices and Demand for Diamonds

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

Cash Flow and Liquidity

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

The Company’s principal working capital needs include investments in inventory, prepaid expenses and other current assets, and accounts payable and income taxes payable and interest and loan repayments.

There can be no assurance that the Company will be able to meet each or all of its liquidity requirements. A failure by the Company to meet its liquidity requirements could result in the Company failing to meet its joint venture commitments, or in the Company being in default of a contractual obligation, each of which could have a material adverse effect on the Company’s business prospects or financial condition.

Event of Default

The Company’s secured notes payable and revolving credit facility are subject to various terms and conditions. If any of the terms and conditions are not met, it could result in an event of default which could affect the Company’s ability to continue as a going concern.

23

Credit Rating

The Company’s debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency, if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any future lowering of the Company’s ratings likely would make it more difficult or more expensive for it to obtain additional debt financing.

Economic Environment

The Company’s financial results are tied to the global economic conditions and their impact on levels of consumer confidence and consumer spending. The global markets have experienced the impact of a significant United States and international economic downturn since autumn 2008. A return to a recession or a weak recovery, due to recent disruptions in financial markets in the United States, the Eurozone with Brexit or elsewhere, budget policy issues in the United States, political upheavals in the Middle East and Ukraine, economic sanctions against Russia, and demonetization/taxation changes in India could cause the Company to experience revenue declines due to deteriorated consumer confidence and spending, and a decrease in the availability of credit, which could have a material adverse effect on the Company’s business prospects or financial condition. The credit facilities essential to the diamond polishing industry are partially underwritten by European banks that are currently under stress. The withdrawal or reduction of such facilities could also have a material adverse effect on the Company’s business prospects or financial condition. The Company monitors economic developments in the markets in which it operates and uses this information in its continuous strategic and operational planning in an effort to adjust its business in response to changing economic conditions.

Synthetic Diamonds

Synthetic diamonds are diamonds that are produced by artificial processes (e.g., laboratory grown), as opposed to natural diamonds, which are created by geological processes. An increase in the acceptance of synthetic gem-quality diamonds could negatively affect the market prices for natural stones. Although significant questions remain as to the ability of producers to produce synthetic diamonds economically within a full range of sizes and natural diamond colours, and as to consumer acceptance of synthetic diamonds, synthetic diamonds are becoming a larger factor in the market. Should synthetic diamonds be offered in significant quantities or consumers begin to readily embrace synthetic diamonds on a large scale, demand and prices for natural diamonds may be negatively affected. Additionally, the presence of undisclosed synthetic diamonds in jewelry would erode consumer confidence in the natural product and negatively impact demand.

Currency Risk

Currency fluctuations may affect the Company’s financial performance. Diamonds are sold throughout the world based principally on the US dollar price, and the Company reports its financial results in Canadian dollars. A majority of the costs and expenses of the GK Diamond Mine are incurred in Canadian dollars. From time to time, the Company may use derivative financial instruments to manage its foreign currency exposure.

24

Licences and Permits

The Company’s mining operations and exploration programmes require licences and permits from the Canadian and Northwest Territories governments, and the process for obtaining, amending and renewing such licences and permits often takes an extended period of time and is subject to numerous delays and uncertainties. Such licences and permits are subject to change in various circumstances. Failure to comply with applicable laws and regulations may result in injunctions, fines, criminal liability, suspensions or revocation of permits and licences, and other penalties. There can be no assurance that De Beers, as the operator of the GK Diamond Mine, will be at all times in compliance with all such laws and regulations and with their applicable licences and permits, or that De Beers will be able to obtain on a timely basis or maintain in the future all necessary licences and permits.

Regulatory and Environmental Risks

The operations of the GK Diamond Mine, and exploration programmes of the Company’s wholly-owned subsidiary Kennady Diamonds Inc. are subject to various laws and regulations governing the protection of the environment, exploration, development, production, taxes, labour standards, occupational health, waste disposal, mine safety and other matters. New laws and regulations, amendments to existing laws and regulations, or more stringent implementation or changes in enforcement policies under existing laws and regulations could have a material adverse effect on the Company by increasing costs and/or causing a reduction in levels of production from the GK Diamond Mine.

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

Climate Change

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

Resource and Reserve Estimates

The Company’s figures for mineral resources and ore reserves are estimates and no assurance can be given that the anticipated carats will be recovered. The estimation of reserves is a subjective process. Forecasts are based on engineering data, projected future rates of production and the timing of future expenditures, all of which are subject to numerous uncertainties and various interpretations. Estimates made at a given time may change significantly in the future when new information becomes available. The Company expects that its estimates of reserves will change to reflect updated information as well as to reflect depletion due to production. Reserve estimates may be revised upward or downward based on the results of current and future drilling, testing or production levels, and on changes in mine design. In addition, market fluctuations in the price of diamonds or increases in the costs to recover diamonds from the Company’s mineral properties may render the mining of ore reserves uneconomical. Any material changes in the quantity of mineral reserves or resources or the related grades may affect the economic viability of the Company’s mining operations and could have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty that may attach to inferred mineral resources, there is no assurance that mineral resources will be upgraded to proven and probable ore reserves. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves.

25

Dependent on the GK Diamond Mine for future operating revenue

The Company’s only economic interest is its indirect 100% equity ownership interest in 2435386 Ontario Inc., which is a 49% participant in the Gahcho Kué Joint Venture, which owns and operates the GK Diamond Mine. As a result, the Company is solely dependent upon its interest in the GK Diamond Mine for its revenue and profits. In addition, production and operating costs are difficult to predict and may render further production at the GK Diamond Mine financially unfeasible. If commercial production and operation of the GK Diamond Mine becomes financially unfeasible, for engineering, technical, economic, political, legal or other reasons, the Company's business and financial position will be materially and adversely affected. In addition, the book value of the Company's interest in the GK Diamond Mine is subject to certain accounting assumptions. If such assumptions prove to be incorrect, then the book value of the Company's interest in the GK Diamond Mine could be impaired, which could have a material adverse effect on the Company.

No Assurance that the Company will be able to Extend the Mine Life Beyond 2028

The Company is currently exploring options to potentially extend the mine life beyond 2028 through resource conversion and deep mining of the Tuzo kimberlite. Additional exploration and resource delineation are required to assess the viability of these prospects at Tuzo. A transition to underground mining generally increases per unit costs and can limit the annual volumes that can be economically extracted from such orebodies. There is no assurance that the Company will be able to extend the mine life beyond 2028 through resource conversion or deep mining.

Volatility of Diamond Prices

The Company’s profitability will be dependent upon its mineral properties and the worldwide demand for and price of diamonds. Diamond prices fluctuate and are affected by numerous factors beyond the Company’s control, including worldwide economic trends, worldwide levels of diamond discovery and production, and the level of demand for, and discretionary spending on, luxury goods such as diamonds. Low or negative growth in the worldwide economy, renewed or additional credit market disruptions, natural disasters or the occurrence of terrorist attacks or similar activities creating disruptions in economic growth could result in decreased demand for luxury goods such as diamonds, thereby negatively affecting the price of diamonds. Similarly, a substantial increase in the worldwide level of diamond production or the release of stocks held back during recent periods of lower demand could also negatively affect the price of diamonds. In each case, such developments could have a material adverse effect on the Company’s results of operations. In addition, prices for the higher value and lower value market segments can move independently of one another, depending on relative demand. For example, strengthening prices in one market segment can offset weakening prices in another, or synchronize with strengthening prices in another, which increases the unpredictability of diamond prices.

Insurance

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

Winter Road

The Company’s mining operation is located in remote, undeveloped areas and is therefore, heavily dependent on the seasonal winter road for the supply of goods and services. The transport of supplies can be susceptible to disruptions due to adverse weather conditions, resulting in unavoidable delays in planned programs and/or cost overruns.

26

Fuel Costs

The expected fuel needs for the GK Diamond Mine are purchased in February and March each year and transported to the mine site by way of the winter road. These costs will increase if transportation by air freight is required due to a shortened “winter road season” or unexpected high fuel usage.

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

Reliance on Skilled Employees

Production at the GK Diamond Mine is dependent upon the efforts of certain skilled employees. The loss of these employees or the inability to attract and retain additional skilled employees may adversely affect the level of diamond production.

The Company’s success in marketing its 49% share of the rough diamonds is dependent on the services of key executives and skilled employees, as well as the continuance of key relationships with certain third parties, such as diamantaires. The loss of these persons or the Company’s inability to attract and retain additional skilled employees or to establish and maintain relationships with required third parties may adversely affect its business and future operations in marketing diamonds.

DIVIDENDS

In fiscal 2018, the Company declared and paid a dividend of $0.04 per common share totaling $8.4 million. The Company did not declare or pay dividends in fiscal 2017. The Company has declared a corporate strategy of returning value to the shareholders by distributing available cash flow in a prudent manner in the form of dividends, and initiated a dividend policy in the 2018 fiscal year. The Company’s policy is to manage down the debt levels and to pay reasonable dividends based on available cashflows. The future payment of dividends or distributions is not certain, however, and will be dependent upon the financial condition of the Company and other factors the Board of Directors of the Company may consider appropriate under the circumstances. The Mountain Province Indenture governing Notes and the Revolving Credit Agreement, contain customary terms which restrict, subject to exceptions and qualifications, ability of the Company and its subsidiaries to make certain dividend payments, distributions, redemptions, repurchases, investments and other restricted payments.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized capital of the Company consists of an unlimited number of common shares. Holders of common shares are entitled to receive notice of, attend and vote at all meetings of the shareholders of the Company. Each common share carries the right to one vote in person or by proxy at all meetings of the shareholders of the Company. The holders of common shares are entitled to receive dividends as and when declared by the Board of Directors of the Company. Subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of the Company, the holders of the common shares are entitled to receive the Company’s proportionate remaining share of the assets of the GK Diamond Mine and any other assets the Company may hold in the event of liquidation, dissolution or winding-up of the Company.

27

Ratings

The following table sets out the ratings of the Company’s corporate debt by the rating agencies indicated as of March 20, 2019:

	Standard & Poor’s		Moody’s Investors Services		Fitch Ratings
Corporate rating		B-		B3		B
First lien senior secured revolving credit facility		-		-		BB/RR1
Senior secured second lien notes payable		B-		B3/LGD4		BB-/RR2
Recovery rating		3		-		-
Outlook		Stable		Stable		Stable

Standard & Poor’s Ratings Services (“S&P”) credit ratings for long-term debt are on a rating scale ranging from AAA to D, which represents the range from highest to lowest quality. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories. S&P’s rating is a forward-looking opinion about credit risk and assesses the credit quality of the individual debt issue and the relative likelihood that the issuer may default. If S&P anticipates that a credit rating may change in the next six to 24 months, it may issue an updated ratings outlook indicating whether the possible change is likely to be “positive”, “negative”, “stable” or “developing”. However, a rating outlook does not mean that a rating change is inevitable.

The B- rating is ranked seventh out of S&P’s eleven major rating categories. According to the S&P rating system, debt securities rated B- are more vulnerable to adverse business, financial and economic conditions but currently the Company has the capacity to meet financial commitments. In addition, S&P uses a scale of 1+ to 6 for recovery ratings, which focuses solely, from high to low, on expected recovery in the event of a payment default of a specific debt issue. A “3” recovery rating ranks fourth out of S&P’s seven recovery rating categories and indicates S&P’s expectation of meaningful (50% - 70%) recovery in the event of default.

Moody’s Investors Service (“Moody’s”) credit ratings are on a rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated. According to Moody’s, a rating of B is the sixth highest of nine major categories. Obligations rated in the B category are considered speculative and are subject to high credit risk. Moody’s applies numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa in its long-term rating scale. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic category. Moody’s also issues a rating outlook opinion regarding the likely rating direction over the medium term. Rating outlooks fall into four categories: positive, negative, stable, and developing. A stable outlook indicates a low likelihood of a rating change over the medium term. A negative, positive or developing outlook indicates a higher likelihood of a rating change over the medium term. A designation of “Under Review” indicates that a rating is under consideration for a change in the near term. A rating can be placed on review for upgrade, downgrade, or more rarely with direction uncertain.

In addition, Moody’s Loss Given Default (“LGD”) assessments are opinions about expected loss given default expressed as a percent of principal and accrued interest at the resolution of the default based on a scale of 1 to 6. A LGD4 ranks fourth out of Moody’s six LGD assessment categories and indicates a ≥50% and <70% difference between value received at default resolution and principal outstanding and accrued interest due at resolution of the default.

28

Fitch Ratings (“Fitch”) credit ratings are on a rating scale that ranges from AAA to C, which represents the range from highest to lowest quality of such securities rated. According to Fitch, a rating of BB is the fifth highest of nine major categories. Obligations rated in the BB category are more vulnerable to adverse business, financial and economic conditions but currently the Company has the capacity to meet financial commitments. In addition, Fitch uses a scale of RR1 to RR6 for recovery ratings, which focuses solely, from high to low, on expected recovery in the event of a payment default of a specific debt issue. A “RR1” recovery rating ranks first out of Fitch’s six recovery rating categories and indicates Fitch’s expectation of meaningful (91% - 100%) recovery in the event of default and a “RR2” recovery rating ranks second out of Fitch’s six recovery categories and indicates Fitch’s expectation of meaningful (71% - 90%) recovery in the event of default.

The Company understands that the rating agencies ratings are based on, among other things, information furnished to the above ratings agencies by the Company and information obtained by the ratings agencies from publicly available sources. The credit ratings are not recommendations to buy, sell or hold securities since such ratings do not comment as to market price or suitability for a particular investor. Credit ratings are intended to provide investors with an independent measure of the credit quality of an individual debt issue; an indication of the likelihood of repayment for an issue of securities; and an indication of the capacity and willingness of the issuer to meet its financial obligations in accordance with the terms of those securities. Credit ratings are not intended as guarantees of credit quality or exact measures of the probability of default. Credit ratings assigned to the Company’s corporate debt may not reflect the potential impact of all risks on the value of debt instruments, including risks related to market or other factors discussed in this Annual Information Form. See also “Risk Factors”.

MARKET FOR SECURITIES

The Company’s common shares have been listed for trading on the TSX (symbol MPVD) since October 25, 2000. The Company is a reporting issuer, or equivalent, in each of the provinces and territories of Canada. The Company’s common shares are also listed for trading on NASDAQ under the symbol MPVD.

29

Trading Price and Volume

The following table outlines the 52-week trading history, as well as monthly trading history during the period from January 2018 to December 2018 for Mountain Province Diamonds Inc. shares on the TSX for the Company’s fiscal year ended December 31, 2018:

52 – Week High:	CDN$3.59
52 – Week Low	CDN$1.64
Average Daily Volume	203,542

Month	High (CDN$)		Low (CDN$)		Average Daily Volume
January (2018)		3.55		3.20		360,323
February		3.47		3.36		135,063
March		3.39		3.20		58,376
April		3.27		2.99		290,248
May		3.63		3.04		357,205
June		3.40		3.09		105,090
July		3.28		3.07		68,876
August		2.93		2.52		200,568
September		2.72		2.43		209,358
October		2.66		2.22		180,573
November		2.23		1.57		303,618
December (2018)		1.95		1.61		143,179

The following table outlines the 52-week trading history, as well as monthly trading history during the period from January 2018 to December 2018 for Mountain Province Diamonds Inc. shares on the NASDAQ for the Company’s fiscal year ended December 31, 2018:

52 – Week High:	US$2.88
52 – Week Low	US$1.19
Average Daily Volume	60,718

Month	High (US$)		Low (US$)		Average Daily Volume
January (2018)		2.88		2.55		132,843
February		2.80		2.60		80,684
March		2.65		2.45		32,633
April		2.60		2.35		32,905
May		2.85		2.38		52,650
June		2.60		2.34		405,800
July		2.50		2.25		25,990
August		2.30		1.90		41,365
September		2.25		1.90		46,879
October		2.18		1.66		94,309
November		1.72		1.19		94,490
December (2018)		1.48		1.21		75,574

Prior Sales

Date of Issuance	Number of Securities Issued		Type of Security	Price per Security ($)		Reason for Issuance
April 10, 2018		8,334	Mountain Province Shares		3.15	RSUs vested and issued
April 13, 2018		49,737,307	Mountain Province Shares		3.09	Plan of arrangement with Kennady Diamonds Inc.
April 19, 2018		3,334	Mountain Province Shares		3.00	RSUs vested and issued
May 4, 2018		3,334	Mountain Province Shares		3.08	RSUs vested and issued
December 21, 2018		96,666	Mountain Province Shares		1.88	RSUs vested and issued

DIRECTORS AND OFFICERS

Directors, Senior Management and Employees

Directors and Senior management.

Each director of the Company is elected by the shareholders to serve until close of the next annual meeting of shareholders or until a successor is elected or appointed, unless such office is earlier vacated in accordance with the Corporation's by-laws. The following table sets forth certain information regarding the current directors and executive officers of the Company, as of March 20, 2019.

30

Name	Position with Company	Date of First Appointment
Stuart Brown	President and CEO and Director	President and CEO since July 1, 2018 and Director since July 1, 2018.
Jonathan Comerford	Chair and Director(3) and Former Interim President and CEO	Chair of the Company since May 11, 2006 and Director since September 21, 2001 and Interim President and CEO from June 1, 2018 to June 30, 2018.
David E. Whittle	Former Interim President and CEO and Director(2)	Interim President and CEO from June 8, 2017 to May 31, 2018 and Director since November 1, 1997.
Perry Ing	Vice-President Finance and CFO	Vice President Finance and Chief Financial Officer since February 6, 2017.
Reid Mackie	Vice-President Diamond Marketing	Vice President Diamond Marketing since November 1, 2015.
Tom E. McCandless	Vice-President Exploration	Vice President Exploration since November 1, 2018
Bruce Dresner	Director(1) (2) (4)	Director since March 11, 2013
Peeyush Varshney	Director(1) (2) (4)	Director since April 13, 2007
Karen Goracke	Director(3) (4)	Director since November 3, 2016
Carl Verley	Director(1)(3) (4)	Director of Old MPVD since December 2, 1986 and Director of the Company since November 1, 1997

(1) Member of the Company's Corporate Governance Committee.

(2) Member of the Company's Audit Committee.

(3) Member of the Company's Compensation Committee.

(4) Independent director.

Based on the disclosure available on the System for Electronic Disclosure by Insiders (“SEDI”), as of the date of this AIF, the directors and executive officers of the Company (as listed in this AIF), as a group, beneficially owned, or controlled or directed, directly or indirectly, a total of 2,036,880 common shares of the Company, representing approximately 0.97% of the total number of common shares of the Company outstanding.

The following is a description of the Company's directors and senior management. The information provided is not within the knowledge of the management of the Company and has been provided by the respective directors and senior officers.

Stuart Brown

Mr. Stuart Brown is the Company's President and CEO since July 1, 2018. Mr. Brown has over 25 years of experience in the diamond industry, where he has gained a wealth of experience across all aspects throughout the diamond pipeline from exploration, mine development and operations to the selling and marketing of diamonds. In 2006, after numerous roles within DeBeers over a period of 14 years, Mr. Brown was appointed as the De Beers Group Chief Financial Officer. He held that position for over five years, and in 2010 was appointed joint acting CEO to run De Beers’ global activities in addition to his CFO duties. From September 2013 to June 2018, Mr. Brown was the CEO of publicly-listed Firestone Diamonds Plc, a diamond producer in Lesotho. Mr. Brown was responsible for securing the funding and building the team that delivered the successful construction and transition to production of Firestone’s Liqhobong diamond mine. Mr. Brown has an enviable track record of leading business transformation to develop lean, agile and high performing organisations. Mr. Brown holds a Bachelor of Accounting Science from the University of South Africa.

31

Jonathan Christopher James Comerford, B.A. (Econ.), M.B.S. (Finance)

Mr. Jonathan Comerford has been a director of the Company since September 2001 and Chair since April 2006. Mr. Comerford also assumed the role of Interim President and CEO for the Company from June1, 2018 until June 30, 2018. Mr. Comerford is resident in Dublin, Ireland. He obtained his Masters in Business from the Michael Smurfit Business School in 1993 and his Bachelor of Economics from University College, Dublin in 1992. Mr. Comerford has been Investment Manager at IIU since August 1995. He also served as a director of Kennady Diamonds Inc. since February 2012 until its acquisition by the Company.

David E. Whittle, B.Comm., CPA, CA

Mr. Whittle is a Chartered Professional Accountant, Chartered Accountant, and is a resident of British Columbia, Canada. He has been a director of Mountain Province Diamonds Inc. since November 1997. Mr. Whittle assumed the role of Interim President and CEO from June 2017 to May 2018. Mr. Whittle obtained a Bachelor of Commerce degree (Finance) in 1987 from the University of British Columbia. He then articled at Coopers & Lybrand, a Chartered Accountancy firm, in Vancouver, British Columbia, becoming a Chartered Accountant in 1991. From 1993 to June 2000, on completion of the Amalgamation, he was President/CEO and Chief Financial Officer of Glenmore. From 1994 to 1998, he was also Chief Financial Officer of Lytton Minerals Limited, a diamond mining exploration company with which Glenmore was affiliated. Additionally, from 1993 to 2004, Mr. Whittle was variously principal and partner of a Chartered Accountancy practice in the Vancouver area, providing services to both private and public companies in a variety of industries including mining, real estate, telecommunications, computer consulting, high tech and general merchandising. From 2004 to August 2007, Mr. Whittle was Chief Financial Officer of Hillsborough Resources Limited, a public company in the mining business. From October 2007 to December 2014, Mr. Whittle was Chief Financial Officer of Alexco Resource Corp., a public company both in the mining business and in the business of providing consulting services to third parties in respect of environmental remediation and permitting. He also served as director of Kennady Diamonds Inc., from February 2012 until June 2016.

Perry Ing. B.Comm., CPA, CA, CFA

Mr. Ing has been the Company’s Vice President Finance and Chief Financial Officer since Feb 6, 2017. Mr. Ing is a resident of Ontario, Canada. Mr. Ing is a Chartered Professional Accountant, Certified Public Accountant (Illinois), and a Chartered Financial Analyst with over 14 years of financial management experience in the mining sector and nearly 20 years industry experience. Mr. Ing started his accounting career with PricewaterhouseCoopers LLP where he spent 6 years in progressively senior roles before joining Goldcorp Inc. in 2003 as Corporate Controller. Mr. Ing then held the positions of Financial Consultant with Barrick Gold Corporation from 2005 to 2008, Chief Financial Officer of McEwen Mining Inc., from 2008 to 2015, and Chief Financial Officer of Kirkland Lake Gold from 2015 to 2016. Mr. Ing holds a Bachelor of Commerce degree with distinction from the University of Toronto.

Reid Mackie, BA

Mr. Mackie has been the Company’s Vice President Diamond Marketing since November 2015. Mr. Mackie is a resident of British Columbia, Canada. Prior to joining the Company, he was with Rio Tinto Diamonds, where he held the positions of Manager Sales and Marketing for Argyle Pink Diamonds in Perth, Australia (2011 to 2015) and Senior Executive Trader in Antwerp, Belgium (1999 to 2010). At Argyle, Mr. Mackie was responsible for the pricing and sales of all Argyle pink polished diamonds including the Argyle pink diamond tender. In Antwerp, Mr. Mackie was responsible for the valuation and sales of rough diamonds from the Diavik, Argyle, Murowa, Ellendale and Merlin diamond mines. Mr. Mackie is a graduate of the University of British Columbia (B.A., 1994).

32

Tom E. McCandless, Ph.D., P.Geo.

Dr. McCandless has been the Company’s Vice President Exploration since November 2018. Dr. McCandless is a resident of British Columbia, Canada. Prior to joining the Company, he was with Stornoway Diamonds (2007-2008) and Ashton Mining of Canada (2000-2007) where he held the position of Chief Mineralogist. At Ashton, Dr. McCandless managed the laboratory facilities and dealt with technical aspects of kimberlite exploration in Quebec, NWT, Nunavut and Alberta. Dr. McCandless was directly involved with the Renard Mine from discovery with Ashton, through its early evaluation with Stornoway. He has served as an officer or director of several public companies and was most recently a director of Kennady Diamonds. Presently he is a director of CBLT, and a technical advisor to Dunnedin Ventures, GGL Resources, and Canterra Minerals. Dr. McCandless is also president of MCC Geosciences Inc., providing advice in diamond and metals exploration and development. Dr. McCandless is a graduate of the University of Arizona (Ph.D., 1994), and is an Adjunct Professor at Arizona and at the University of Alberta. He is a registered Professional Geoscientist with Engineers and Geoscientists BC, and the NT/NU Association of Professional Engineers and Geoscientists.

Bruce Dresner, MBA, BA, CFA

Mr. Dresner has had a distinguished career as an investment professional, including Director of Investments and Chief Investment Officer at Dartmouth College (1985-1990), Vice President for Investments and Chief Investment Officer at Columbia University (1990-2002), Principal of Quellos Group LLC (2002-2007) and Managing Director, BlackRock Inc. (2007-2008). Since his retirement from BlackRock, Mr. Dresner has held a number of board and advisory positions, including serving on the advisory board of Capstone Investment Advisors (2008-2010), as a member of the strategic advisory board of Wilshire Private Markets at Wilshire Associates Inc. (2010-2014), and a trustee of the Gottex Multi-Asset Endowment and Alternative Asset Funds (2011-2016) and as Senior Advisor to BlueLine Advisors LLC (2014 – present). Bruce Dresner is a graduate of Dartmouth College Tuck School of Business (MBA, 1971) and the University of Miami (BA Economics, 1969). Mr. Dresner also received his CFA (Chartered Financial Analyst) designation in 1980. Mr. Dresner is a resident of Florida, USA. Mr. Dresner was appointed as a director of Mountain Province in March 2013. He is also a director of the Sherman Fairchild Foundation (non-profit).

Peeyush Varshney, B.Comm., LL.B.

A resident of British Columbia, Canada, Mr. Peeyush Varshney has been actively involved in the capital markets since 1996 and has been a principal of Varshney Capital Corp., a private merchant banking, venture capital and corporate advisory firm since 1996. Since September 2005, he has also been the Chief Executive Officer and a director of ZincX Resources Corp., a resource exploration company listed on the TSX Venture Exchange. Mr. Varshney obtained a Bachelor of Commerce degree (Finance) in 1989 and Bachelor of Laws in 1993, both from the University of British Columbia. He has been a member of the Law Society of British Columbia since September 1994.

Carl G. Verley, B.Sc., P. Geo.

Mr. Carl Verley is a resident of British Columbia, Canada, and a graduate of the University of British Columbia where he received his Bachelor of Science Degree in May of 1974. He worked for Cordilleran Engineering Ltd. from 1975 to 1982.  He has been a self-employed geologist since 1982.  From August of 1990 to January 2002, he served on the Board of Directors of Gee-Ten Ventures Inc., from May 2002 to July 2003 he was a director of Rome Resources Ltd., from July 2003 to December 2011, he was a director of Alphamin Resources Corp., and from October 2007 to May 2012 he was a director of African Metals Corp. He was vice president of exploration for Windstorm Resources Inc. from July 2011 to October 2012. He has been a director of Mountain Province Diamonds Inc. since 1986 and he has also been a director of Troy Energy Corp. since August 21, 2017. He was a director of Kennady Diamonds Inc. between February 2012 and February 2016.  He is the President of Amerlin Exploration Services Ltd., a private company providing exploration services to the mineral industry, that he formed 1983.  He is a registered Professional Geoscientist with the British Columbia Association of Professional Engineers and Geoscientists and Northwest Territories and Nunavut Association of Professional Engineers and Geoscientists.

33

Karen Goracke, B.Sc., Business Administration

Ms. Goracke is a resident of Omaha, Nebraska, USA. Ms. Goracke is President and CEO of Borsheims Fine Jewelry, a Berkshire Hathaway company. She began her career at Borsheims in 1988 as a Sales Associate, but soon was promoted. In her time at Borsheims she has worked as inventory supervisor, watch buyer, ladies jewelry buyer, director of merchandising, and, in 2013, was named President and CEO by Berkshire Hathaway Chairman Warren Buffett. Ms. Goracke graduated from the University of Nebraska–Kearney with Bachelors of Science degrees in Business Administration and Organizational Communication. She serves as a Director with the Jewelers Vigilance Committee, the leading compliance organization in the jewelry and gem industry. She also serves as a Director with Jewelers of America and as well as on a number of other boards and committees within the gem and jewelry industry.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No individual set forth in the above table is, as at the date hereof, or was, within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that:

(a) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days and that was issued while such individual was acting in the capacity as director, chief executive officer or chief financial officer; or

(b) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after such individual ceased to be a director, chief executive officer or chief financial officer, and which resulted from an event that occurred while such individual was acting in the capacity as director, chief executive officer or chief financial officer.

Other than as set out below, no the knowledge of the Company, no individual set forth in the above table or shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, nor any personal holding company of any such individual:

(a) is, as of the date hereof, or has been within 10 years before the date hereof, a director or executive officer of any company (including the Company) that, while such individual was acting in that capacity, or within a year of such individual ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets; or

(b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such individual; or

has been subject to (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

34

Conflicts of Interest

Certain of the directors and officers of the Corporation also serve as directors and/or officers of other companies involved in natural resource exploration, development and mining operations. Consequently, there exists the possibility for such directors and officers to be in a position of conflict. The directors of the Corporation are required by law to act honestly and in good faith with a view to the best interests of the Corporation, and to disclose any interest they may have in any project or opportunity of the Corporation. In addition, each of the directors is required by law to declare his or her interest in and refrain from voting on any matter in which he or she may have a conflict of interest, in accordance with applicable laws.

AUDIT COMMITTEE

The Audit Committee Charter as approved by the Board of Directors of the Company is included in Appendix 1. As of the date hereof, the Audit Committee is composed of David Whittle (Chair), Bruce Dresner, and Peeyush Varshney, all of whom are independent directors.

Education and Experience

This section describes the education and experience of the Company’s Audit Committee members that are relevant to the performance of their responsibilities in that role.

The Board of Directors believes that the composition of the Audit Committee reflects a high level of financial literacy and expertise. Each member of the Audit Committee has been determined by the Board of Directors to be “independent” and “financially literate” as such terms are defined under Canadian and United States securities laws. The Board of Directors has also determined that David Whittle is a financial expert with years of experience in finance. Each other member of the Audit Committee currently are financially literate within the meaning of Section 1.6 of National Instrument 52-110.

Pre-Approval Policies and Procedures

The charter of the Audit Committee requires the Audit Committee to review and approve the engagement of the external auditors to perform non-audit services, together with the fees therefore, and the impact thereof, on the independence of the external auditors.

35

External Auditor Service Fees

Fees paid to KPMG LLP during the years ended December 31, 2018 and 2017 were as follows:

Auditor’s Fees	2018 CAD$		% of Total Fees		2017 CAD$		% of Total Fees
Audit Fees:
Audit		520,000		89.8		526,050		72.8
Audit related		36,400		6.3		165,759		22.9
Total Audit Fees		556,400		96.1		691,809		95.7
Tax Fees:
Planning and advice		9,623		1.7		11,244		1.6
Compliance		13,142		2.3		19,667		2.7
Total Tax Fees		22,765		3.9		30,911		4.3
Total Fees		579,165		100.0		722,720		100.0

Tax Fees

Tax fees were for tax compliance, tax advice and tax planning professional services. These services consisted of: tax compliance including the review of tax returns, and tax planning and advisory services.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, and there are no material legal proceedings to which any of the GK Diamond Mine is subject, and no such proceedings are known to be contemplated.

No penalties or sanctions have been imposed against the Company (i) by a court relating to securities legislation or (ii) by a securities regulatory authority, nor has the Company entered into any settlement agreements (a) before a court relating to securities legislation or (b) with a securities regulatory authority, during the Company's most recently completed financial year, nor has a court or regulatory body imposed any other penalties or sanctions against the Company.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as described elsewhere in this AIF or in the joint management information circular of the Company and Kennady dated as of March 5, 2018 (including, without limitation, under the headings "Interests of Directors and Officers of Mountain Province In The Arrangement", "Interest of Informed Persons in Material Transactions" and "Securities Law Matters—Canadian Securities Laws") which is incorporated by reference herein and available on the Company's SEDAR profile at www.sedar.com, no director, executive officer or person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of the Company’s outstanding voting securities and no associate or affiliate of any of such persons or companies has any material interest, direct or indirect, in any transaction within the three most recently completed fiscal years or since the commencement of the Company’s last completed fiscal year or in any proposed transaction, which, in either case, has materially affected or is reasonably expected to materially affect the Company or any of its subsidiaries.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common shares of the Company is Computershare of Canada at its principal transfer office in Toronto, Ontario.

36

INTERESTS OF EXPERTS

The 2016 Technical Report and 2017 Technical Report “Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project was prepared and completed jointly by Aurora Geosciences Ltd. and Mineral Services Canada Inc. The qualified persons acting for Aurora Geosciences Ltd. was Mr. Gary Vivian, M.Sc., P.Geo. The qualified person acting for Mineral Services Canada Inc. was Dr.Tom Nowicki, Ph.D., P.Geo.

The 2017 Technical Report “Gahcho Kué Mine: NI 43-101 Technical Report” was prepared and completed by JDS, with Daniel D. Johnson, P. Eng., and Dino Pilotto, P. Eng., acting as qualified persons for the purposes of NI 43-101. The technical report preceding the 2017 Technical Report was filed by the Company in 2014, and was prepared and completed jointly by JDS and Hatch Ltd. The qualified persons acting for JDS were Mr. Johnson, Mr. Pilotto and Kenneth Meikle, P. Eng. The qualified person acting for Hatch Ltd. was Kato Lone, P. Eng.

To the knowledge of the Company, each of these experts holds less than 1% of the outstanding securities of the Company or of any associate or affiliate thereof as of the date hereof. None of the aforementioned firms or persons received, or will receive, any direct or indirect interest in any securities of the Company or of any associate or affiliate thereof in connection with the preparation of the report prepared by such person. None of the aforementioned firms or persons, nor any directors, officers or employees of such firms, are currently, or are expected to be elected, appointed or employed as, a director, officer or employee of the Company, or of any associate or affiliate of the Company.

During 2018, disclosure by the Company of scientific and technical information regarding its mineral properties in its continuous disclosure documents and filings has been reviewed and approved variously by Carl G. Verley, P.Geo., Keyvan Salehi, P.Eng., MBA, and Tom E. McCandless, Ph.D., P.Geo., qualified persons for the purposes of NI 43-101. Mr. Verley is a director of the Company, and, as at the date hereof, beneficially owns 379,318 common shares, 250,000 options to acquire common shares and 28,332 restricted share units to acquire common shares of the Company. Mr. Verley’s holdings in aggregate represent less than one percent of the Company’s issued and outstanding common shares. Mr. Salehi was retained as a consultant to the Company, and became an employee of the Company in June 2018. To the knowledge of the Company, Mr. Salehi does not have an interest in any securities of the Company. Dr. McCandless is Vice President, Exploration and beneficially owns 195 common shares of the Company.

KPMG LLP, the auditors of the Company, prepared an auditors' report to the shareholders of the Company, on the consolidated balance sheets of the Company, for the years ended December 31, 2018 and 2017, and the consolidated statements comprehensive (loss) income, cash flows and changes in shareholders' equity for each of the years ended December 31, 2018 and 2017. KMPG LLP has advised that they are independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations, and also that they are independent accountants with respect to the Company under all relevant United States professional and regulatory standards.

MATERIAL CONTRACTS

Except for contracts entered into by Mountain Province in the ordinary course of business, the only material contracts entered into by Mountain Province since the beginning of the most recently completed financial year or that are still in effect, are:

· the Kennady Arrangement Agreement (see "Description of the Business—Three Year History—Fiscal Year 2018");

· the Kennady Voting and Support Agreements (see "Description of the Business—Three Year History—Fiscal Year 2018");

· the Mountain Province Indenture (see "Description of the Business—Three Year History—Fiscal Year 2017");

37

· the Joint Venture Agreement (see "Mineral Properties—The Gahcho Kué Diamond Mine—History").

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on SEDAR at www.sedar.com. Further, additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the Company’s information circular dated May 15, 2018, for the annual meeting of shareholders that was held on June 19, 2018. Additional financial information is provided in the Company’s comparative financial statements and Management’s Discussion and Analysis for the years ended December 31, 2018, and December 31, 2017.

APPENDIX 1: AUDIT COMMITTEE CHARTER

Mandate

A. Role and Objectives

The Audit Committee (the “Committee”) is a committee of the Board of Directors (the “Board”) of Mountain Province Diamonds Inc (“MPVD” or the “Company”) established for the purpose of overseeing the accounting and financial reporting process of MPVD and external audits of the consolidated financial statements of MPVD. In connection, therewith, the Committee assists the Board in fulfilling its oversight responsibilities in relation to MPVD’s internal accounting standards and practices, financial information, accounting systems and procedures, financial reporting and statements and the nature and scope of the annual external audit. The Committee also recommends for Board approval MPVD’s audited annual consolidated financial statements and other mandatory financial disclosure.

MPVD’s external auditor is accountable to the Board and the Committee as representatives of shareholders of MPVD. The Committee shall be directly responsible for overseeing the relationship of the external auditor. The Committee shall have such access to the external auditor as it considers necessary or desirable in order to perform its duties and responsibilities. The external auditor shall report directly to the Committee.

The objectives of the Committee are as follows:

1. to be satisfied with the credibility and integrity of financial reports;

2. to support the Board in meeting its oversight responsibilities in respect of the preparation and disclosure of financial reporting, including the consolidated financial statements of MPVD;

3. to facilitate communication between the Board and the external auditor and to receive all reports of the external auditor directly from the external auditor;

4. to be satisfied with the external auditor’s independence and objectivity; and

5. to strengthen the role of independent directors by facilitating in-depth discussions between members of the Committee, management and MPVD’s external auditor.

B. Composition

1. The Committee shall comprise at least three directors, none of whom shall be an officer or employee of MPVD or any of its subsidiaries or any affiliate thereof. Each Committee member shall satisfy the independence, financial literacy and experience requirements of applicable securities laws, rules or guidelines, any applicable stock exchange requirements or guidelines and any other applicable regulatory rules. In particular, each member of the Committee shall have no direct or indirect material relationship with MPVD or any affiliate thereof which could reasonably interfere with the exercise of the member’s independent judgment. Determinations as to whether a particular director satisfies the requirements for membership on the Committee shall be made by the full Board.

38

2. Members of the Committee shall be appointed by the Board. Each member shall serve until his successor is appointed, unless he shall resign or be removed by the Board or he shall otherwise cease to be a director of MPVD.

3. The Chair of the Committee may be designated by the Board or, if it does not do so, the members of the Committee may elect a Chair by vote of a majority of the full Committee membership. The Committee Chair shall satisfy the independence, financial literacy and experience requirements as described above.

4. The Committee shall have access to such officers and employees of MPVD and to such information respecting MPVD as it considers necessary or advisable in order to perform its duties and responsibilities.

C. Meetings

1. At all meetings of the Committee, every question shall be decided by a majority of the votes cast. In case of an equality of votes, the matter will be referred to the Board for decision.

2. A quorum for meetings of the Committee shall be a majority of its members.

3. Meetings of the Committee shall be scheduled at least quarterly and at such other times during each year as it deems appropriate. Minutes of all meetings of the Committee shall be taken. The CFO shall attend meetings of the Committee, unless otherwise excused from all or part of any such meeting by the Committee Chair. The Chair of the Committee shall hold in camera sessions of the Committee, without management present, at each meeting, as determined necessary.

4. The Committee shall report the results of meetings and reviews undertaken and any associated recommendations to the Board.

5. The Committee shall meet periodically with MPVD’s external auditor in connection with the preparation of the annual consolidated financial statements and otherwise as the Committee may determine, part or all of each such meeting to be in the absence of management.

D. Responsibilities

As discussed above, the Committee is established to assist the Board in fulfilling its oversight responsibilities with respect to the accounting and financial reporting processes of MPVD and external audits of MPVD’s consolidated financial statements. In that regard, the Committee shall:

1. satisfy itself on behalf of the Board with respect to MPVD’s internal control systems including identifying, monitoring and mitigating business risks as well as compliance with legal, ethical and regulatory requirements. The Committee shall also review with management, the external auditor and, if necessary, legal counsel, any litigation, claim or other contingency (including tax assessments) that could have a material effect on the financial position or operating results of MPVD (on a consolidated basis), and the manner in which these matters may be, or have been, disclosed in the financial statements;

2. review with management and the external auditor the annual consolidated financial statements of MPVD, the reports of the external auditor thereon and related financial reporting, including Management’s Discussion and Analysis and any earnings press releases, (collectively, “Annual Financial Disclosures”) prior to their submission to the Board for approval. This process should include, but not be limited to:

(a) reviewing changes in accounting principles, or in their application, which may have a material impact on the current or future year’s financial statements;

(b) reviewing significant accruals, reserves or other estimates;

39

(c) reviewing accounting treatment of unusual or non-recurring transactions;

(d) reviewing the adequacy of any reclamation fund;

(e) reviewing disclosure requirements for commitments and contingencies;

(f) reviewing financial statements and all items raised by the external auditor, whether or not included in the financial statements; and

(g) reviewing unresolved differences between MPVD and the external auditor.

Following such review, the Committee shall recommend to the Board for approval all Annual Financial Disclosures;

· review with management all interim consolidated financial statements of MPVD and related financial reporting, including Management’s Discussion and Analysis and any earnings press releases, (collectively “Quarterly Financial Disclosures”) and, if thought fit, approve all Quarterly Financial Disclosures;

· be satisfied that adequate procedures are in place for the review of MPVD’s public disclosure of financial information extracted or derived from MPVD’s financial statements, other than Annual Financial Disclosures or Quarterly Financial Disclosures, and shall periodically assess the adequacy of those procedures;

· review with management and recommend to the Board for approval, any financial statements of MPVD which have not previously been approved by the Board and which are to be included in a prospectus of MPVD;

· review with management and recommend to the Board for approval, MPVD’s AIF;

· with respect to the external auditor:

(h) receive all reports of the external auditor directly from the external auditor;

(i) discuss with the external auditor:

(i) critical accounting policies;

(ii) alternative treatments of financial information within GAAP discussed with management (including the ramifications thereof and the treatment preferred by the external auditor); and

(iii) other material, written communication between management and the external auditor;

(j) consider and make a recommendation to the Board as to the appointment or re-appointment of the external auditor, being satisfied that such auditor is a participant in good standing pursuant to applicable securities laws;

(k) review the terms of engagement of the external auditor, including the appropriateness and reasonableness of the auditor’s fees, and make a recommendation to the Board as to the compensation of the external auditor;

(l) when there is to be a replacement of the external auditor, review with management the reasons for such replacement and the information to be included in any required notice to securities regulators and recommend to the Board for approval the replacement of the external auditor along with the content of any such notice;

(m) oversee the work of the external auditor in performing its audit or review services and oversee the resolution of any disagreements between management and the external auditor;

(n) review and discuss with the external auditor all significant relationships that the external auditor and its affiliates have with MPVD and its affiliates in order to determine the external auditor’s independence, including, without limitation:

(i) requesting, receiving and reviewing, on a periodic basis, written or oral information from the external auditor delineating all relationships that may reasonably be thought to bear on the independence of the external auditor with respect to MPVD;

(ii) discussing with the external auditor any disclosed relationships or services that the external auditor believes may affect the objectivity and independence of the external auditor; and

(iii) recommending that the Board take appropriate action in response to the external auditor’s information to satisfy itself of the external auditor’s independence;

40

(o) as may be required by applicable securities laws, rules and guidelines, either:

(i) pre-approve all non-audit services to be provided by the external auditor to MPVD (and its subsidiaries, if any), or, in the case of de minimus non-audit services, approve such non-audit services prior to the completion of the audit; or

(ii) adopt specific policies and procedures for the engagement of the external auditor for the purposes of the provision of non-audit services;

(i) review and approve the hiring policies of MPVD regarding partners, employees and former partners and employees of the present and former external auditor of MPVD;

3. (a) establish procedures for:

(i) the receipt, retention and treatment of complaints received by MPVD regarding accounting, internal accounting controls or auditing matters; and

(ii) the confidential, anonymous submission by employees of MPVD of concerns regarding questionable accounting or auditing matters; and

(b) review with the external auditor its assessment of the internal controls of MPVD, its written reports containing recommendations for improvement, and MPVD’s response and follow-up to any identified weaknesses;

4. with respect to risk management, be satisfied that MPVD has implemented appropriate systems of internal control over financial reporting (and review management’s assessment thereof) to ensure compliance with any applicable legal and regulatory requirements;

5. review annually with management and the external auditor and report to the Board on insurable risks and insurance coverage; and

6. engage independent counsel and other advisors as it determines necessary to carry out its duties and set and pay the compensation for any such advisors.

APPENDIX 2: GLOSSARY OF TERMS USED FREQUENTLY IN THIS DOCUMENT

berm - an embankment of crushed and screened rock fill.

carat - unit used to measure gemstones, equal to 200 milligrams or 0.2 grams. For smaller gems, 100 points is equal to one carat.

core - the long cylindrical piece of rock, about an inch in diameter, brought to surface by diamond drilling.

CPT - carats per tonne.

diamantaire - a professional diamond trader or manufacturer active in the diamond business.

diamondiferous - containing diamonds.

diamonds - a crystallized variety of pure carbon that may be of gem quality.

dike - a temporary structure used to retain or restrict water flow.

dilution - the effect of waste or low-grade ore being included unavoidably in the mine ore, lowering the recovered grade.

grade - number of carats (or other unit of weight) in a physical unit of ore, usually expressed in carats per tonne.

Cut-off grade - is the minimum grade at which a tonne of rock can be processed on an economic basis.

Recovered grade - is actual grade realized by the metallurgical process and treatment or ore, based on actual experience or laboratory testing.

kimberlite - A volatile-rich, potassic, ultrabasic rock which varies in mineralogical composition and texture. Kimberlite magmas originate at great depth in the earth’s mantle and as they ascend rapidly to the surface they are often emplaced in vertical, carrot-shaped bodies known as pipes or thin (1-3 metres wide) tabular bodies known as dikes. Kimberlite deposits may or may not contain diamonds.

41

mineral reserves:

- mineral reserve: The economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.

- proven mineral reserve: The part of a deposit which is being mined, or which is being developed and for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of a measured mineral resource for which the size, configuration and grade or quality and distribution of values are so well established, and for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, that there is the highest degree of confidence in the estimate.

- probable mineral reserve: The estimated quantity and grade or quality of that part of an indicated mineral resource for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, at a confidence level which would serve as a basis for decisions on major expenditures.

mineral resources:

- mineral resource: A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.

- measured mineral resources: A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

- indicated mineral resources: An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and test information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

MT - million tonnes.

open pit - a mine that is entirely on surface. Also, referred to as an open-cut or open-cast mine.

pipe - see “kimberlite” above.

polished diamonds - rough stones that have been cut and polished for retail trade.

qualified person - is an individual who:

(a) is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of these; (b) has experience relevant to the subject matter of the mineral project, and the technical report; and (c) is a member in good standing of a professional association as defined by NI 43-101 of the Canadian Securities Administrators.

42

reclamation - the restoration of a site after mining or exploration activity is completed.

recovery - a term used in process metallurgy to indicate the proportion of valuable material obtained in the processing of an ore. It is generally stated as a percentage of valuable metal in the ore that is recovered compared to the total valuable metal present in the ore.

rough diamonds - untreated stones in run-of-mine form, which have been boiled and cleaned.

sample - a small portion of rock or a mineral deposit, taken so that the metal content can be determined by assaying.

till - a glacial, surficial deposit composed of unsorted clay, sand and matrix-supported rock fragments.

43

EX-99.2

Exhibit 99.2

Consolidated Financial Statements

(Expressed in thousands of Canadian Dollars)

MOUNTAIN PROVINCE
DIAMONDS INC.

As at December 31, 2018 and 2017

And for the years ended December 31, 2018 and 2017

MOUNTAIN PROVINCE DIAMONDS INC.

CONTENTS	Page
Responsibility for Consolidated Financial Statements	3
Management’s Report on Internal Controls Over Financial Reporting	4
Report of Independent Registered Public Accounting Firm	5
Report of Independent Registered Public Accounting Firm	6
Consolidated Balance Sheets	8
Consolidated Statements of Comprehensive (Loss) Income	9
Consolidated Statements of Equity	10
Consolidated Statements of Cash Flows	11
Notes to the Consolidated Financial Statements	12 – 41

Page | 2

MOUNTAIN PROVINCE DIAMONDS INC.

Responsibility for Consolidated Financial Statements

The accompanying consolidated financial statements of Mountain Province Diamonds Inc. (the "Company") are the responsibility of the Board of Directors.

The consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the Company’s consolidated financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the balance sheet date. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) appropriate in the circumstances.

Management has established processes, which are in place to provide sufficient knowledge to support management representations that it has exercised reasonable diligence that the consolidated financial statements fairly present in all material respects the financial condition, financial performance and cash flows of the Company, as of the date of and for the periods presented by the consolidated financial statements.

The Board of Directors is responsible for reviewing and approving the consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. The Audit Committee assists the Board of Directors in fulfilling this responsibility.

The Audit Committee meets with management to review the financial reporting process and the consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consolidated financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with IFRS as issued by the IASB, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

“Stuart Brown”	“Perry Ing”
Stuart Brown	Perry Ing
President and Chief Executive Officer	VP Finance and Chief Financial Officer

Toronto, Canada

March 20, 2019

Page | 3

MOUNTAIN PROVINCE DIAMONDS INC.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB.

Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all possible misstatements or frauds. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control – Integrated Framework (2013), which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2018. The Company's independent auditors, KPMG LLP, have issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

March 20, 2019

Page | 4

MOUNTAIN PROVINCE DIAMONDS INC.

REPORT OF independent REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Mountain Province Diamonds Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Mountain Province Diamonds Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of comprehensive (loss) income, equity, and cash flows for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 20, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

We have served as the Company's auditor since 1999.

Toronto, Canada

March 20, 2019

Page | 5

MOUNTAIN PROVINCE DIAMONDS INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Mountain Province Diamonds Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Mountain Province Diamonds Inc.’s (the Company) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of comprehensive (loss) income, equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively, the consolidated financial statements), and our report dated March 20, 2019 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, appearing under the heading Internal Control over Financial Reporting in Management’s Discussion and Analysis for the year ended December 31, 2018. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Page | 6

MOUNTAIN PROVINCE DIAMONDS INC.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada

March 20, 2019

Page | 7

MOUNTAIN PROVINCE DIAMONDS INC.

Consolidated Balance Sheets

Expressed in thousands of Canadian dollars

		December 31,			December 31,
	Notes	2018			2017
ASSETS
Current assets
Cash		$	30,708		$	43,129
Amounts receivable	5		2,478			2,679
Prepaid expenses and other			1,269			3,464
Inventories	7		102,261			82,173
			136,716			131,445
Reclamation deposit			250			-
Derivative assets	14		1,670			963
Property, plant and equipment	8		841,241			662,658
Total assets		$	979,877		$	795,066
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	16	$	48,295		$	34,615
Derivative liabilities	14		653			-
Income taxes payable	17		574			-
			49,522			34,615
Secured notes payable	10		408,144			396,509
Decommissioning and restoration liability	9		54,922			29,200
Deferred income tax liabilities	17		3,174			-
Shareholders' equity:
Share capital	12		629,796			475,624
Share-based payments reserve	12		6,750			5,549
Deficit			(173,765	)		(146,431	)
Accumulated other comprehensive income			1,334			-
Total shareholders' equity			464,115			334,742
Total liabilities and shareholders' equity		$	979,877		$	795,066
Commitments and contingencies	10, 15 & 16
Subsequent event	14

On behalf of the Board:    

“David Whittle”	“Jonathan Comerford”
Director	Director

The accompanying notes are an integral part of these consolidated financial statements.

Page | 8

MOUNTAIN PROVINCE DIAMONDS INC.

Consolidated Statements of Comprehensive (Loss) Income

Expressed in thousands of Canadian dollars

		Year ended			Year ended
	Notes	December 31, 2018			December 31, 2017
Sales		$	310,969		$	170,108
Cost of sales:
Production costs			117,908			64,420
Cost of acquired diamonds			32,611			8,940
Depreciation and depletion			79,419			44,615
Earnings from mine operations			81,031			52,133
Exploration and evaluation expenses			8,204			472
Selling, general and administrative expenses	13		14,439			15,593
Operating income			58,388			36,068
Net finance expenses	11		(40,564	)		(52,219	)
Derivative (losses) gains	14		(247	)		3,178
Foreign exchange (losses) gains			(32,474	)		30,035
Other income			81			90
(Loss) income before taxes			(14,816	)		17,152
Current income taxes	17		(1,148	)		-
Deferred income taxes	17		(2,970	)		-
Total income taxes	17		(4,118	)		-
Net (loss) income for the year		$	(18,934	)	$	17,152
Other Comprehensive Income
Items that will not be reclassified subsequently to profit and loss:
Change in fair value of equity securities	6		1,334			-
Other comprehensive income			1,334			-
Total comprehensive (loss) income for the year		$	(17,600	)	$	17,152
Basic and diluted (loss) earnings per share	12(iv)	$	(0.10	)	$	0.11
Basic weighted average number of shares outstanding			195,968,588			160,189,858
Diluted weighted average number of shares outstanding			195,968,588			161,024,354

The accompanying notes are an integral part of these consolidated financial statements.

Page | 9

MOUNTAIN PROVINCE DIAMONDS INC.

Consolidated Statements of Equity

Expressed in thousands of Canadian dollars, except for the number of shares

	Notes		Number of shares		Share capital		Share-based payments reserve			Deficit			Accumulated other comprehensive income		Total
Balance, January 1, 2017				159,818,833	$	472,995	$	5,019		$	(163,583	)	$	-	$	314,431
Net income for the year				-		-		-			17,152			-		17,152
Issuance of common shares – exercise of options		12(iii)		355,000		1,577		-			-			-		1,577
Fair value of options exercised from share-based payments reserve				-		538		(538	)		-			-		-
Share-based payment				-		-		1,582			-			-		1,582
Issuance of common shares – restricted share unit				79,668		514		(514	)		-			-		-
Balance, December 31, 2017				160,253,501	$	475,624	$	5,549		$	(146,431	)	$	-	$	334,742
Net loss for the year				-		-		-			(18,934	)		-		(18,934	)
Share-based payment				-		-		1,685			-			-		1,685
Issuance of common shares - restricted share units		12(iii)		111,668		484		(484	)		-			-		-
Share issuance to acquire Kennady Diamonds Inc.		6		49,737,307		153,688		-			-			-		153,688
Dividends declared and paid		12(ii)		-		-		-			(8,400	)		-		(8,400	)
Other Comprehensive Income:
Financial assets at fair value through other comprehensive income
Gain on equity securities		6		-		-		-			-			1,334		1,334
Balance, December 31, 2018				210,102,476	$	629,796	$	6,750		$	(173,765	)	$	1,334	$	464,115

The accompanying notes are an integral part of these consolidated financial statements.

Page | 10

MOUNTAIN PROVINCE DIAMONDS INC.

Consolidated Statements of Cash Flows

Expressed in thousands of Canadian dollars

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Cash provided by (used in):
Operating activities:
Net (loss) income for the year	$	(18,934	)	$	17,152
Adjustments:
Net financing expenses		40,564			52,219
Depreciation and depletion		79,441			44,634
Share-based payment expense		1,685			1,582
Derivative losses (gains)		247			(3,178	)
Foreign exchange losses (gains)		32,474			(30,035	)
Current income taxes		1,148			-
Deferred income taxes		2,970			-
Income taxes paid		(574	)		-
		139,021			82,374
Changes in non-cash operating working capital:
Amounts receivable		842			(643	)
Prepaid expenses and other		2,314			(2,146	)
Inventories		(15,633	)		(53,534	)
Accounts payable and accrued liabilities		9,359			16,600
		135,903			42,651
Investing activities:
Restricted cash		-			83,878
Pre-production sales capitalized		-			67,493
Interest income		582			1,081
Capitalized interest paid		-			(5,451	)
Purchase of property, plant and equipment		(76,062	)		(105,824	)
Cash acquired and transaction costs on asset acquisition of Kennady Diamonds Inc.		(4,193	)		-
		(79,673	)		41,177
Financing activities:
Loan facility proceeds		-			32,403
Repayment of loan facility		-			(458,888	)
Secured notes payable		-			424,365
Repurchase of secured notes		(26,366	)		-
Financing costs		(33,371	)		(48,150	)
Payment of dividends		(8,400	)		-
Proceeds from option exercises		-			1,577
		(68,137	)		(48,693	)
Effect of foreign exchange rate changes on cash		(514	)		1,150
(Decrease) increase in cash		(12,421	)		36,285
Cash, beginning of year		43,129			6,844
Cash, end of year	$	30,708		$	43,129

The accompanying notes are an integral part of these consolidated financial statements.

Page | 11

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

1. Nature of Operations

Mountain Province Diamonds Inc. (“Mountain Province” and together with its subsidiaries collectively, the “Company”) was incorporated on December 2, 1986 under the British Columbia Company Act. The Company amended its articles and continued incorporation under the Ontario Business Corporations Act effective May 8, 2006. The Company holds a 49% interest in the Gahcho Kué Project (“Gahcho Kué Diamond Mine” or “GK Mine” or “GK Project”) in Canada’s Northwest Territories. On April 13, 2018, the Company completed the asset acquisition of Kennady Diamonds Inc. (formerly KDI.V on the TSX Venture exchange), which included 100% of the mineral rights of the Kennady North Project (“KNP”).

Effective March 1, 2017, the GK Mine declared commercial production for accounting purposes.

The address of the Company’s registered office and its principal place of business is 161 Bay Street, Suite 1410, PO Box 216, Toronto, ON, Canada, M5J 2S1. The Company’s shares are listed on the Toronto Stock Exchange (“TSX”) and NASDAQ under the symbol ‘MPVD’.

The underlying value and recoverability of the amounts shown as “Property, Plant and Equipment” (Note 8) are dependent upon future profitable production and proceeds from disposition of the Company’s mineral properties.

KNP is involved in the exploration, discovery, evaluation and development of diamond properties in Canada’s Northwest Territories. The underlying value and recoverability of amounts shown as “Mineral Properties” is dependent upon the ability of the Company to discover economically recoverable reserves, to have successful exploration, permitting and development, and upon future profitable production or proceeds from disposition of the Company’s mineral properties. Failure to discover and develop economically recoverable reserves will require the Company to write off costs capitalized to date.

Authorization of Financial Statements

These consolidated financial statements were approved by the Board of Directors on March 20, 2019.

2. BASIS OF PRESENTATION

These consolidated financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The policies set out below were consistently applied to all the periods presented.

These financial statements were prepared under the historical cost convention, as modified by the revaluation of equity securities and derivative assets and liabilities and are presented in thousands of Canadian dollars.

The consolidated financial statements include the accounts of Mountain Province and its wholly-owned subsidiaries:

· 2435572 Ontario Inc. (100% owned)

· 2435386 Ontario Inc. (100% owned by 2435572 Ontario Inc.)

· Kennady Diamonds Inc. (100% owned) (from the date of acquisition – See Note 6)

The Company’s interest in the GK Mine is held through 2435386 Ontario Inc. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have been eliminated on consolidation.

Page | 12

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The Company has determined that its interest in the GK Mine through its joint arrangement is a joint operation under IFRS 11, Joint Arrangements, and, accordingly has recorded the assets, liabilities, revenues and expenses in relation to its interest in the joint operation. The Company’s interest in the GK Mine is bound by a contractual arrangement establishing joint control over the mine through required unanimous consent of the Company and De Beers Canada Inc. (“De Beers” or the “Operator”, and together with the Company, the “Participants”) for strategic, financial and operating policies of the GK Mine. The GK Mine management committee has two representatives of each of the Company and De Beers. The Participants have appointed De Beers as the operator of the GK Mine.

3. Significant accounting policies

(i) Foreign currency

The functional currency of the Company and its subsidiaries is the Canadian Dollar.

In preparing the consolidated financial statements, transactions in currencies other than the Company’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Exchange differences are recognized in profit or loss in the period in which they arise and presented in the consolidated statements of comprehensive (loss) income.

(ii) Share-based payments

The Company maintains a Restricted Share Unit (“RSU”), Deferred Share Unit (“DSU”) and stock option plan for employees, directors, and other qualified individuals.

Equity-settled transactions, which include RSUs, DSUs and stock options, are measured by reference to their fair value at the grant date. The fair value for RSU’s is determined using the market value of the share price, as listed on the TSX, at the close of business at the grant date. The fair value for stock options is determined using a Black-Scholes option pricing model, which relies on estimates of the future risk-free interest rate, future dividend payments, future share price volatility and the expected average life of options. The Company believes this model adequately captures the substantive features of the option awards, and is appropriate to calculate their fair values. The fair value determined for both RSUs and stock options at grant date is recognized over the vesting period in accordance with the vesting terms and conditions, with a corresponding increase to share-based payments reserve.

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed in profit or loss over the vesting period, if any, which is the period during which the employee becomes unconditionally entitled to equity instruments. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest, if any.

(iii) Income taxes and deferred taxes

The income tax expense or benefit for the year consists of two components: current and deferred.

Page | 13

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the balance sheet date in each of the jurisdictions and includes any adjustments for taxes payable or recovery in respect of prior periods.

Taxable profit or loss differs from profit or loss as reported in the Consolidated Statements of Comprehensive Income because of items of income or expenses that are taxable or deductible in other years, and items that are never taxable or deductible.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, loss carryforwards and tax credit carryforwards to the extent that it is probable that taxable profits will be available against which they can be utilized. To the extent that the Company does not consider it to be probable that taxable profits will be available against which deductible temporary differences, loss carryforwards, and tax credit carryforwards can be utilized, a deferred tax asset is not recognized.

Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

(iv) Mineral properties and exploration and evaluation costs and development costs

Exploration and evaluation (“E&E”) costs are those costs required to find a mineral property and determine commercial viability and technical feasibility. E&E costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be converted to proven and probable reserves.

Page | 14

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

Exploration and evaluation costs consist of:

· gathering exploration data through topographical and geological studies;

· exploratory drilling, trenching and sampling;

· determining the volume and grade of the resource;

· test work on geology, metallurgy, mining, geotechnical and environmental; and

· conducting and refining engineering, marketing and financial studies.

Costs in relation to these activities are expensed as incurred until such time that the technical feasibility and commercial viability of extracting the mineral resource are demonstrable. At such time, mineral properties are assessed for impairment, and an impairment loss, if any, is recognized, and future development costs will be capitalized to assets under construction.

The key factors management used in determining technical feasibility and commercial viability were the following;

· completion of a feasibility study;

· obtaining required permits to construct the mine;

· completion of an evaluation of the financial resources required to construct the mine;

· availability of financial resources necessary to commence development activities to construct the mine; and

· management’s determination that a satisfactory return on investment, in relation to the risks to be assumed, is likely to be obtained.

The Company also recognizes exploration and evaluation costs as assets when acquired as part of a business combination, or asset purchase, or as a result of rights acquired relating to a mineral property.

(v) Commencement of commercial production

There are a number of quantitative and qualitative measures the Company considers when determining if conditions exist for the transition from pre-commercial production to commencement of commercial production of an operating mine, which include:

· all major capital expenditures have been completed to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management;

· mineral recoveries are at or near expected production levels;

· the ability to sustain ongoing production of ore; and

· the ability to operate the plant as intended, achieving 30 days at an average of 70% design capacity.

The list of measures is not exhaustive and management takes into account the surrounding circumstances before making any specific decision.

(vi) Impairment of non-financial assets

The carrying value of the Company’s capitalized property, plant and equipment, and evaluation and exploration assets are assessed for impairment when indicators of potential impairment are identified to exist. If any indication of impairment is identified, an estimate of the asset’s recoverable amount is calculated to determine the extent of the impairment loss, if any. The recoverable amount is determined as the higher of the fair value less costs of disposal for the asset and the asset’s value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

Impairment is determined on an asset by asset basis, whenever possible. If it is not possible to determine impairment on an individual asset basis, then impairment is considered on the basis of a cash generating unit (“CGU”). CGUs represent the lowest level for which there are separately identifiable cash inflows that are largely independent of the cash flows from other assets or the Company’s other group of assets. The Company has determined that it has two CGUs.

Page | 15

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged immediately to profit or loss so as to reduce the carrying amount to its recoverable amount.

(vii) Capitalized interest

Interest costs for qualifying assets are capitalized. Qualifying assets are assets that require a significant amount of time to prepare for their intended use, including projects that are in development or construction stages. Capitalized interest costs are considered an element of the cost of the qualifying asset. Capitalization ceases when the asset is substantially complete or if active development is suspended or ceases. Where funds borrowed are directly attributable to a qualifying asset, the amount capitalized represents the borrowing costs specific to those borrowings.

(viii) Provisions

Provisions represent liabilities to the Company for which the amount or timing is uncertain. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expected expenditures to settle the obligation, applying a pre-tax risk-free discount rate. The increase in the provision due to passage of time is recognized as accretion expense. The Company does not have any provisions as of December 31, 2018 and 2017 other than the provision for decommissioning and restoration associated with the property, plant and equipment.

The Company records as decommissioning and restoration liability the present value of estimated costs of legal and constructive obligations required to restore locations in the period in which the obligation is incurred. The nature of these decommissioning and restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation of affected areas.

The obligation generally arises when the asset is installed or the ground and/or environment is disturbed at the production location. When the liability is initially recognized, the present value of the estimated cost is capitalized if the Company has a related asset on its balance sheet, or expensed. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and is added to inventory, and then in production costs as inventory is sold. Over time, the discounted liability is increased for the change in present value. The periodic unwinding of the discount is recognized in profit or loss as a finance cost called “accretion expense on decommissioning and restoration liability”. Additional disturbances or changes in rehabilitation costs will be recognized as additional capitalized costs (or exploration and evaluation expense depending on whether there was a related asset when the liability was initially recognized) and additional decommissioning and restoration liability when they occur. If it is determined that the expected costs for decommissioning and restoration are reduced, the change in the present value of the reduction is recorded as a reduction in the capitalized costs (expensed), and a reduction of the decommissioning and restoration liability.

(ix) Loss or earnings per share

Basic loss or earnings per share is calculated by dividing loss or earnings attributable to common shares divided by the weighted average number of shares outstanding during the year.

Diluted loss or earnings per share is calculated using the denominator of the basic calculation described above adjusted to include the potentially dilutive effect of outstanding stock options. The denominator is increased by the weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares.

Page | 16

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

(x) Revenue recognition

The Company utilizes a sales agent to facilitate the sale of rough and/or fancies and specials diamonds to the end-customer. The Company recognizes revenue when consideration has been received by the Company’s sales agent, which represents the completion of the performance obligation of the Company and when control is passed to the customer.

As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and specials diamonds produced at the GK mine are subject to a bid process. When De Beers is the successful bidder, the Company recognizes 49% of the bid price as revenue at the completion of the bid process, as De Beers receives the fancies and specials diamonds and the Company is paid immediately for its share by De Beers.

(xi) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated amortization and accumulated impairment losses. Cost comprises the fair value of consideration given to acquire an asset and includes the direct charges associated with bringing the asset to the location and condition necessary to put the asset into use, as well as the future cost of dismantling and removing the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Replacement cost, including major inspection and overhaul expenditures are capitalized for components of property, plant and equipment, which are accounted for separately.

Development costs are capitalized under assets under construction. Expenditures, including engineering to design the size and scope of the project, environmental assessment and permitting and borrowing costs are capitalized to assets under construction.

Amortization is provided on property, plant and equipment. Amortization is calculated so as to allocate the cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and amortization method are reviewed at the end of each annual reporting period. Mineral properties are not amortized until the properties to which they relate are placed into commercial production, at which time the costs will be amortized on a unit-of-production method following commencement of commercial production. Assets under construction are not amortized; rather costs are deferred until the asset is ready for use, at which point the deferred amount is transferred to the appropriate asset category and amortized as set out below.

The Company has changed its estimate of the useful life of the earthmoving equipment category within property, plant and equipment to better reflect the pattern of consumption being the straight line over the shorter of remaining life of the mine or life of the asset, rather than estimated hours. This change has been applied prospectively. This change in estimate did not result in a material difference to the depreciation in the current period. It is estimated it will not have a material impact on future periods’ depreciation.

The Company has changed its estimate of the basis for units of production over proven and probable reserves from carats recovered to ore treated. This change has been applied prospectively to better reflect the pattern of consumption over the remaining life of mine. This change only affects the production and related equipment, general infrastructure, mineral properties and deferred stripping categories within property, plant and equipment.

Upon entering commercial production stage, capitalized costs associated with the acquisition of the mineral property or the development of the mine, are amortized using the various methods based in the asset categories as follows:

Corporate assets	two to seven years, straight line
Vehicles	three to five years, straight line
Production and related equipment	units of production over proven and probable reserves
General infrastructure	units of production over proven and probable reserves
Earthmoving equipment	straight line over shorter of life of mine or life of the asset
Mineral properties	units of production over proven and probable reserves
Assets under construction	not depreciated until ready for use

Page | 17

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

(xii) Inventories

Inventories are recorded at the lower of cost and net realizable values. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion. An impairment adjustment is made when the carrying amount is higher than the net realizable value.

Rough diamonds classified as finished goods comprise diamonds that have been subject to the sorting process. Cost is determined on a weighted average cost per carat basis including production costs and value-added processing activity. As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and special diamonds produced at the GK Mine are subject to a bid process. Upon a successful bid by the Company, the fancies and specials diamonds will be included in inventories and 51% of the bid amount will be paid to De Beers and capitalized to the cost of inventory. Cost for fancies and specials diamonds is determined on a weighted average cost basis including production costs and value-added processing activity plus the direct cost of acquiring the fancies and specials diamonds from De Beers.

Stockpiled ore represents coarse ore that has been extracted from the mine and is available for future processing. Stockpiled ore value is based on costs incurred in bringing ore to the stockpile. Costs are added to the stockpiled ore based on current mining costs per tonne and are removed at the average cost per tonne of ore in the stockpile.

Supplies inventory are consumable materials which are measured at the lower of weighted average cost and net realizable value.

(xiii) Capitalized stripping costs

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of removing overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as mine development costs. These amounts were capitalized under assets under construction.

It may be also required to remove waste materials and to incur stripping costs during the production phase of the mine. The Company recognizes a stripping activity asset if all of the below conditions are met:

· It is probable that the future economic benefit (improved access to the component of the ore body) associated with the stripping activity will flow to the Company.

· The Company can identify the component of the ore body for which access has been improved.

· The costs relating to the stripping activity associated with that component can be measured reliably.

The Company measures the stripping activity at cost based on an accumulation of costs incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable costs. The waste to ore strip ratio projected for the life of the specific orebody must be exceeded for the costs to be capitalized as stripping costs.

After initial recognition, the stripping activity asset is carried at cost less depreciation and impairment losses in the same way as the existing asset of which it is a part.

The stripping activity asset is depreciated over the expected useful life of the identified components of the ore body that becomes more accessible as a result of the stripping activity using the units of production method.

Page | 18

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

(xiv) New accounting policies adopted in the current year

(a) Financial instruments

The Company has adopted all of the requirements of IFRS 9 Financial Instruments (“IFRS 9”), as of January 1, 2018. IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 utilizes a revised model for recognition and measurement of financial instruments and a single, forward-looking “expected loss” impairment model. There are differences between IFRS 9 and IAS 39, however, most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, so the Company’s accounting policy with respect to financial liabilities, including the accounting for the embedded derivative related to the secured notes payable, is unchanged.

As a result of the adoption of IFRS 9, the Company has changed its accounting policy for financial assets retrospectively, for assets that were recognized at the date of application. The change did not impact the carrying value of any financial assets on transition date. The main area of change is the accounting for cash previously classified as fair value through profit and loss.

The following is the Company’s new accounting policy for financial instruments under IFRS 9.

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Financial liabilities are measured at amortized cost unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

Asset/Liability	Original classifciation IAS 39	New classification IFRS 9
Cash	FVTPL	Amortized cost
Equity securities	Available-for-sale	FVTOCI
Amounts receivable	Loans and receivables	Amortized cost
Derivative assets	FVTPL	FVTPL
Accounts payable and accrued liabilities	Other liabilties	Amortized cost
Secured notes payable	Other liabilties	Amortized cost

The Company is not required to restate prior periods. The adoption of IFRS 9 resulted in no change to the opening accumulated deficit on January 1, 2018.

The Company’s cash consists of balances with banks.

The Company had no held-to-maturity financial assets at December 31, 2018 and 2017.

Page | 19

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income.

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value, plus transaction costs, and subsequently carried at amortized cost less any impairment. Financial liabilities carried at amortized cost utilize the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of comprehensive (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of comprehensive (loss) income in the period in which they arise.

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive (loss) income. However, gains and losses on derecognition of financial assets classified as FVTOCI are reclassified to retained earnings (deficit) as a reclassification within equity.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of comprehensive (loss) income.

(b) Foreign currency transactions and advance consideration

In December 2016, the IASB issued IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” (“IFRIC 22”). IFRIC 22 is applicable for annual periods beginning on or after January 1, 2018 and permits early adoption. IFRIC 22 clarifies which date should be used for translation when a foreign currency transaction involves an advance payment or receipt. The interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of the advance consideration. The adoption of IFRIC 22 did not have an effect on the consolidated financial statements for the period.

Page | 20

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

(xv) Standards and amendments to existing standards

At the date of authorization of these financial statements, certain new standards and amendments to existing standards have been published but are not yet effective, and have not been adopted early by the Company. The Company anticipates that all of the relevant standards will be adopted by the Company in the first period beginning after the effective date of the standard. Information on new standards and amendments that are expected to be relevant to the Company’s financial statements is provided below.

Leases

On January 13, 2016, the IASB issued IFRS 16, Leases (“IFRS 16”). The new standard will replace existing lease guidance in IFRS and related interpretations and requires companies to bring most leases on balance sheet. The significant change will affect the accounting treatment of leases currently classified as operating leases. The new standard is effective for annual periods beginning on or after January 1, 2019. The Company has concluded that the adoption of IFRS 16 will have an increase in lease liabilities, representing the present value of future payments under arrangements currently classified as operating leases, along with a corresponding increase in property, plant and equipment. Upon increasing property, plant and equipment, there will be an impact on the statement of comprehensive (loss) income, with an increase to depreciation, depletion and finance costs rather than operating expenses. There will be an impact on the statement of cash flows with an increase to financing activities rather than operating activities. Management believes the quantitative impact of this adoption will not be material.

Uncertainty over income tax treatments

On June 7, 2017, the IASB issued IFRIC Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”). IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. IFRIC 23 is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. Management concludes there will be no material impact on the effect of adopting IFRIC 23 on the consolidated financial statements for annual periods beginning January 1, 2019.

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements requires management to make judgments and/or estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. These judgments and estimates are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Actual results may differ from the estimates. The key areas where judgments, estimates and assumptions have been made are summarized below.

i) Significant judgments in applying accounting policies

The areas which require management to make significant judgments in applying the Company’s accounting policies are:

a) Impairment analysis – property, plant and equipment and evaluation and exploration assets

As required under IAS 36 and IFRS 6, the Company reviews its property, plant and equipment and its evaluation and exploration assets for impairment based on results to date and when events and changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company is required to make certain judgments in assessing indicators of impairment. The Company’s assessment was that as at December 31, 2018 no indicator of an impairment in the carrying value of its property, plant and equipment and evaluation and exploration assets had occurred. The Company assessed for impairment as at December 31, 2017, but determined no impairment existed.

Page | 21

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

ii) Significant accounting estimates and assumptions

The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:

a)           Mineral reserves and resources

Mineral reserve and resource estimates include numerous uncertainties and depend heavily on geological interpretations and statistical inferences drawn from drilling and other data, and require estimates of the future price for the commodity and future cost of operations. The mineral reserve and resources are subject to uncertainty and actual results may vary from these estimates. Results from drilling, testing and production, as well as material changes in commodity prices and operating costs subsequent to the date of the estimate, may justify revision of such estimates. Changes in the proven and probable mineral reserves or measured and indicated and inferred mineral resources estimates may impact the carrying value of the properties. This will also impact the carrying value of the decommissioning and restoration liability and future depletion charges.

b)           Provision for decommissioning and restoration

The decommissioning and restoration liability and the accretion recorded are based on estimates of future cash flows, discount rates, and assumptions regarding timing. The estimates are subject to change and the actual costs for the decommissioning and restoration liability may change significantly. Significant assumptions exist for the determination of what constitutes decommissioning and restoration. Judgment has been applied by management to determine which decommissioning and restoration costs have been appropriately capitalized to inventory, based on the nature of the costs incurred upon reaching commercial production.

Page | 22

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

c)           Deferred taxes

Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and on unused losses carried forward, and are measured using the substantively enacted tax rates that are expected to be in effect when the differences are expected to reverse or losses are expected to be utilized. Deferred tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, including forecasts which include taxable profits, it is probable that they will be realized. Significant judgement is involved in determining when an adequate track record has been established to support the accuracy of the assumptions related to the forecasts of taxable profits.

d)            Business combinations

Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require may require the Company to make certain judgments as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 – Business Combinations. Based on an assessment of the relevant facts and circumstances, the Company concluded that the acquisition of Kennady Diamonds Inc. on April 13, 2018 did not meet the criteria for accounting as a business combination (Note 6).

5. AMOUNTS RECEIVABLE

	December 31,		December 31,
	2018		2017
Sales receivable	$	180	$	-
GST/HST receivable		1,247		2,068
Other receivable		1,051		611
Total	$	2,478	$	2,679

6. ACQUISITION OF KENNADY DIAMONDS INC.

On January 29, 2018, the Company announced a definitive arrangement agreement pursuant to which the Company would acquire all of the issued and outstanding shares of Kennady Diamonds Inc. (“Kennady”) by way of a court-approved plan of arrangement (the “Transaction”). Under the terms of the Transaction, Kennady shareholders would receive 0.975 of a Mountain Province common share for each Kennady common share. During the three-month period ended March 31, 2018, the Company obtained 3,000,000 Kennady shares, by way of a private placement. On April 9, 2018, approval of the Transaction was obtained from both Mountain Province and Kennady shareholders. On April 11, 2018, final approval of the Ontario Superior Court of Justice for the proposed transaction took place. On April 13, 2018, after all conditions precedent were satisfied, the Transaction was closed. Kennady shareholders received 49,737,307 shares of Mountain Province for 51,012,599 shares of Kennady. The transaction was valued based on the share price of the Company on April 13, 2018.

Until April 13, 2018, the 3,000,000 shares of Kennady obtained were held as equity securities. During the year ended December 31, 2018, the Company recognized a realized gain of $1,334, net of income taxes, related to the fair value adjustment of its equity securities. All equity securities owned by the Company are classified as FVTOCI, with fair value gains, net of income taxes, of $1,334 recorded in other comprehensive income for the year ended December 31, 2018. All $1,334 recorded in other comprehensive income arose by April 13, 2018 as a result of the acquisition.

Page | 23

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The acquisition of Kennady Diamonds Inc. is considered an asset acquisition, and not a business combination in accordance with IFRS 3. The following table summarizes the fair value of the consideration transferred to the Kennady shareholders and the final estimates of the fair values of identified assets acquired and liabilities assumed.

The purchase price allocation and the net assets acquired were as follows:

Purchase price:
Common shares issued	$	153,688
Purchase of equity securities prior to April 13, 2018		9,038
Company transaction costs		4,247
Total	$	166,973
Net assets acquired:
Assets
Cash	$	54
Amounts receivable		641
Prepaid expenses		119
Reclamation deposit		250
Property, plant and equipment		168,609
Liabilities
Accounts payable and accrued liabilities		(2,527	)
Decommissioning and restoration liability		(173	)
Total	$	166,973

7. INVENTORIES

	December 31,		December 31,
	2018		2017
Ore stockpile	$	17,714	$	19,972
Rough diamonds		56,300		45,999
Supplies inventory		28,247		16,202
Total	$	102,261	$	82,173

Depreciation and depletion included in inventories at December 31, 2018 is $21,519 (2017 - $17,225).

The amount of inventory expensed approximates cost of sales with respect to production costs incurred, and the cost of acquired diamonds.

Included in production costs for the year ended December 31, 2018 are the Company’s 49% share of payroll and employee benefits for staff of the GK Mine of $34,017 (2017 - $15,037).

Page | 24

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

8. PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment as at December 31, 2018 and 2017 are as follows:

	Property,			Assets under			Property,			Exploration and		Assets under
	plant and equipment GK			construction GK			plant and equipment KNP			evaluation assets KNP		construction KNP		Total
Cost
At January 1, 2017	$	91,936		$	590,680		$	-		$	-	$	-	$	682,616
Decommissioning and restoration adjustment		2,979			-			-			-		-		2,979
Additions/transfers*		612,484			(566,701	)		-			-		-		45,783
At December 31, 2017		707,399			23,979			-			-		-		731,378
Decommissioning and restoration adjustment		23,553			-			-			-		-		23,553
Additions/transfers*		89,154			(19,085	)		90			166,947		1,564		238,670
At December 31, 2018	$	820,106		$	4,894		$	90		$	166,947	$	1,564	$	993,601
Accumulated depreciation
At January 1, 2017	$	(6,563	)	$	-		$	-		$	-	$	-	$	(6,563	)
Depreciation		(62,157	)		-			-			-		-		(62,157	)
At December 31, 2017		(68,720	)		-			-			-		-		(68,720	)
Depreciation and depletion		(83,630	)		-			(10	)		-		-		(83,640	)
At December 31, 2018	$	(152,350	)	$	-		$	(10	)	$	-	$	-	$	(152,360	)
Carrying amounts
At December 31, 2017	$	638,679		$	23,979		$	-		$	-	$	-	$	662,658
At December 31, 2018	$	667,756		$	4,894		$	80		$	166,947	$	1,564	$	841,241

*Included in the additions of assets under construction for the year ended December 31, 2018 is $Nil (2017 - $10,168) of borrowing and other costs and is net of $Nil (2017 - $67,493) of pre-production sales. Amounts were transferred to their appropriate asset class upon the declaration of commercial production. On April 13, 2018, KNP assets were acquired at their fair value for share consideration of the Company. Please see Note 6 for further details. Included in additions of property, plant and equipment for GK is $32,776 (2017 - $2,777) related to deferred stripping.

The Company’s primary project, the 49% owned GK Mine, declared commercial production on March 1, 2017. Failure to meet the obligations for cash calls to fund the Company’s share in the GK Mine may lead to dilution of the interest in the GK Mine.

On April 13, 2018, KNP mineral asset rights under the KNP were acquired. Kennady is involved in the exploration, discovery, evaluation and development of diamond properties in Canada’s Northwest Territories.

Page | 25

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

9. Decommissioning and restoration liability

The decommissioning and restoration liability is the addition of the liabilities for both for the GK Mine and the Kennady North Project, which are broken down separately below.

The GK Mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018 and 2017:

	December 31, 2018			December 31, 2017
Expected undiscounted cash flows	$	56,122		$	30,045
Discount rate		2.18	%		2.26	%
Inflation rate		1.95	%		1.99	%
Periods		2029			2028

The Kennady North Project mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018:

	December 31, 2018
Expected undiscounted cash flows	$	175
Discount rate		1.86	%
Inflation rate		1.95	%
Periods		2021

The decommissioning and restoration liability has been calculated using expected cash flows that are current dollars, with inflation.

During the year ended December 31, 2018, the decommissioning and restoration liability was increased by $24,892 (2017 - $4,372) for a change in estimate, reflecting primarily an increase in estimated reclamation and restoration costs due to the construction work completed at the GK mine site, the mining operations on the property, and a decrease in estimated reclamation and restoration costs due minimal construction and exploration work performed at the KNP mine site.

The continuity of the decommissioning and restoration liability at December 31, 2018 and 2017 is as follows:

	GK Mine		KNP			Total
Balance, at January 1, 2017	$	24,266	$	-		$	24,266
Change in estimate of discounted cash flows		4,372		-			4,372
Accretion recorded during the year		562		-			562
Balance, at December 31, 2017	$	29,200	$	-		$	29,200
Addition of balance at the time of KDI acquisition (Note 6)		-		173			173
Change in estimate of discounted cash flows		24,900		(8	)		24,892
Accretion recorded during the year		656		1			657
Balance, at December 31, 2018	$	54,756	$	166		$	54,922

Page | 26

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

10. secured notes payable

On December 11, 2017, the Company completed an offering of US$330 million aggregate principal amount of senior secured notes, secured by a second-ranking lien on all present and future assets, property and undertakings of the Company. The secured notes were sold at 97.992% of par, resulting in total proceeds of US$323.4 million. The secured notes pay interest in semi-annual instalments on June 15 and December 15 of each year, commencing on June 15, 2018, at a rate of 8.00% per annum, and mature on December 15, 2022. The Company incurred transaction costs of approximately $10 million, which have been offset against the carrying amount of the secured notes and are amortized using the effective interest rate method. The indenture governing the secured notes contains certain restrictive covenants that limit the Company’s ability to, among other things, incur additional indebtedness, make certain dividend payments and other restricted payments, and create certain liens, in each case subject to certain exceptions. The restrictive covenant on the Company’s ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.

During the year ended December 31, 2018, the Company repurchased US$20.1 million ($26.4 million) of outstanding secured notes. During the year ended December 31, 2017, no repurchases were made.

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent from the secured notes payable.

	December 31,		December 31,
	2018		2017
Total outstanding secured notes payable	$	422,262	$	414,843
Less: unamortized deferred transaction costs and issuance discount		14,118		18,334
Total secured notes payable	$	408,144	$	396,509

The secured notes payable is carried at amortized cost on the consolidated balance sheet.

Despite the repurchase of US$20.1 million secured notes payable, during the year ended December 31, 2018, due to the relative weakening of the Canadian dollar as compared to the U.S. dollar, an unrealized foreign exchange translation caused the secured notes payable balance to increase over the amount as at December 31, 2017.

The senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded derivatives and are outlined below. The Company may redeem the secured notes:

· during each of the two twelve-month periods commencing on December 11, 2017, in an amount not to exceed 10% of the aggregate principal amount of the secured notes at a redemption price equal to 103% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; 

· at any time and from time to time prior to December 15, 2019, in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the secured notes, with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 108% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

· in whole or in part at any time during the twelve-month period beginning on December 15, 2019 at a redemption price equal to 104% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

Page | 27

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

· in whole or in part at any time during the twelve-month period beginning on December 15, 2020 at a redemption price equal to 102% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; and

· in whole or in part at any time during the twelve-month period beginning on December 15, 2021 at a redemption price equal to 100% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption.

Revolving Credit Facility

Concurrent with the closing of the Notes offering, the Company entered into an undrawn US$50 million first ranking lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. The RCF has a term of three years and the Company is subject to a quarterly commitment between 0.9625% and 1.2375%, depending on certain leverage ratio calculations at the time. Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time. As at December 31, 2018, the RCF remained undrawn. The RCF is subject to several financial covenants, in order to remain available. The following financial covenants are calculated on a quarterly basis:

· Total leverage ratio of less than or equal to 4.50:1 calculated as total debt divided by EBITDA, up to and including December 31, 2019; and 4:1, thereafter until the maturity date.

· A ratio of EBITDA to interest expense no less than 2.25:1; and

· A tangible net worth that is no less than 75% of the tangible net worth as reflected in the September 30, 2017 financial statements provided to the administrative agent as a condition precedent to closing, plus 50% of the positive net income for each subsequent quarter date.

· Permitted distributions are subject to the Company having a net debt to EBITDA ratio of less than or equal to 2.75:1 in 2018, 2.25:1 in 2019, and 1.75:1 in 2020. Net debt is equal to total debt, less cash and cash equivalents. The aggregate amount of all distributions paid during the rolling four quarters up to and including the date of such distribution does not exceed 25% of free cash flows (“FCF”) during such period. FCF is defined as EBITDA minus, without duplication, (a) capital expenditures, (b) cash taxes, (c) any applicable standby fee, other fees or finance costs payable to the finance parties in connection with the RCF, (d) interest expenses and (e) any indebtedness (including mandatory prepayments) permitted under the existing agreement.

The Company is in compliance with all financial covenants as at December 31, 2018.

11. net finance expenses

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Interest income	$	582		$	1,081
Accretion expense on decommissioning and restoration liability		(657	)		(562	)
Interest expense		(34,628	)		(30,419	)
Amortization of deferred financing costs		(4,216	)		(20,790	)
Other finance costs		(1,645	)		(1,529	)
	$	(40,564	)	$	(52,219	)

Finance costs include interest expense calculated using the effective interest method, adjusted for interest paid on interest rate swaps and foreign exchange on the interest paid and accrued. These financing costs, until the declaration of commercial production had been capitalized to assets under construction.

Page | 28

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

12. SHAREHOLDERS’ EQUITY

i. Authorized share capital

Unlimited common shares, without par value.

There is no other class of shares in the Company.

ii. Share capital

The number of common shares issued and fully paid as at December 31, 2018 is 210,102,470. There are no shares issued but not fully paid. As part of the Transaction which took place on April 13, 2018 to acquire all of the outstanding shares of Kennady, 49,737,307 shares of the Company were issued.

In the year ended December 31, 2018, the Company declared and paid a dividend of $0.04 per common share totalling $8,400.

iii. Stock options, RSUs, DSUs and share-based payments reserve

On June 21, 2016, the Company, through its Board of Directors and shareholders, adopted a long-term equity incentive plan (the “Plan”) which, among other things, allows for the maximum number of shares that may be reserved for issuance under the Plan to be 10% of the Company’s issued and outstanding shares at the time of the grant. The Board of Directors has the authority and discretion to grant stock option, RSU and DSU awards within the limits identified in the Plan, which includes provisions limiting the issuance of options to qualified persons and employees of the Company to maximums identified in the Plan.

As at December 31, 2018, the aggregate maximum number of shares pursuant to options granted under the Plan will not exceed 21,010,248 shares, and there were 17,511,251 shares available to be issued under the Plan. All stock options are settled by the issuance of common shares.

The following table summarizes information about the stock options outstanding and exercisable:

	December 31, 2018					December 31, 2017
	Number of options			Weighted average exercise price		Number of options			Weighted average exercise price
Balance at beginning of year		3,640,000		$	4.40		3,020,000		$	4.68
Granted during the year		240,000			3.30		1,110,000			3.69
Exercised during the year		-			-		(355,000	)		4.44
Expired during the year		(750,000	)		5.00		(135,000	)		4.84
Balance at end of the year		3,130,000		$	4.17		3,640,000		$	4.40
Options exercisable at the end of the year		2,183,334		$	4.45		2,530,000		$	4.70

The fair values of the stock options granted have been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions are presented below. Expected volatility is calculated by reference to the weekly closing share price for a period that reflects the expected life of the options. The 200,000 stock options issued on June 30, 2018 vest 1/3 on June 30, 2019, 1/3 on June 30, 2020 and 1/3 on June 30, 2021. The 40,000 stock options issued on June 30, 2018 vest 1/2 on June 30, 2019 and 1/2 on June 30, 2020. The 100,000 stock options issued on February 6, 2017 vested 1/3 immediately and 1/3 vested on February 6, 2018 and the remaining 1/3 vest on February 6, 2019. The 1,010,000 stock options issued on December 22, 2017 vest 1/3 on December 22, 2018, 1/3 on December 22, 2019, and 1/3 on December 22, 2020.

Page | 29

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

	December 31,		December 31,
	2018		2017
Exercise price		$3.30		$3.48 - $5.86
Expected volatility		30.78%		31.03% - 31.14%
Expected option life		5 years		5 years
Contractual option life		5 years		5 years
Expected forfeiture		none		none
Expected dividend yield		0%		0%
Risk-free interest rate		2.06%		1.11% - 1.82%

During the year ended December 31, 2017, 355,000 stock options were exercised for proceeds of $1,577. The aggregate market price of the common shares on the exercise dates was $2,316.

The following tables reflect the number of stock options outstanding, the weighted average of options outstanding, and the exercise price of stock options outstanding at December 31, 2018. The Black-Scholes values are measured at the grant date.

At December 31, 2018
	Black-Scholes		Number of		Number of		Exercise
Expiry Date	Value		Options		Exercisable Options		Price
February 13, 2019		206		150,000		150,000		5.29
April 13, 2020		1,242		785,000		785,000		4.66
October 14, 2020		133		100,000		100,000		4.21
December 10, 2020		614		545,000		545,000		3.57
June 30, 2021		120		100,000		100,000		6.35
November 3, 2021		214		100,000		100,000		6.96
February 5, 2022		171		100,000		66,667		5.86
December 21, 2022		1,075		1,010,000		336,667		3.48
June 30, 2023		203		200,000		-		3.30
June 30, 2023		41		40,000		-		3.30
	$	4,019		3,130,000		2,183,334	$	4.17

The weighted average remaining contractual life of the options outstanding at December 31, 2018 is 2.63 years (2017 – 2.85 years).

Subsequent to the year ended December 31, 2018, 150,000 stock options, with an exercise price of $5.29, expired.

The restricted and deferred share unit plans are full value phantom shares that mirror the value of the Company’s publicly traded common shares. Grants under the RSU and DSU plan are made on a discretionary basis to qualified persons and employees of the Company subject to the Board of Directors’ approval. Under the RSU and DSU plan, RSUs vest according to the terms set out in the award agreement which are determined on an individual basis at the discretion of the Board of Directors. Vesting under the RSU and DSU plan is subject to special rules for death, disability and change in control. The awards can be settled through issuance of common shares or paid in cash, at the discretion of the Board of Directors. These awards are accounted for as equity settled RSUs.

The fair value of each RSU issued is determined at the closing share price on the grant date.

Page | 30

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The following table shows the RSU awards which have been granted and settled during the year:

	December 31, 2018					December 31, 2017
RSU	Number of units			Weighted average value		Number of units			Weighted average value
Balance at beginning of year		488,665		$	4.88		320,000		$	6.48
Awards and payouts during the period (net):
RSUs awarded		-			-		265,000			3.52
RSUs settled and common shares issued*		(111,668	)		4.33		(79,668	)		6.45
RSUs forfeited		(8,000	)		6.49		(16,667	)		6.49
Balance at end of the year		368,997		$	5.01		488,665		$	4.88

*As at December 31, 2018, 106,668 RSUs at a weighted average value of $6.49 have vested and have not yet been settled.

As at December 31, 2018, no DSU awards have been granted.

The share-based payments recognized as an expense for the years ended December 31, 2018 and 2017 are as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Expense recognized in the year for share-based payments	$	1,685	$	1,582

The share-based payment expense for the years ended December 31, 2018 and 2017 is included in selling, general and administrative expenses.

iv. (Loss) earnings per share

The following table sets forth the computation of basic and diluted (loss) earnings per share:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Numerator
Net (loss) income for the year	$	(18,934	)	$	17,152
Denominator
For basic - weighted average number of shares outstanding		195,968,588			160,189,858
Effect of dilutive securities		-			834,496
For diluted - adjusted weighted average number of shares outstanding		195,968,588			161,024,354
(Loss) Earnings Per Share
Basic	$	(0.10	)	$	0.11
Diluted	$	(0.10	)	$	0.11

For the year ended December 31, 2018, 3,130,000 stock options and 368,997 RSUs were not included in the calculation of diluted loss per share since to include them would be anti-dilutive (2017 – 2,805,504 stock options).

Page | 31

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

13. Selling, general and administrative expenses

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Selling and marketing	$	6,607	$	6,493
General and administrative:
Consulting fees and payroll		2,297		3,238
Share-based payment expense		1,685		1,582
Depreciation		21		19
Office and administration		879		870
Professional fees		1,579		2,161
Promotion and investor relations		264		162
Director fees		328		325
Transfer agent and regulatory fees		536		390
Travel		243		353
	$	14,439	$	15,593

14. Derivative assets and liabilities

(a) Derivative Assets

The senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded derivatives and are outlined below. The Company may redeem the secured notes:

· during each of the two twelve-month periods commencing on December 11, 2017, in an amount not to exceed 10% of the aggregate principal amount of the secured notes at a redemption price equal to 103% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; 

· at any time and from time to time prior to December 15, 2019 in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the secured notes with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 108% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

· in whole or in part at any time during the twelve-month period beginning on December 15, 2019 at a redemption price equal to 104% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

· in whole or in part at any time during the twelve-month period beginning on December 15, 2020 at a redemption price equal to 102% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; and

· in whole or in part at any time during the twelve-month period beginning on December 15, 2021 at a redemption price equal to 100% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption.

As at December 31, 2018, the fair value of the prepayment option embedded derivative was US$1,226 ($1,670 Canadian dollar equivalent) (2017 – US$766 or $963 Canadian dollar equivalent), and has been presented as a derivative asset on the consolidated balance sheet. The Company recorded a gain of approximately $406 for the year ended December 31, 2018 (2017 - $971), which is recorded in derivative gains.

Page | 32

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

(b) Derivative Liabilities

The Company entered into foreign currency forward strip contracts to mitigate the risk that a devaluation of the U.S. dollar against the Canadian dollar would reduce the Canadian dollar equivalent of the U.S. dollar sales proceeds and the Company would not have sufficient Canadian dollar funds to contribute to the operations of the GK Mine.

These derivatives have been classified as “non-hedge derivatives”. Changes in fair value of the foreign currency forward strip contracts are recognized in net income or loss as gains or losses on derivatives.

Foreign Currency Forward Contracts

On December 19, 2018, the Company executed foreign currency forward contracts to buy Canadian dollars and sell U.S. dollars for the period from January 31, 2019 to July 2, 2019 for notional amounts of US$25,000 or $33,500 with a weighted average price of $1.34/US$1. As at December 31, 2017, the Company did not have any foreign currency forward contracts outstanding.

The table below provides a summary of currency contracts outstanding as at December 31, 2018.

Period of Currency Contracts	Notional Amount (CAD)		Weighted Average Price (USD)		Notional Amount (USD)
January 31, 2019 to July 2, 2019	$	33,500	$	1.34	$	25,000
Total	$	33,500	$	1.34	$	25,000

The following table presents amounts recognized in the Consolidated Statement of Comprehensive (Loss) Income for the year ended December 31, 2018 and 2017:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Gain on derivative contracts - interest rate swap contracts	$	-		$	2,207
Loss on derivative contracts - currency contracts		(653	)		-
Gain on prepayment option embedded derivative		406			971
Total	$	(247	)	$	3,178

Subsequent to the year ended December 31, 2018, the Company executed foreign currency forward contracts to buy Canadian dollars and sell U.S. dollars for the period from April 9, 2019 to October 9, 2019 for notional amounts of US$15,000 or $20,093 with a weighted average price of $1.3395/US$1.

15. Financial instruments

Fair value measurement

The Company categorizes each of its fair value measurements in accordance with a fair value hierarchy. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity).

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

Page | 33

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The fair values of the amounts receivable and accounts payable and accrued liabilities approximate their carrying values due to the relatively short-term maturity of these financial instruments.

The following table shows the carrying amounts and fair values of the Company’s financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

	Carrying amount										Fair value
December 31, 2018	Assets at amortized cost		Fair value through  profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	1,670	$	-	$	-	$	1,670	$	-	$	1,670	$	-	$	1,670
	$	-	$	1,670	$	-	$	-	$	1,670
Financial assets not measured at fair value
Cash	$	30,708	$	-	$	-	$	-	$	30,708		30,708		-		-		30,708
Amounts receivable		2,478		-		-		-		2,478		2,478		-		-		2,478
	$	33,186	$	-	$	-	$	-	$	33,186
Financial liabilities measures at fair value
Derivative liabilities	$	-	$	653	$	-	$	-	$	653		-		653		-		653
	$	-	$	653	$	-	$	-	$	653
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	48,295	$	48,295		48,295		-		-		48,295
Secured notes payable		-		-		-		408,144		408,144		425,860		-		-		425,860
	$	-	$	-	$	-	$	456,439	$	456,439

	Carrying amount										Fair value
December 31, 2017	Assets at amortized cost		Fair value through profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	963	$	-	$	-	$	963	$	-	$	963	$	-	$	963
	$	-	$	963	$	-	$	-	$	963
Financial assets not measured at fair value
Cash	$	43,129	$	-	$	-	$	-	$	43,129		43,129		-		-		43,129
Amounts receivable		2,679		-		-		-		2,679		2,679		-		-		2,679
	$	45,808	$	-	$	-	$	-	$	45,808
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	34,615	$	34,615		34,615		-		-		34,615
Secured notes payable		-		-		-		396,509		396,509		412,976				-		412,976
	$	-	$	-	$	-	$	431,124	$	431,124

Fair values of assets and liabilities classified as Level 2 are valued using discounted cash flow (“DCF”) models. These models require a variety of observable inputs including market prices, forward price curves, yield curves and credit spreads. These inputs are obtained from or verified with the market where possible. The financial assets relate to the embedded derivative assets, which are prepayment options on the secured notes payable (Note 10).

Derivative instruments are valued using DCF models. These models require a variety of observable inputs including market prices, forward price curves and yield curves. These inputs are obtained from or verified with the market where possible.

The fair value of the secured notes payable is determined using market quoted prices.

Financial instruments risks

The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include credit risk, liquidity risk, market risk, foreign currency risk and interest rate risk.

Page | 34

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The Company’s exposure to credit risk is for its amounts receivable of which all of the outstanding amounts of $2,478 and $2,679 as at December 31, 2018 and 2017, respectively, were collected.

On December 31, 2018 and 2017, the Company does not have any allowance for doubtful accounts, and does not consider that any such allowance is necessary.

All of the Company’s cash and restricted cash is held with a major Canadian financial institution and thus the exposure to credit risk is considered insignificant. Management actively monitors the Company’s exposure to credit risk under its financial instruments, including with respect to amounts receivable. The Company considers the risk of loss for its amounts receivable to be remote and significantly mitigated due to the financial strength of the parties from whom most of the amounts receivable are due - the Canadian government for harmonized sales tax (“HST”) refunds receivable in the amount of approximately $1,247 (2017 - $2,068).

The Company’s current policy is to hold excess cash in bank accounts. It periodically monitors the investment income it makes and is satisfied with the credit ratings of its bank.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to monitor forecast cash flows so that it will have sufficient liquidity to meet liabilities when due. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support its ongoing requirements. The Company coordinates this planning and budgeting process with its financing activities through its capital management process. The Company expects that it will be able to meet its obligations as they come due from the positive cash flows of ongoing operations. Also, the Company entered into an undrawn US$50 million first lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. In order for the RCF to remain available, certain financial covenants must be met (Note 10). Being able to maintain positive cash flows from operations and the ability to comply with the RCF covenants, and/or maintain sufficient liquidity, is dependent upon many factors including, but not limited to, diamond prices, exchange rates, operating costs and levels of production. Adverse changes in one or more of these factors negatively impact the Company’s ability to comply with the covenants and/or maintain sufficient liquidity.

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent (2017 – US$330 million or $414.8 Canadian dollar equivalent) from the secured notes payable. The notes are secured by a second-priority lien on substantially all of the assets which includes the 49% participating rights to the GK Mine, as mentioned in Note 1 and Note 8. The parties under the RCF are granted first priority, if amounts become drawn. Failure to meet the obligations of the secured notes payable as they come due may lead to the sale of the 49% participating interest in the GK Mine.

Page | 35

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The following table summarizes the contractual maturities of the Company’s significant financial liabilities and capital commitments, including contractual obligations:

	Less than			1 to 3		4 to 5		After 5
	1 Year			Years		Years		Years		Total
Operating lease obligations	$	231		$	471	$	473	$	79	$	1,254
Gahcho Kué Diamond Mine commitments		1,578			-		-		-		1,578
Gahcho Kué Diamond Mine operating lease obligations		798			806		190		-		1,794
Revolving credit facility stand by charges		843			808		-		-		1,651
Notes payable - Principal		-			-		422,262		-		422,262
Notes payable - Interest		34,250			68,594		34,250		-		137,094
Forward Exchange Contracts:
(Inflows)		(33,500	)		-		-		-		(33,500	)
Outflows		34,060			-		-		-		34,060
	$	38,260		$	70,679	$	457,175	$	79	$	566,193

Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Company’s income and the value of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing returns.

(i) Interest rate risk

The Company does not have significant exposure to interest rate risk at December 31, 2018 and 2017, since the secured notes payable does not have a variable interest rate. At December 31, 2018, the total secured notes payable was US$309.9 million (2017 – US$330 million).

(ii) Foreign currency

The Company is exposed to market risk related to foreign exchange rates. The Company operates in Canada and has foreign currency exposure to transactions in U.S. dollars. The majority of the ongoing operational costs of the GK Mine are in Canadian dollars, and are funded through operating cash flows. The Company’s operating cash flows include the sale of its 49% share of the GK Mine diamonds produced in U.S. dollars.

As at December 31, 2018 and 2017, the Company had cash, accounts payable and accrued liabilities, derivative assets, derivative liabilities, financing costs payable and the secured notes payable that are in U.S. dollars. The Canadian dollar equivalent is as follows:

	December 31,			December 31,
	2018			2017
Cash	$	16,837		$	25,509
Derivative assets		1,670			963
Accounts payable and accrued liabilities		(2,248	)		(3,783	)
Derivative liabilities		(653	)		-
Secured notes payable		(422,262	)		(414,843	)
Total	$	(406,656	)	$	(392,154	)

A 10% appreciation or depreciation of the Canadian dollar relative to the U.S. dollar at December 31, 2018 and 2017 would have resulted in an increase or decrease to net income for the year of approximately $40.7 million and $39.2 million, respectively.

Page | 36

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

16. RELATED PARTIES

The Company’s related parties include the Operator of the GK Mine, Dermot Desmond, Bottin and Vertigol Unlimited Company (“Vertigol”) (corporations ultimately beneficially owned by Dermot Desmond), key management and their close family members, and the Company’s directors. During the year ended December 31, 2018, Dermot Desmond and Bottin transferred all owned shares of the Company to Vertigol. Dermot Desmond, indirectly through Vertigol, is the ultimate beneficial owner of greater than 10% of the Company’s shares. Kennady Diamonds Inc. (“Kennady Diamonds”) was also a related party since the Company and Kennady Diamonds had a common member of key management, until the date of acquisition on April 13, 2018. International Investment and Underwriting Unlimited (“IIU”) is also a related party since it is ultimately beneficially owned by Mr. Dermot Desmond.

Related party transactions are recorded at their exchange amount, being the amount agreed to by the parties.

The Company had the following transactions and balances with its related parties including key management personnel including the Company’s directors, Dermot Desmond, Vertigol, IIU, the Operator of the GK Mine, and Kennady Diamonds. The transactions with key management personnel are in the nature of remuneration. The transactions with the Operator of the GK Mine relate to the funding of the Company’s interest in the GK Mine for the current year’s expenditures, capital additions, management fee, and production sales related to the 49% share of fancies and special diamonds. The transactions with Kennady Diamonds are for a monthly management fee charged by the Company for reimbursement of expenses paid on behalf of Kennady Diamonds. The transactions with IIU are for the director fees and travel expenses of the Chairman of the Company.

Between 2014 and 2016, the Company and De Beers signed agreements allowing De Beers (“the Operator”) to utilize De Beers’ credit facilities to issue reclamation and restoration security deposits to the federal and territorial governments. In accordance with these agreements, the Company agreed to a 3% fee annually for their share of the letters of credit issued. As at December 31, 2018, the Company’s share of the letters of credit issued were $23.4 million (December 31, 2017 - $23.4 million).

The balances as at December 31, 2018 and 2017 were as follows:

	December 31,		December 31,
	2018		2017
Payable De Beers Canada Inc. as the operator of the GK Mine*	$	1,430	$	523
Payable to De Beers Canada Inc. for interest on letters of credit		352		339
Receivable from De Beers Canada Inc. for sunk cost overpayment		-		21
Payable to International Investment and Underwriting		-		32
Payable to key management personnel		57		178

*included in accounts payable and accrued liabilities

Page | 37

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The transactions for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
The total of the transactions:
Kennady Diamonds	$	30	$	90
International Investment and Underwriting		99		82
Remuneration to key management personnel		2,917		3,828
Sunk cost repayment to De Beers Canada Inc.		-		49,063
Diamonds sold to De Beers Canada Inc.		2,028		8,791
Diamonds purchased from De Beers Canada Inc.		29,774		19,470
Finance costs incurred from De Beers Canada Inc.		705		339
Assets purchased from De Beers Canada Inc.		-		324
Management fee charged by the Operator of the GK Mine		4,153		4,153

The remuneration expense of directors and other members of key management personnel for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Consulting fees, payroll, director fees, bonus and other short-term benefits	$	1,643	$	2,707
Share-based payments		1,324		1,171
	$	2,967	$	3,878

In accordance with International Accounting Standard 24 Related Parties, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

17. INCOME TAXES

Rate Reconciliation

The provision for income tax differs from the amount that would have resulted by applying the combined Canadian statutory income tax rates of approximately 26.5% (2017 – 26.5%):

	December 31, 2018			December 31, 2017
(Loss) income before income taxes	$	(14,816	)	$	17,152
		26.5	%		26.5	%
Tax expense calculated using statutory rates		(3,926	)		4,545
Expenses not deductible (earnings not taxable)		4,656			(3,491	)
Change in tax benefits not recognized		(934	)		(1,054	)
Current and deferred mining taxes		4,322			-
Income tax expenses	$	4,118		$	-
Current income tax expense*	$	1,148		$	-
Deferred tax expense	$	2,970		$	-

*In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

Page | 38

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

Components of deferred tax assets and liabilities

	December 31, 2018			December 31, 2017
Deferred tax liabilities
Inventory	$	(4,993	)	$	(4,724	)
Property, plant & equipment		(25,275	)		(31,606	)
Derivative assets		(443	)		(255	)
Deferred tax asset
Non-capital loss carryforwards		27,537			36,585
	$	(3,174	)	$	-

Unrecognized deferred tax assets

Deductible temporary differences for which deferred tax assets have not been recognized are attributable to the following:

	December 31, 2018		December 31, 2017
Property, plant and equipment	$	4,693	$	-
Decommissioning and restoration liability		57,929		29,200
Capital losses		3,200		3,420
Non-capital losses, expiring 2034 to 2038		34,247		95,730
Share issuance cost		1,250		3,150
Secured notes payable		36,995		2,439
	$	138,314	$	133,939

The Company also has deductible temporary differences of $6,669 (2017 -$34,580) related to the Northwest Territories mining royalty that are not recognized in these financial statements.

18. CAPITAL MANAGEMENT

The Company considers its capital structure to consist of debt, share capital, share-based payments reserve, and net of deficit. The Company manages its capital structure and makes adjustments to it, in order to have the funds available to support the acquisition, exploration and development of mineral properties and ongoing operations (Note 1). The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

The declaration and payment of dividends on the Company’s common shares and the amount thereof are at the discretion of the Board of Directors, which takes into account the Company’s financial results, capital requirements, available cash flow, future prospects of the Company’s business and other factors considered relevant from time to time. There is a restrictive covenant on the Company’s ability to pay potential future dividends, which relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. The amount of the dividend, is limited to a maximum dollar threshold which is calculated at an opening basket of US$10 million, plus 50% of the historical consolidated net income reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment.

Management reviews its capital management approach on an ongoing basis.

Page | 39

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

The Company’s capital is summarized as follows:

	December 31,			December 31,
	2018			2017
Secured notes payable	$	408,144		$	396,509
Share capital		629,796			475,624
Share-based payments reserve		6,750			5,549
Deficit		(173,765	)		(146,431	)
	$	870,925		$	731,251

19. SEGMENTED REPORTING

The reportable operating segments are those operations for which operating results are reviewed by the Chief Executive Officer who is the chief operating decision maker regarding decisions about resources to be allocated to the segment and to assess performance provided those operations pass certain quantitative thresholds. Operations with revenues, earnings or losses or assets that exceed 10% of total consolidated revenue, earnings or losses or assets are reportable segments.

As a result of the asset acquisition of Kennady Diamonds Inc. (formerly KDI.V on the TSX Venture exchange), which included all mineral rights of the KNP, the Company now owns multiple diamond projects in the North West Territories, Canada. The GK Mine is a diamond mine in operations, while the KNP resource continues to be developed through exploration and evaluation programs.

Page | 40

MOUNTAIN PROVINCE DIAMONDS INC.

Notes to the Consolidated Financial Statements

As at December 31, 2018 and 2017 and

For the Years Ended December 31, 2018 and 2017

Amounts in thousands of Canadian Dollars, except share and per share amounts, unless otherwise noted

As at and for the year ended December 31, 2018
	GK Mine			KNP*			Total
Sales	$	310,969		$	-		$	310,969
Cost of sales:
Production costs		117,908			-			117,908
Cost of acquired diamonds		32,611			-			32,611
Depreciation and depletion		79,419			-			79,419
Earnings from mine operations		81,031			-			81,031
Exploration and evaluation expenses		3,511			4,693			8,204
Selling, general and administrative expenses		14,391			48			14,439
Operating income (loss)		63,129			(4,741	)		58,388
Net finance (expenses) income		(40,567	)		3			(40,564	)
Derivative losses		(247	)		-			(247	)
Foreign exchange losses		(32,473	)		(1	)		(32,474	)
Other income		81			-			81
Net loss before taxes	$	(10,077	)	$	(4,739	)	$	(14,816	)
Total assets	$	810,901		$	168,976		$	979,877
Total liabilities	$	515,246		$	516		$	515,762

*From the date of acquisition April 13, 2018 (Note 6)

Page | 41

 

Management’s Discussion and Analysis

For the Year Ended December 31, 2018

TSX: MPVD NASDAQ: MPVD

MOUNTAIN PROVINCE DIAMONDS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2018

TABLE OF CONTENTS	Page
Fourth Quarter 2018 Highlights	3
Company Overview	4
Gahcho Kué Diamond Mine	5
Gahcho Kué Exploration	8
Acquisition of Kennady Diamonds Inc.	11
Kennady North Project Exploration	12
Results of Operations	16
Selected Annual Information	16
Summary of Full Year 2018 Financial Results	16
Summary of Quarterly Results	18
Summary of Fourth Quarter Financial Results	19
Income and Mining Taxes	21
Financial Position and Liquidity	21
Off-Balance Sheet Arrangements	23
Financial Instruments Risks	23
Significant Accounting Policies Adopted in the Current Year	24
Significant Accounting Judgments, Estimates and Assumptions	24
Standards and Amendments to Existing Standards	24
Related Party Transactions	25
Contractual Obligations	26
Subsequent Event	26
Non-IFRS Measures	26
Other Management Discussion and Analysis Requirements	27
Disclosure of Outstanding Share Data	28
Controls and Procedures	28
Cautionary Note Regarding Forward-Looking Statements	29

This Management’s Discussion and Analysis (“MD&A”) as of March 20, 2019 provides a review of the financial performance of Mountain Province Diamonds Inc. (the “Company” or “Mountain Province” or “MPV”) and should be read in conjunction with the audited consolidated financial statements and the notes thereto as at December 31, 2018 and for the years ended December 31, 2018 and 2017. The following MD&A has been approved by the Board of Directors.

The audited consolidated financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

All amounts are expressed in thousands of Canadian dollars, except share and per share amounts, unless otherwise noted.

The disclosure in this MD&A of scientific and technical information regarding exploration projects on Mountain Province’s mineral properties has been reviewed and approved by Tom McCandless, Ph.D., P.Geo., while that regarding mine development and operations has been reviewed and approved by Keyvan Salehi, P.Eng., MBA, both of whom are Qualified Persons as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Properties (“NI 43-101”).

Page | 2

Additional information, related to the Company is available on SEDAR at http://sedar.com/ and on EDGAR at http://www.sec.gov/edgar.shtml.

HIGHLIGHTS

· Earnings from mine operations for the years ended December 31, 2018 and 2017 amounted to $81,031 and $52,133, respectively.

· Net (loss) income for the years ended December 31, 2018 and 2017 were ($18,934) and $17,152 respectively, or ($0.10) loss per share and $0.11 earnings per share (basic and diluted), respectively. Adjusted EBITDA for those periods were $139,157 and $103,376, respectively (Adjusted EBITDA is not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers; refer to the Non-IFRS Measures section).

· Cash at December 31, 2018 was $30,708 with net working capital of $87,194; US$50,000 revolving credit facility remains undrawn. Cash at December 31, 2017 was $43,129 with a net working capital of $96,830, and the US$50,000 revolving credit facility was undrawn.

· During the year ended December 31, 2018, the Company repurchased $26,366 (US$20,060) of outstanding secured notes payable.

· In the year ended December 31, 2018, the Company declared and paid a dividend of $0.04 per common share totaling $8,400.

· The Company concluded three sales in the fourth quarter of 2018 totaling 823,000 carats and recognized revenue of $70,477 at an average realized value of $86 per carat (US$65). Revenue for the year ended December 31, 2018 totaled $310,969 at an average realized value of $96 per carat (US$74). Revenue was primarily realized through ten sales conducted by the Company through its diamond broker based in Antwerp, Belgium, with the balance realized through direct sales to De Beers Canada Inc. (“De Beers”) in instances where production split bids for fancies and specials were won by De Beers.

· Mining of waste and ore in the 5034 and Hearne open pits for the year ended December 31, 2018 was approximately 28.2 million tonnes and 13.2 million tonnes, respectively, for a total of 41.4 million tonnes with 11.4 million tonnes mined in the fourth quarter. Ore mined for the year totalled 2,908,000 tonnes, with approximately 554,000 tonnes of ore stockpile available at quarter end on a 100% basis of the GK mine of which MPV holds 49%.

· For the year ended December 31, 2018, the GK Mine treated approximately 3,194,000 tonnes of ore and recovered approximately 6,937,000 carats on a 100% basis for an average recovered grade of approximately 2.17 carats per tonne (“cpt”). This recovered grade is approximately 4% above the original budget for the year ended December 31, 2018. For the three months ended December 31, 2018, the GK Mine treated approximately 751,000 tonnes of ore and recovered approximately 1,546,000 carats on a 100% basis for an average recovered grade of approximately 2.06 cpt. The Company’s 49% attributable share of diamond production for the three months ended December 31, 2018 was approximately 758,000 carats and 3,399,000 carats for the year ended December 31, 2018.

· Rough diamond market prices in 2018 remained firm for the white gem categories contributing the majority of Gahcho Kué’s production value. Market demand for lower value articles remains weak and is influencing prevailing price levels for these goods.

· Customer participation at the Company’s 2018 sales increased over 2017. The Company’s product offering in 2018 included a large number of fancies and specials, which generated considerable market interest and competition. In the fifth sale of 2018, the Company sold an exceptional 95 carat white gem stone which was the highest value individual diamond recovered to date from Gahcho Kué mine.

Page | 3

· Despite widely reported decreases in demand for smaller, lower quality and brown diamonds during H2 2018, Mountain Province’s sales platform achieved 100% sell through of all rough diamonds presented for sale in 2018.

· Cash costs of production, including capitalized stripping costs, for the three-month period and year ended December 31, 2018 were $126 and $101 per tonne respectively, and $61 and $47 per carat recovered, respectively (cash costs of production per tonne and per carat are not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers; refer to the Non-IFRS Measures section). The reason the average cost increase was due to the focused sampling in the fourth quarter. The Company also faced the challenge of learning the effects of Hearne ore going through the plant, which involved the higher use of consumables. These costs are generally in line with expectations, with the exception of slightly higher than expected mobile maintenance costs, and road and air freight costs. This was necessary due to a series of equipment failures, where the equipment was under warranty, and the Company agreed to fly up spare parts to reduce risk.

· On April 13, 2018, the Company successfully completed the acquisition of Kennady Diamonds Inc. (“Kennady”), pursuant to which the Company acquired all of the common shares of Kennady. The transaction adds diamondiferous bodies, which contain indicated resources of 13.62 million carats and inferred resources of 5.02 million carats. It also adds 67,164 hectares of highly prospective and 100% held exploration ground strategically surrounding the GK Mine.

The following table summarizes key operating highlights for the three months and years ended December 31, 2018 and 2017.

		Three months ended		Three months ended		Year ended		Year ended
		December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
GK operating data
Mining
*Ore tonnes mined	kilo tonnes		671		839		2,908		3,513
*Waste tonnes mined	kilo tonnes		10,695		7,825		38,536		29,523
*Total tonnes mined	kilo tonnes		11,366		8,664		41,444		33,036
*Ore in stockpile	kilo tonnes		554		840		554		840
Processing
*Ore tonnes processed	kilo tonnes		751		693		3,194		2,775
*Average plant throughput	tonnes per day		8,168		7,703		8,751		7,603
*Average diamond recovery	carats per tonne		2.06		2.35		2.17		2.14
*Diamonds recovered	000's carats		1,546		1,628		6,937		5,934
Approximate diamonds recovered - Mountain Province	000's carats		758		798		3,399		2,908
Cash costs of production per tonne, net of capitalized stripping **		$	92		62		80		71
Cash costs of production per tonne of ore, including capitalized stripping**		$	126		62		101		73
Cash costs of production per carat recovered, net of capitalized stripping**		$	45		26		37		32
Cash costs of production per carat recovered, including capitalized stripping**		$	61		26		47		33
Sales
Approximate diamonds sold - Mountain Province***	000's carats		823		1,006		3,253		2,656
Average diamond sales price per carat	US	$	65	$	60	$	74	$	70

* at 100% interest in the GK Mine including ramp-up period in 2017

**See Non-IFRS Measures section

***Includes the sales directly to De Beers for fancies and specials acquired by De Beers through the production split bidding process

COMPANY OVERVIEW

Mountain Province is a Canadian-based resource company listed on the Toronto Stock Exchange and NASDAQ under the symbol ‘MPVD’. The Company’s registered office and its principal place of business is 161 Bay Street, Suite 1410, P.O. Box 216, Toronto, ON, Canada, M5J 2S1. The Company, through its wholly owned subsidiaries 2435572 Ontario Inc. and 2435386 Ontario Inc., holds a 49% interest in the Gahcho Kué diamond mine (the “GK Mine”), located in the Northwest Territories of Canada. De Beers Canada Inc. (“De Beers” or the “Operator”) holds the remaining 51% interest. The Joint Arrangement between the Company and De Beers is governed by the 2009 amended and restated Joint Venture Agreement.

Page | 4

The Company’s primary assets are its aforementioned 49% interest in the GK Mine and 100% owned Kennady North Project (“KNP”). On April 13, 2018, the Company completed the asset acquisition of Kennady Diamonds Inc. (formerly KDI.V on the TSX Venture exchange), which included 100% of the mineral rights of the Kennady North Project.

The Company’s strategy is to mine and sell its 49% share of rough diamonds at the highest price on the day of the close of the sale. The Company’s long-term view of the rough diamond market remains positive, based on the outlook for a tightening rough diamond supply and growing demand, particularly in developing markets such as China and India, resulting in real, long term price growth. The Company also expects to build value through exploration and development of the Kennady North Project which covers properties adjacent to the GK Mine.

During the year ended December 31, 2018, the Company held ten sales in Antwerp. Sales are held ten times per year, approximately every five weeks.

GAHCHO KUÉ DIAMOND MINE

Gahcho Kué Joint Venture Agreement

The GK Mine is located in the Northwest Territories, approximately 300 kilometers northeast of Yellowknife. The mine covers 10,353 hectares, and encompasses four mining leases (numbers 4341, 4199, 4200, and 4201) held in trust by the Operator. The Project hosts four primary kimberlite bodies – 5034, Hearne, Tuzo and Tesla. The four main kimberlite bodies are within two kilometers of each other.

The GK Mine is an unincorporated Joint Arrangement between De Beers (51%) and Mountain Province (49%) through its wholly owned subsidiaries. On October 2, 2014, Mountain Province assigned its 49% interest to its wholly-owned subsidiary 2435386 Ontario Inc. to the same extent as if 2435386 Ontario Inc. had been the original party to the Joint Venture Agreement. The Company accounts for the mine as a joint operation in accordance with International Financial Reporting Standard 11, Joint Arrangements. Mountain Province through its subsidiaries holds an undivided 49% ownership interest in the assets, liabilities and expenses of the GK Mine.

Between 2014 and 2016, the Company and De Beers signed agreements allowing the Operator to utilize De Beers’ credit facilities to issue reclamation and restoration security deposits to the federal and territorial governments. In accordance with these agreements, the Company agreed to a 3% fee annually for their share of the letters of credit issued. As at December 31, 2018, the Company’s share of the letters of credit issued were $23.4 million (2017 - $23.4 million).

Gahcho Kué Capital Program

During the GK Mine’s first winter of operations in the last quarter of 2016 and the first quarter of 2017, extreme cold conditions affected the mine’s conveyor systems which resulted in downtime and lowered throughput. In 2017, De Beers and the Company approved a capital project totalling $23 million on a 100% basis to install enclosures on two conveyors as well as to install dust collection systems at the primary crusher and plant feed bin. As of December 31, 2018, the project was complete.

Additional mining equipment purchased in 2018 to support higher anticipated mining rates include three additional Komatsu 830E haul trucks and a PC5500 shovel.

Mining and Processing

For the three months ended December 31, 2018, on a 100% basis, a total of 11.4 million tonnes of waste and ore had been extracted from the 5034 and Hearne open pits, compared to the original fourth quarter plan of approximately 11.3 million (101% of plan). Mining rates have increased as additional equipment has been commissioned. For the year ended December 31, 2018, on a 100% basis a total of 41.4 million tonnes of waste and ore had been extracted from the 5034 and Hearne open pit, compared to an original plan of approximately 43.3 million tonnes (96% of plan).

Page | 5

For the three months and year ended December 31, 2018, 751,000 tonnes and 3,194,000 tonnes of kimberlite ore were processed (compared to an original plan of 803,000 tonnes and 3,114,000 tonnes, respectively) with 1,546,000 carats and 6,937,000 carats, respectively (100% basis) being recovered at a grade of 2.06 carats per tonne and 2.17 carats per tonne, respectively. The main reason the tonnage was lower than the original plan in the fourth quarter of 2018, was due to focused sampling through the processing plant. Cash costs of production including capitalized stripping were $126 per tonne for the three months ended December 31, 2018 and $101 per tonne for the year ended December 31, 2018. The reduced mining treatment was due to the focused sampling in the fourth quarter, which did cause the average cost to increase. The Company also faced the challenge of learning the effects of Hearne ore going through the plant, which involved the higher use of consumables. These costs are generally in line with expectations, with the exception of slightly higher than expected mobile maintenance costs, and road and air freight costs. This was necessary due to a series of equipment failures, where the equipment was under warranty, and the Company agreed to fly up spare parts to reduce risk.

At December 31, 2018, there was approximately 554,000 tonnes (100% basis) of stockpiled ore. Sufficient ore is available from the stockpile and 5034 and Hearne pits to meet the planned process throughput rates for 2019.

At December 31, 2018, the GK Mine had 591,058 carats on a 100% basis in rough diamond inventory at the GK Mine and at the sorting facility in Yellowknife. The Company had 626,199 carats within its sale preparation channel plus its share of carats at the GK Mine and sorting facility for a total of 835,998 carats in inventory.

Diamond Sales

The Company undertook ten sales of diamonds during the year in Antwerp, Belgium and anticipates holding ten sales in 2019. Although the GK Mine declared commercial production on March 1, 2017, revenues and costs from four out of the ten sales conducted in 2017 had been recorded against the mine construction costs rather than as revenue on the Company’s statement of comprehensive income as those diamonds sold were all recovered prior to the mine declaring commercial production. The majority of the Company’s revenue is derived from its sales on the open market, with the remainder attributed to sales of fancies and specials directly to De Beers on such occasions where De Beers has won the periodic fancies and specials bidding process. The average realized value per carat for the ten sales held in Antwerp, was US$74 per carat.

The following chart summarizes the sales in 2017 and 2018:

 

*The GK Mine declared commercial production on March 1, 2017. Revenues and costs from four out of the ten sales conducted in 2017 were recorded against the mine construction costs rather than as revenue on the Company’s statement of comprehensive income, as those diamonds sold were all recovered prior to the mine declaring commercial production.

** Although the final sale in this quarter closed on June 22, 2018, the sale of 43,000 carats occurred during the first half of July for IFRS purposes. The amount of revenue recognized for the 43,000 carats was approximately US$8.1 million or $10.7 million.

Page | 6

The following table summarizes the results for sales in 2018:

	000's of carats sold		Gross proceeds (US$ 000's)		Revenue/carat (US$)
Q1		527	$	52,358	$	99
Q2(1)		1,157	$	84,956	$	73
Q3		746	$	49,067	$	66
Q4		823	$	53,629	$	65
Total		3,253	$	240,010	$	74

Note: Sales made directly to De Beers are attributed to the closest tender.

(1) Although 1,157,000 carats were sold, in accordance with IFRS only 1,114,000 carats could be recognized as sales proceeds in the quarter. The remaining 43,000 carats were recognized in Q3 2018. The amount of revenue recognized for the 43,000 carats was approximately US$8.1 million or $10.7 million.

The following table summarizes the results of sales in 2017:

	000's of carats sold		Gross proceeds (US$ 000's)		Revenue/carat (US$)
Q1(1) &( (2)		522	$	37,701	$	72
Q2 (3)		371	$	33,809	$	91
Q3		757	$	52,262	$	69
Q4		1,006	$	60,873	$	61
Total		2,656	$	184,645	$	70

Note: Sales made directly to De Beers are attributed to the closest tender.

(1) Although 522,000 carats were sold, in accordance with IFRS only 416,000 carats were recognized as sales proceeds in the quarter. The remaining 106,000 carats were recognized in Q2 2017.

(2) Sold carats were produced in the period before declaration of commercial production, therefore were recorded against the property, plant and equipment in accordance with IFRS.

(3) Certain sales in this quarter represented the first sale of diamonds produced after the declaration of commercial production on March 1, 2017, therefore have been recorded as revenue on the statement of comprehensive income. Although 222,000 carats were sold, in accordance with IFRS only 215,000 carats could be recognized as sales proceeds in the quarter. The remaining 7,000 carats have been recognized during Q3 2017.

Rough diamond market prices in 2018 remained firm for the white gem categories contributing the majority of Gahcho Kué’s production value. The Company’s product offering in 2018 included a large number of fancies and specials, which generated considerable market interest and competition.

After two successful years of sales, the Gahcho Kué goods are now firmly established in the market and attract regular and sustained interest from customers. The Gahcho Kué orebody and product profile are complex, producing a broad range of white commercial goods together with large, high value special stones, as well as large volumes of small diamonds, and brown diamonds. The Gahcho Kué product also exhibits varying degrees of fluorescence for which the Company has attracted specialist customers who are developing strategies to market this product characteristic.

The Company’s diamond products have a market and an established customer base. With the natural exception of some industrials, the majority of the Company’s diamonds are sold into market segments that cut and polish the rough, with resultant polished destined for the major diamond jewelry markets of the US, India and China.

Given the complexities of the Gahcho Kué rough diamond product profile and the nature of the Joint Venture’s production splitting process, the mix of diamond categories present in an individual sale may differ. Each sale’s results can and may vary.

Page | 7

2019 Production Outlook

For 2019, the GK Mine operational plan anticipates total ore processing of approximately 3.1 million to 3.2 million tonnes, recovering between 6.6 million and 6.9 million carats (100% basis) and reflecting a recovered grade of between 2.12 cpt and 2.16 cpt.

In addition to the 2019 guidance, the Company also provides a three-year production outlook for the GK Mine from the updated life of mine plan as summarized in the following table:

		2019	2020	2021
Ore tonnes processed	000s	3,100 - 3,200	3,100 - 3,200	3,100 - 3,200
Carats recovered	000s	6,600 - 6,900	6,600 - 6,900	6,800 - 7,100
Cash costs of production per tonne, including capitalized stripping	$	110 - 120	110 - 120	110 -120
Cash costs of production per carat, including capitalized stripping	$	50 - 54	49 - 53	48 - 52
Sustaining capital expeditures	$000s	20,000	10,000	7,000

Diamond Outlook

Through 2018, global rough diamond demand and market pricing remained firm for the larger, better-quality product segments that contribute the majority Gahcho Kué production value. The major producers reported their 2018 sales declined in carat terms but increased in value compared with 2017.

Overall retail demand for luxury goods was reported to be strong in both the US and China up to Q4 2018. Retailers’ end of year reports indicated holiday season demand for fine jewelry outperformed fashion jewelry. During Q4 2018, demand in China showed signs of softening, coincident with the onset of trade tensions with the US.

During H2 2018, smaller, cheaper rough diamond categories experienced price pressure due to higher than normal levels of polished stocks, the currency issues in India and China, and financing constraints in India. Current market conditions for this product segment are expected to continue into 2019.

The long-term supply fundamentals for cheaper rough diamond categories are more positive with the anticipated closure of older and depleted mines.

Gahcho Kué EXPLORATION

Subsequent to the GK Mine achieving commercial production in early 2017, exploration at the GK Mine began in the second half of 2017 with the implementation of airborne magnetics and electromagnetics over the entire lease area with the goal of identifying targets for adding resources to the GK Mine. A ground gravity survey was also conducted in the region between the Tesla and Tuzo kimberlites and within the Southwest Corridor. In August 2018, a high-resolution aeromagnetic survey with a superconducting quantum interference device (‘SQUID’) was completed. The SQUID survey incorporated a total of 1,630 line kilometers with tie lines at 200 meters spacing and survey lines at 35 meter spacing. Data generated during the surveys are undergoing interpretation with results expected in 2019.

Exploration drilling conducted in 2018 focused on finding kimberlite between the north and south lobes of the Hearne kimberlite, establishing the Southwest Corridor between 5034 and Hearne, confirming the Northeast Extension between 5034 and Tuzo, particularly around the North Pipe kimberlite, and confirming the Curie ground gravity target located between the Tesla and Tuzo kimberlites as kimberlite.

Drilling confirmed that the north and south lobes of the Hearne kimberlite are connected by a kimberlite breccia. The kimberlite breccia is present at 40 metres depth vertically from the surface and extends vertically to at least as deep as 220 metres from surface. A summary of drill results from Hearne is provided below.

Page | 8

Hearne – 2018 Drilling Results (reported July 11, 2018)

					Intercept (m)1						Intercept True		End of Hole
Drill Hole	Azimuth		Inclination		From		To		Length		Thickness (m)2		(m)
MPV-18-458C		273		-51		231.34		284.65		53.31		40.90		320
MPV-18-459C		228		-54		-		-		-		-		380
MPV-18-461C		293		-53		-		-		-		-		284
MPV-18-462C		250		-50		54.00		102.78		48.78		27.30		134
MPV-18-464C		297		-53		-		-		-		-		413
MPV-18-466C		280		-50		-		-		-		-		416

¹ The intercept for MPV-18-458C is composed of 96% of kimberlite granite breccia with 4% internal granitic dilution. The intercept for MPV-18-462C is composed of 98% of kimberlite granite breccia with 2% internal granitic dilution. Kimberlite granite breccia is defined as having greater than 50% kimberlite present. ²Defined as the horizontal distance between drill hole contacts based on Hearne as a linear shape striking at an average azimuth of 353^o and with vertical contacts.

Drill testing of the 5034-Tuzo Corridor initially focused on the zone between the 5034 pipe and the North Pipe, and the zone extending immediately northeast of the North pipe. Drilling has confirmed kimberlitic material between the north lobe of 5034 and the North Pipe, as well as in the corridor extending northeast of the North Pipe towards Tuzo. The kimberlitic material extends vertically from 248 meters to 350 meters depth. A summary of results from the drill programs is provided in the table below.

Northeast Extension (‘NEX’) – Summer 2018 Drilling Results (reported September 17, 2018)

					Intercept1 (m)						Intercept True		End of Hole
Drill Hole	Azimuth		Inclination		From		To		Length		Thickness2 (m)		(m)
MPV-18-460C3		137		-49		360.36		394.86		34.50		26.80		452.0
MPV-18-465C4		139		-49		329.00		338.10		9.10		6.80
						355.65		356.00		0.35		ND		401.0
MPV-18-467C		136		-54		389.60		439.90		50.30		32.90		462.2
MPV-18-469C		132		-59		329.75		443.82		114.07		72.50		473.0
MPV-18-470C		302		-57		189.65		189.66		0.01		ND		212.0
MPV-18-473C		117		-66		371.58		383.55		11.97		5.00		629.0
MPV-18-475C		130		-51		304.20		389.00		84.80		59.00		419.0

 

¹Intercepts are not true thicknesses. ²Defined as the horizontal distance between drillhole pierce points, based on the 5024 extnesion as elgongate striking roughly N45E and with vertical contacts. ³The 26.8m intercept for MPV-18-460C includes 13% granite and granite breccia. ⁴The 6.8m intercept for MPV-18-465C includes 39% kimberlite granite breccia with <50% internal granitic dilution. The intercept for MPV-18-462C is kimberlite granite breccia. Granite breccia is defined as having greater than 50% kimberlite present. ND = Not determined. Drillholes MPV-18-459C, MPV-18-461C, MPV-18-464C, MPV-18-466C and MPV-18-474C did not intersect kimberlite.

At the Curie target kimberlite was encountered at a vertical depth of 18 meters, with the deepest intercept occurring at 119 meters. The Curie kimberlite lies within the proposed open pit mine plan for the Tuzo kimberlite, and midway between Tuzo and the Tesla kimberlite. Drill results for the Curie kimberlite are provided in the table below.

Page | 9

Curie Kimberlite – Summer 2018 Drilling Results (reported September 17, 2018)

					Intercept1 (m)						Intercept True	End of Hole
Drill Hole	Azimuth		Inclination		From		To		Length		Thickness2 (m)	(m)
MPV-18-463C		310		-48		35.98		66.50		30.52	ND2
						93.70		146.40		52.70	ND		195.9
MPV-18-468C		114		-47		159.77		163.25		3.48	ND		251.0
MPV-18-471C		309		-47		25.10		37.60		12.50	ND		37.6
MPV-18-472C		311		-48		33.90		44.60		10.70	ND		257.0

¹Intercepts are not true thicknesses. ²The geometry of Curie is not sufficiently known to determine true thicknesses.

The Currie kimberlite is likely a blowout of the Dunn kimberlite sheet, which is located in an area of the northwest wall of the planned Tuzo pit towards the Tesla pipe. The vertical extent of the Curie body remains to be determined.

An 18-hole drill program based on a 50 metre by 50 metre spacing was completed in the Southwest Corridor (including drill results from the 2017 program). Drilling results are summarized in the table below.

Southwest Corridor – 2018 Drilling Results (reported April 10, 2018)

						Intercept (m)1,2								Intercept Composition %1
Drill Hole ID	Target	Azimuth		Inclination		From		To		Length		Intercept True Thickness (m)3,8		Kimberlite4			Kimberlite Granite Breccia5			Granite Kimberlite Breccia6			Internal Granitic Waste7			End of Hole (m)
MPV-17-435C	5034 South West Corridor / South Pipe		300		-54		76.65		120.08		43.43		25.40		64	%		8	%		0	%		28	%		126
MPV-17-436C	5034 South West Corridor / South Pipe		311		-54		107.00		130.23		23.23		13.80		44	%		44	%		0	%		12	%		164
MPV-17-437C	5034 South West Corridor / South Pipe		329		-54		151.80		199.70		47.90		26.40		31	%		60	%		0	%		9	%		230
MPV-17-438C	5034 South West Corridor / South Pipe		285		-50		151.60		157.00		5.40		3.10		0	%		100	%		0	%		0	%		191
MPV-17-439C	5034 South West Corridor / South Pipe		305		-60		157.00		164.50		7.50		3.50		0	%		100	%		0	%		0	%		224
MPV-17-440C	5034 South West Corridor / South Pipe		327		-50		211.27		229.40		18.13		11.60		7	%		82	%		8	%		3	%		284
MPV-18-441C	5034 South West Corridor / South Pipe		309		-58		196.20		197.76		1.56		0.80		100	%		0	%		0	%		0	%		283
MPV-18-442C	5034 South West Corridor / South Pipe		330		-51		229.87		253.15		23.28		14.40		5	%		0	%		95	%		0	%		284
MPV-18-443C	5034 South West Corridor / South Pipe		130		-49		62.69		89.60		26.91		18.10		0	%		100	%		0	%		0	%		122
MPV-18-444C	5034 South West Corridor / South Pipe		268		-46		16.30		50.40		34.10		19.30		99	%		1	%		0	%		0	%		89
MPV-18-445C	5034 South West Corridor / South Pipe		300		-46		37.75		56.83		19.08		13.20		100	%		0	%		0	%		0	%		100
MPV-18-446C	5034 South West Corridor / South Pipe		244		-46		73.57		119.18		45.61		20.00		9	%		34	%		57	%		0	%		185
MPV-18-447C	5034 South West Corridor / South Pipe		25		-53		31.38		199.49		168.11		N/A		61	%		23	%		11	%		6	%		230
MPV-18-448C	5034 South West Corridor / South Pipe		319		-61		109.90		110.34		0.44		0.20		100	%		0	%		0	%		0	%		143
MPV-18-449C	5034 South West Corridor / South Pipe		293		-54		129.80		131.10		1.30		0.80		100	%		0	%		0	%		0	%		170
MPV-18-450C	5034 South West Corridor / South Pipe		16		-53		26.10		57.00		30.90		N/A		0	%		100	%		0	%		0	%		146
MPV-18-450C	5035 South West Corridor / South Pipe		16		-53		78.23		146.00		67.77		N/A		69	%		7	%		22	%		2	%		146
MPV-18-452C	5034 South West Corridor / South Pipe		275		-46		51.00		51.50		0.50		0.30		100	%		0	%		0	%		0	%		92
MPV-18-454C	5034 South West Corridor / South Pipe		335		-50						0.00		0.00		0	%		0	%		0	%		0	%		380

1 Intercept is composed of Kimberlite, Kimberlite Granite Breccia, Granite Kimberlite Breccia, and Internal Granitic Dilution; 2 Not true thickness; 3 Estimated true thickness; 4 Hypabyssal Kimberlite; 5 Kimberlite > 50%; 6 Kimberlite < 50%; 7 Consists of Granite and Granite Breccia; 8 Holes MPV-18-447C and MPV-18-450C are drilled on strike and therefore cannot be used determine true thickness.

Upon completion of the drill program, select intervals of SWC core were processed for microdiamond recovery by caustic fusion at the SRC (Saskatoon, SK), an ISO/IEC 17025 accredited laboratory for caustic fusion analyses. A total of 3,289 diamonds with dimensions greater than a 0.075mm square mesh screen were recovered from 535 kilograms of kimberlite. A focused mining sample of SWC kimberlite that was accessed from the 5034 pit was processed through the Gahcho Kué Dense Media Separation facility, generating a total of 19,567 carats (+1 DTC) in a total of 18,881 tonnes.

Page | 10

ACQUISITION OF KENNADY DIAMONDS INC.

On January 29, 2018, the Company announced a definitive arrangement agreement pursuant to which the Company would acquire all of the issued and outstanding shares of Kennady Diamonds Inc. (“Kennady”) by way of a court-approved plan of arrangement (the “Transaction”). Under the terms of the Transaction, Kennady shareholders would receive 0.975 of a Mountain Province common share for each Kennady common share of Kennady. During the three-month period ended March 31, 2018, the Company obtained 3,000,000 Kennady shares, by way of a private placement. On April 9, 2018, approval of the Transaction was obtained from both Mountain Province and Kennady shareholders. On April 11, 2018, final approval of the Ontario Superior Court of Justice for the proposed transaction took place. On April 13, 2018, after all conditions precedent were satisfied, the Transaction was closed and Kennady became a wholly owned subsidiary of the Company. Kennady shareholders received 49,737,307 shares of Mountain Province for 51,012,599 shares of Kennady. The transaction was valued based on the share price of the Company on April 13, 2018.

Until April 13, 2018, the 3,000,000 shares of Kennady obtained were held as equity securities. During the year ended December 31, 2018, the Company recognized a realized gain of $1,334, net of income taxes, related to the fair value adjustment of its equity securities. All equity securities owned by the Company are reclassified as FVTOCI, with fair value gains, net of income taxes, of $1,334 recorded in other comprehensive income for the year ended December 31, 2018.

The acquisition of Kennady Diamonds Inc. is considered an asset acquisition, and not a business combination in accordance with IFRS 3. The following table summarizes the fair value of the consideration transferred to the Kennady shareholders and the final estimates of the fair values of identified assets acquired and liabilities assumed. The purchase price allocation and the net assets acquired were as follows:

Purchase price:
Common shares issued	$	153,688
Purchase of equity securities prior to April 13, 2018		9,038
Company transaction costs		4,247
Total	$	166,973
Net assets acquired:
Assets
Cash	$	54
Amounts receivable		641
Prepaid expenses		119
Reclamation deposit		250
Property, plant and equipment		168,609
Liabilities
Accounts payable and accrued liabilities		(2,527	)
Decommissioning and restoration liability		(173	)
Total	$	166,973

The Kennady North property covers a portion of the southeastern Slave Geological Province, an Archean terrane ranging in age from 4.03 Ga to 2.55 Ga. The area consists of granodiorite, high-grade gneiss and migmatite, along with volcanic and sedimentary supracrustal rocks typical of many greenstone belts in the Slave Province. The kimberlite bodies in the Kennady Lake/Gahcho Kué area were emplaced between 531-542Ma during the Cambrian Period. Erosional processes since emplacement may have been significant, stripping the kimberlites almost to their root zones but still preserving the hypabyssal and diatreme facies. The Kennady North property hosts five known kimberlites to date; Kelvin, Faraday 2, Faraday 1-3, MZ, and Doyle. The following map shows the location of the Kennady North property relative to the GK Mine, and the holdings consist of 22 federal leases and 58 claims covering an area of 67,164 hectares.

Page | 11

KENNADY NORTH PROJECT EXPLORATION

Exploration at Kennady North commenced in the early 1990’s and resulted in the discovery of the diamond-bearing Kelvin, Faraday, MZ and Doyle kimberlite occurrences. Kennady Diamonds recovered significant diamonds between 2014 and 2017. The diamond package from the Kelvin and Faraday kimberlites, using the size-frequency distribution curves, indicated that these kimberlites may be of comparable grade to the 5034 and Hearne kimberlites at the GK Mine.

A 2018 exploration program which was completed in May 2018 had three objectives: delineation drilling at Faraday 2, geotechnical drilling adjacent to Faraday 2 and Faraday 1-3, and drill testing of exploration targets within the Kelvin-Faraday Corridor. A total of 38 drill holes were completed for a program total of 6,826 metres. All of the drilling results were reported in a Kennady Diamonds news release on May 23, 2018.

Drilling at Faraday 2 kimberlite focused on the northwest extension, which extends the Faraday 2 kimberlite by over 150 metres. Geologic units in the inferred near-surface resource extend into the northwest extension and the completed drilling will enable the full projection of Faraday 2 to advance to an inferred level of confidence. Drilling results for Faraday 2 are summarized in the following table.

Page | 12

Faraday 2 – Winter 2018 Geotechnical and Delineation Drill Program

						Intercept1 (m)						End of
Drill Hole	Drill Hole Purpose	Azimuth		Inclination		From		To		Intercept		Hole (m)
KDI-18-010	Geotech/Delineation		220		-65		270.91		322.70		51.79		346
KDI-18-011	Delineation		040		-65		280.74		313.26		32.52		350
KDI-18-012a	Delineation/Exploration		000		-90		254.33		270.52		15.182		334
							279.68		292.94		11.372		334
							297.36		298.34		0.452		334
							304.00		305.45		0.512		334
KDI-18-012b	Delineation/Exploration		305		-80		-		-		-		317
KDI-18-010	Geotech/Delineation		038		-66		258.69		288.97		28.052		319

¹Intercepts are not true thicknesses. ²Includes minor country rock intercepts.

Drill core from the Faraday 2 delineation and geotechnical program reported above and the drilling conducted in 2017 was shipped to SRC (Saskatoon, SK) for caustic fusion recovery of microdiamonds. SRC has conducted all of the caustic fusion and dense media separation analyses since the KNP was initiated in 2012. SRC is an ISO/IEC 17025 accredited laboratory for caustic fusion analyses.

The samples weighed a combined total of 2.101 tonnes and generated 9,218 diamonds larger than a 0.106 mm square mesh screen. A sample grade of 4.9 carats per tonne for 267 stones greater than 0.85mm in size is similar to sample grades from previous microdiamond test results of Faraday 2. The microdiamond results will be used to increase the inferred resource at Faraday 2. This work is being conducted by SRK (Vancouver, BC) and will be completed in Q1 of 2019. Results for the microdiamond test of the Faraday 2 extension are shown in the table below.

Faraday 2 – Winter 2018 Microdiamond Results

		Number and Weights of Diamonds according to Sieve Size Fraction (mm)
Sample Weight (Dry Tonnes)		+0.106 -0.150		+0.150 -0.212		+0.212 -0.300		+0.300 -0.425		+0.425 -0.600		+0.600 -0.850		+0.850 -1.180		+1.180 -1.700		+1.700 -2.360		+2.360 -3.350		+3.350 -4.750		Total Diamonds		Total Carats (+0.850mm)
	2.101		3645		2197		1441		908		481		279		146		90		19		8		4		9218		10.4

One drillhole was completed at Faraday 1-3 was designed to test the geotechnical characteristics of country rock for the purposes of open pit mine design and was not expected to intersect kimberlite. Results are summarised in the table below.

Faraday 1-3 – Winter 2018 Geotechnical Drilling Results

Intercept (m)

End of

Drill Hole

Drill Hole Purpose

Azimuth

Inclination

From

To

Intercept

Hole (m)

KDI-18-017

Geotechnical

320

-45

-

-

-

189

In addition to the geotechnical, delineation and exploration drilling, associated geotechnical surveys, ground water sampling and other required test work was also successfully completed in the winter program. The combined work is expected to help advance the Faraday kimberlites from a scoping-level to a pre-feasibility level of confidence in terms of geotechnical analysis.

Page | 13

Three geophysically-defined grassroots exploration targets located in close proximity to the Faraday kimberlites were also drill-tested. All of the seven drill holes intersected kimberlite, consisting of kimberlite sheet complexes with the largest intercept being 5.4 metres of coherent kimberlite. Drill results for the grassroots exploration targets are summarized in the table below.

Grassroots Exploration – Winter 2018 Drilling Results

						Intercept1 (m)							End of
Drill Hole	Geophysical Target	Azimuth		Inclination		From		To		Intercept			Hole (m)
KDI-18-014a	Target #18-01		000		-90		34.53		35.55		1.02			165
							46.20		46.31		0.11			165
KDI-18-014b	Target #18-01		017		-45		89.33		89.54		0.21			199
							91.15		93.64		2.49			199
							95.18		95.47		0.29			199
							96.89		98.09		1.20			199
KDI-18-015	Target #18-01		283		-45		78.87		79.18		0.31			199
							91.66		97.30		5.41	2		199
KDI-18-16a	Target #18-02		000		-90		64.48		66.49		2.01			119
							75.18		76.91		0.932			119
KDI-18-16b	Target #18-02		220		-65		61.03		61.31		0.28			131
							62.00		65.37		2.29	2		131
KDI-18-16c	Target #18-02		220		-45		66.89		68.98		1.68	2		122
							79.51		82.65		3.14			122
KDI-18-018a	Target#18-03		340		-90		128.00		133.00		5.00			179

¹Intercepts are not true thicknesses. ²Includes minor country rock intercepts.

In each case, the geophysical targets were explained by intervals of highly altered and fractured country rock associated with kimberlite sheets. Similarly fractured and altered country rock is associated with both the Kelvin and the Faraday kimberlites. These latest results will be utilized in conjunction with other exploration data to prioritize remaining geophysical targets for future drill testing.

A brief program was also conducted in summer 2018, including a geotechnical drillhole completed at Faraday 2 and continued collection of baseline environmental data. The drillhole at Faraday 2 targeted an area with limited geotechnical data in the country rock adjacent to the kimberlite, but also passed through the kimberlite itself. Results for the single geotechnical drillhole are provided in the table below.

Faraday 2 – Summer 2018 Geotechnical Drilling Results

Intercept1 (m)

End of

Drill Hole

Drill Hole Purpose

Azimuth

Inclination

From

To

Intercept

Hole (m)

KDI-18-027

Geotechnical

90

-50

128.62

176.52

47.90

229

¹Intercepts are not true thicknesses.

The Kelvin, Faraday 2 and Faraday 3 geological model domains have been adopted as the resource domains for the estimation of Mineral Resources. The volumes of these domains were combined with estimates of bulk density to derive tonnage estimates. Bulk sampling programs using large diameter RC drilling were conducted to obtain grade and value information. Microdiamond data from drill core were used to forecast grades for the different kimberlite lithologies. Details of the modeling are available in the 2016 Technical Report and the 2017 Technical Report.

The work outlined in these reports has defined a total Indicated Mineral Resource for the Kelvin kimberlite of 8.5 million tonnes at an average grade of 1.6 carats per tonne and an overall average diamond value of US$63 per carat. An Inferred Mineral Resource has been determined for portions of Faraday 2 and 1-3, totaling 3.27 million tonnes at an average grade of 1.54 cpt and an average diamond value of US$98 per carat. Both estimates are on the basis of a 1mm bottom cut-off. Details are provided in the table below.

Page | 14

Mineral Resource Estimates for the Kelvin and Faraday Kimberlites (as of December 2017)

Resource	Classification	Tonnes (Mt)		Carats (Mct)		Grade (cpt)
Kelvin	Indicated		8.50		13.62		1.60
Faraday 2 and Faraday 1-3	Inferred		3.27		5.02		1.54

(1) Mineral Resources are reported at a bottom cut-off of 1.0 mm. Incidental diamonds are not incorporated in grade calculations.

(2) Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

Relevant parameters for two minor domains of the Faraday 2 and for all of the Faraday 1 kimberlite are not sufficiently well-constrained by available data to define Mineral Resources. These deposits are defined as Target for Further Exploration (TFFE) with estimates of the potential ranges of volume, tonnes and grade (where possible) provided in the table below.

Target for Further Exploration for the Faraday Kimberlites (as of December 2017) 

	Volume (Mm3)				Tonnes (Mt)				Grade (cpt)
Resource	Low		High		Low		High		Low		High
Faraday 1-3		0.20		0.50		0.60		1.20		1.50		3.70
Faraday 2		0.01		0.02		0.01		0.04		-		-

(1) The estimate of a TFFE is conceptual in nature as there has been insufficient exploration to define a Mineral Reserve and it is uncertain if future exploration will result in the estimate being delineated as a Mineral Reserve.

In the latter half of 2018, exploration at Kennady North focused on compiling all in-house data in order to identify and prioritize kimberlite targets. This included the acquisition of historical data from GGL Resources (‘GGL data’) that cover the area of interest of the Kennady North Project. This acquisition in the form of a perpetual lease of the GGL data was completed in December 2019 for a one-time cash payment of CAD$30,000. The historic and GGL data have been incorporated into a user-friendly GIS platform that also includes an updated interpretation of the surficial geology. The updated interpretation combines new field mapping and sampling with a recent LIDAR survey of the project area to generate a till sample ranking scheme. The ranking scheme was then combined with geophysical and till sampling results to generate target areas for follow-up sampling and drilling. Some of these target areas will be the focus of exploration in 2019.

Page | 15

Results of operations

The Company, as discussed above, held ten sales of diamonds during the year ended December 31, 2018.

SELECTED ANNUAL INFORMATION

	December 31			December 31			December 31
Expressed in thousands of Canadian dollars	2018			2017			2016
	$			$			$
Sales		310,969			170,108			-
Earnings from mine operations		81,031			52,133			-
Operating income (loss)		58,388			36,068			(6,277	)
Net (loss) income for the year		(18,934	)		17,152			4,798
Basic and diluted (loss) earnings per share		(0.10	)		0.11			0.03
Cash flow provided by (used in) operating activities		135,903			42,651			(17,907	)
Cash flow provided by (used in) investing activities		(79,673	)		41,177			(205,568	)
Cash flow provided by (used in) financing activities		(68,137	)		(48,693	)		221,103
Balance Sheet
Total assets		979,877			795,066			783,761
Total non-current financial liabilities		466,240			425,709			416,979
Total cash dividends declared per common share		0.04			-			-

In the year ended December 31, 2018, diamond sales related to 3,253,000 carats sold for $310,969 (US$240,010) compared to 1,986,000 carats sold for $170,108 (US$134,253) for the same period in 2017. The first four sales of 2017 were not recognized as sales on the statement of comprehensive (loss) income due to the transition to commercial production in the period. During 2016, no diamond sales took place, as the company was not yet in commercial production, and the GK Mine was still under development. Earnings from mine operations, and operating income (loss) have followed the same pattern, as a result of the timing of commercial production. Net income (loss), is affected by unrealized foreign exchange gains (losses) from period to period on US$ denominated debt. The Company has reported strong cash flows provided by operating activities in 2018, as compared to 2017 and 2016. Cash flows from investing activities mainly represent the capital expenditure and development costs spent on the GK Mine, with 2017 being the outlier, as revenue earned prior to the declaration of commercial production was captured in investing activities, net of additions to property, plant and equipment. Cash flows used in financing activities have been a direct result of interest charges, and repurchases related to the secured notes payable, and the previous Loan Facility which existed prior to the secured notes payable financing which closed on December 11, 2017. As a result of positive operating income, and the acquisition of Kennady Diamonds Inc. during 2018, total assets have grown significantly year over year.

In the year ended December 31, 2018, the Company declared and paid its inaugural dividend of $0.04 per common share totaling $8,400. In 2017 and 2016, the Company did not pay a dividend.

Summary of full year 2018 Financial Results

Year ended December 31, 2018 compared to the year ended December 31, 2017, expressed in thousands of Canadian dollars.

For the year ended December 31, 2018, the Company recorded a net loss of $18,934 or $0.10 loss per share compared to $17,152 net income or $0.11 earnings per share for the same period in 2017. A significant difference was earnings from mine operations of $81,031 in the year ended December 31, 2018, compared to $52,133 for the same period in 2017. The main reason for the significant increase in net loss for the year ended December 31, 2018 was the $32,474 foreign exchange loss, compared to $30,035 foreign exchange gain for the same period in 2017. These foreign exchange gains and losses primarily comprise unrealized amounts from the translation of the US dollar denominated balance sheet items, the majority of which is the secured notes payable, with an unrealized loss in 2018 of $32,058 (2017: unrealized gain of $9,014). An additional reason for the significant increase in the net loss is due to the $8,204 exploration and evaluation expenses compared to only $472 for the same period in 2017. The significant increase in exploration and evaluation expenses is both due to a ramped-up program on the GK Mine properties, and due to the exploration at KNP.

Page | 16

Earnings from mine operations

Earnings from mine operations for the year ended December 31, 2018 were $81,031, compared to $52,133 for the same period in 2017. For the year ended December 31, 2018, diamond sales related to 3,253,000 carats were $310,969 (US$240,010), or approximately $96 per carat sold, compared to 1,986,000 carats for $170,108 (US$134,253), or approximately $86 per carat sold, for the same period in 2017. Production costs (net of capitalized stripping costs) related to diamonds sold for the year ended December 31, 2018 were $117,908; depreciation and depletion on the GK Mine commissioned assets related to diamonds sold for the year ended December 31, 2018 were $79,419; and the cost of acquired diamonds for the year ended December 31, 2018 was $32,611, which had been previously paid to De Beers when winning the periodic fancies and specials bids. The total production cost per carat was approximately $71 per carat sold. Resultant earnings from mine operations were $81,031. Production costs (net of capitalized stripping costs) related to diamonds sold for the year ended December 31, 2017 were $64,420; depreciation and depletion on the GK Mine commissioned assets related to diamonds sold for the year ended December 31, 2017 were $44,615; and the cost of acquired diamonds for the year ended December 31, 2017 was $8,940, which had been previously paid to De Beers when winning the periodic fancies and specials bids. The total production cost per carat was approximately $59 per carat sold. Resultant earnings from mine operations were $52,133.

Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended December 31, 2018 were $14,439 compared to $15,593 for the same period in 2017. The decrease in selling, general and administrative costs can partially be attributed to the decrease in consulting fees and payroll, as 2017 contained costs for the transition in executive leadership, and the associated costs of severance and transition. Also, the decrease can partially be attributed to the decrease in professional fees, given that 2017 had additional technical professional fees associated with the completion of the GK Mine, and additional ongoing legal fees associated with the previous Loan Facility. All other selling, general and administrative costs were consistent between 2018 and 2017. The significant expenses included in these amounts for the year ended December 31, 2018 were $6,607 relating to selling and marketing, $2,297 related to consulting fees and payroll, $1,579 related to professional fees, and $1,685 relating to share-based payment expense. The significant expenses included in these amounts for the year ended December 31, 2017 were $6,493 relating to selling and marketing, $3,238 related to consulting fees and payroll, $2,161 related to professional fees, and $1,582 relating to share-based payment expense.

Exploration and evaluation expenses

Exploration and evaluation expenses for the year ended December 31, 2018, were $8,204, compared to $472 for the same period in 2017. Exploration and evaluation expenses have grown significantly in the period due to the acquisition of Kennady Diamonds Inc., which was effective April 13, 2018, and the exploration on the properties of the GK Mine have ramped up with the goal of identifying targets for adding potential resources. Kennady Diamonds Inc. owns the rights to the Kennady North Project, which continue to be further developed through continuous exploration and evaluation drill programs. As mentioned above, a program was also conducted in summer 2018, including a geotechnical drillhole completed at Faraday 2 and continued collection of baseline environmental data for the project as a whole. At the GK Mine the exploration and evaluation expenses were comprised of airborne magnetics and electromagnetics, and a ground gravity survey conducted in the region between the Tesla and Tuzo kimberlites and within the Southwest Corridor. Of the $8,204 total exploration and evaluation expenses incurred in the year ended December 31, 2018, $3,511 related to the Company’s 49% share of the exploration and evaluation expenses on the GK Mine, while the remaining $4,693 related to those spent on the KNP. All $472 spent in the year ended December 31, 2017, related to the exploration and evaluation expenses of the GK Mine.

Page | 17

Net finance expenses

Net finance expenses for the year ended December 31, 2018 were $40,564 compared to $52,219 for the same period in 2017. Included in these amounts for the year ended December 2018 were $40,489 relating to finance costs, $657 relating to accretion expense on decommissioning liability and $582 relating to interest income. Included in these amounts for the year ended December 2017 were $52,738 relating to finance costs, $562 relating to accretion expense on decommissioning liability and $1,081 relating to interest income. Finance costs have decreased for the year ended December 31, 2018 compared to 2017 mainly due to the non-recurring non-cash expense for deferred financing costs of $15,533 written off upon termination of the Loan Facility, and approximately $1 million of non-recurring costs associated with the setup of the RCF in December 2017. All finance expenses in 2018 were recurring interest expenses and other financing costs on the secured notes payable. The increase in accretion expense on decommissioning liability is due to a higher decommissioning liability balance. Interest income in 2018 decreased, mainly due to a lower average cash balance held throughout the year.

Foreign exchange (losses) gains

Foreign exchange (losses) gains for the year ended December 31, 2018 were ($32,474) compared to $30,035 for the same period in 2017. The foreign exchange losses for the year ended December 31, 2018 was a result of the Canadian dollar weakening relative to the U.S. dollar and the translation of the secured notes payable, net of U.S. dollar cash balances, to Canadian dollar at the spot rate at the period end. The majority of the foreign exchange losses for the year ended December 31, 2018 relates to the $32,637 unrealized losses associated with the translation of the U.S. dollar based secured notes payable, which is not closely tied to operational metrics. At December 31, 2018, the spot exchange rate was $1.3624/US$1 compared to $1.2571/US$1 at December 31, 2017. At December 31, 2017, the spot exchange rate was $1.2571/US$1 compared to $1.3427/US$1 at December 31, 2016. The foreign exchange gains for the year ended December 31, 2017 was a result of the Canadian dollar strengthening relative to the U.S. dollar and the translation of the Loan Facility and secured notes payable, net of U.S. dollar cash balances, to Canadian dollar at the spot rate at the period end.

Quarterly financial information for the past eight quarters is shown in Table 1.

SUMMARY OF QUARTERLY RESULTS

Table 1 - Quarterly Financial Data
Expressed in thousands of Canadian dollars
				Three months ended
	December 31			September 30			June 30			March 31
	2018			2018			2018			2018
Earnings and Cash Flow
Number of sales		3			2			3			2
Sales	$	70,477			74,852			99,075			66,565
Operating income	$	7,144			19,952			11,187			20,105
Net (loss) income for the period	$	(30,204	)		17,483			(6,280	)		67
Basic and diluted (loss) earnings per share	$	(0.15	)		0.08			(0.03	)		0.00
Adjusted EBITDA*	$	26,512			37,948			41,062			33,635
Cash flow provided by (used in) operating activities	$	41,818			33,319			59,007			1,759
Cash flow provided by (used in) investing activities	$	(14,915	)		(10,175	)		(38,485	)		(16,098	)
Cash flow provided by (used in) financing activities	$	(23,398	)		(29,017	)		(15,535	)		(188	)
Balance Sheet
Total assets	$	979,877			969,245			974,816			823,966

*Adjusted EBITDA is not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers; refer to the Non-IFRS Measures section.

Page | 18

				Three months ended
	December 31			September 30			June 30			March 31
	2017			2017			2017			2017**
Earnings and Cash Flow
Number of sales		3			2			3			2
Sales	$	77,242			65,218			27,648			-
Operating income (loss)	$	11,176			20,657			7,663			(3,428	)
Net (loss) income for the period	$	(15,927	)		27,669			7,554			(2,144	)
Basic and diluted (loss) earnings per share	$	(0.10	)		0.17			0.05			(0.01	)
Adjusted EBITDA*	$	54,937			37,570			13,159			(3,792	)
Cash flow provided by (used in) operating activities	$	36,389			49,238			(15,737	)		(27,239	)
Cash flow provided by (used in) investing activities	$	54,079			(38,715	)		18,217			7,596
Cash flow provided by (used in) financing activities	$	(62,970	)		(7,871	)		(8,826	)		30,974
Balance Sheet
Total assets	$	795,066			884,806			857,320			873,753

*Adjusted EBITDA is not defined under IFRS and therefore may not be comparable to similar measures presented by other issuers; refer to the Non-IFRS Measures section.

**Diamonds produced prior to the declaration of commercial production on March 1, 2017 were not recorded as sales and were recorded as pre-production sales as assets under construction, included in property, plant and equipment. Sale 5 in June 2017 was the first sale recorded in the statement of comprehensive income.

During the years ended December 31, 2018 and 2017, the Company took part in ten sales in Antwerp, Belgium. For the three months ended March 31, 2018 and September 30, 2018 there were two sales that took place, while for the three months ended June 30, 2018 and December 31, 2018 there were three sales that took place. This explains, partially, the sales level and operating income quarter by quarter. Typically, quarters with three sales have resulted in higher overall sales and operating income levels. The operating income of $7,144 in the three months ended December 31, 2018 is lower than a typical three sale quarter as a result of product mix and a lower than expected volume of carats sold due to timing in the sales distribution channel. The same sales pattern existed in 2017. The exception above is for the quarter ended September 30, 2018, which although was a two sale quarter, included additional revenue from the last sale in the quarter ended June 30, 2018 due to the time of collection of funds, and the revenue recognition policy of the Company.

summary of Fourth Quarter Financial Results

Three months ended December 31, 2018 compared to the three months ended December 31, 2017, expressed in thousands of Canadian dollars.

For the three months ended December 31, 2018, the Company recorded a net loss of $30,204 or $0.15 loss per share compared to net loss $15,927 or $0.10 loss per share for the same period in 2017. A significant difference was earnings from mine operations of $12,726 in the three months ended December 31, 2018, compared to $16,363 for the same period in 2017. The total net finance expenses for the period were $9,938, compared to $25,939 for the same period in 2017. The most significant impact on the net loss was the foreign exchange loss, for the three months ended December 31, 2018, of $21,008, compared to $2,949 for the same period in 2017. This was largely driven by the Canadian dollar weakening relative to the U.S. dollar and the translation of the secured notes payable, net of U.S. dollar cash balances, to Canadian dollars at the spot rate at the period ended December 31, 2018. Additionally, the Company incurred a derivative loss of $4,297 in the period, due to the decrease in the fair value of embedded derivatives, and forward currency contracts. The derivative gain in the same period in 2017 was $1,763, all attributed to the increase in fair value of the embedded derivative from December 11, 2017 to December 31, 2017. The forward currency contracts did not exist in the previous period.

Page | 19

Earnings from mine operations

Earnings from mine operations for the three months ended December 31, 2018 were $12,726, compared to $16,363 for the same period in 2017. For the three months ended December 31, 2018, diamond sales related to 823,000 carats were $70,477. The average diamond sales price per carat was approximately US$65, which resulted from a slight decline in overall prices, predominantly in the lower run of mine categories in the diamond market, compared to the first half of the year. Production costs (net of capitalized stripping costs) related to diamonds sold for the three months ended December 31, 2018 were $31,668; depreciation and depletion on the GK Mine commissioned assets related to diamonds sold for the three months ended December 31, 2018 were $19,031; and the cost of acquired diamonds for the three months ended December 31, 2018 were $7,052, which had been previously paid to De Beers when winning the periodic fancies and specials bids. Resultant earnings from mine operations were $12,726. For the three months ended December 31, 2017, diamond sales related to 1,006,000 carats were $77,242. Production costs (net of capitalized stripping costs) related to diamonds sold for the three months ended December 31, 2017 were $34,594; depreciation and depletion on the GK Mine commissioned assets related to diamonds sold for the three months ended December 31, 2017 were $23,028; and the cost of acquired diamonds for the three months ended December 31, 2017 were $3,257.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended December 31, 2018 were $3,920 compared to $4,715 for the same period in 2017. The significant expenses included in these amounts for the three months ended December 31, 2018 $1,935 relating to selling and marketing, $724 related to consulting fees and payroll, and $424 relating to share-based payment expense. The significant expenses included in these amounts for the three months ended December 31, 2017 $1,879 relating to selling and marketing, $1,176 related to consulting fees and payroll, and $293 relating to share-based payment expense. All selling, general and administrative costs have been consistent for both the three months ended December 31, 2018 compared to the same period in 2017, with the exception of consulting fees and payroll. The reduction in consulting fees and payroll was mainly driven by costs for the transition in executive leadership existing in 2017. Also, the review for any potential bonus on the new CEO has been deferred until the first quarter of 2019, which reduced the expense in the three-month period.

Exploration and evaluation expenses

Exploration and evaluation expenses for the three months ended December 31, 2018, were $1,662, compared to $472 for the same period in 2017. Exploration and evaluation expenses have grown significantly in the period due to the acquisition of Kennady Diamonds Inc., which was effective April 13, 2018, and the exploration on the properties of the GK Mine have ramped up with the goal of identifying targets for adding potential resources. Kennady Diamonds Inc. owns the rights to the Kennady North Project, which continue to be further developed through continuous exploration and evaluation drill programs. As mentioned above, a program was also conducted in summer 2018, including a geotechnical drillhole completed at Faraday 2 and continued collection of baseline environmental data for the project as a whole. At the GK Mine the exploration and evaluation expenses were comprised of airborne magnetics and electromagnetics, and a ground gravity survey conducted in the region between the Tesla and Tuzo kimberlites and within the Southwest Corridor. Of the $1,662 total exploration and evaluation expenses incurred in the year ended December 31, 2018, $544 related to the Company’s 49% share of the exploration and evaluation expenses on the GK Mine, while the remaining $1,118 related to those spent on the KNP. All $472 spent in the three months ended December 31, 2017, related to the exploration and evaluation expenses of the GK Mine.

Net finance expenses

Net finance expenses for the three months ended December 31, 2018 were $9,938 compared to $25,939 for the same period in 2017. Included in the amount for the three months ended December 31, 2018, were $9,994 relating to finance costs, $165 relating to accretion expense on decommissioning liability and $221 relating to interest income. Included in the amount for the three months ended December 31, 2017, were $26,160 relating to finance costs, $141 relating to accretion expense on decommissioning liability and $362 relating to interest income. Finance costs have decreased for the three months ended December 31, 2018 because there was a non-recurring non-cash expense for deferred financing costs of $15,533 written off upon termination of the Loan Facility in December 2017. Also included was approximately $1 million of non-recurring costs associated with the setup of the RCF incurred in December 2017. The increase in accretion expense on decommissioning liability is due to a higher decommissioning liability balance. Interest income in 2018 was lower than the 2017 period due to a lower average cash balance held throughout the period.

Page | 20

Foreign exchange losses

Foreign exchange losses for the three months ended December 31, 2018 were $21,008 compared to $2,949 for the same period in 2017. The foreign exchange loss for the three months ended December 31, 2018 was a result of the Canadian dollar weakening relative to the U.S. dollar and the translation of the secured notes payable, net of U.S. dollar cash balances, to Canadian dollars at the spot rate at the three months ended December 31, 2018. The same trend existed in the previous year, but on a smaller foreign exchange variance.

INCOME AND MINING TAXES

The Company is subject to income and mining taxes in Canada with the statutory income tax rate at 26.5%.

No deferred tax asset has been recorded in the financial statements as a result of the uncertainty associated with the ultimate realization of these tax assets.

The Company is subject to assessment by Canadian authorities, which may interpret tax legislation in a manner different from the Company. These differences may affect the final amount or the timing of the payment of taxes. When such differences arise, the Company makes provision for such items based on management’s best estimate of the final outcome of these matters.

The Company’s current tax expenses are associated with mining royalty taxes in the Northwest Territories. There are no other current tax expenses for income tax purposes, as there are significant losses carried forward that are available to offset current taxable income.

FINANCIAL POSITION AND LIQUIDITY

The Company originally funded its share of the construction and commissioning costs of the GK Mine through a combination of equity and a project lending facility (the previous “Loan Facility”). In December 2017, the Company terminated its previous Loan Facility through the issuance of US$330 million in second lien secured notes payable. Concurrent with the closing of the Notes offering, the Company entered into an undrawn US$50 million first lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. The RCF has a term of three years.

The RCF is subject to a quarterly commitment fee between 0.9625% and 1.2375%, depending on certain leverage ratio calculations at the time. Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time. As at December 31, 2018, the RCF remained undrawn. The RCF is subject to several financial covenants, in order to remain available. The following financial covenants are calculated on a quarterly basis:

· Total leverage ratio of less than or equal to 4.50:1 calculated as total debt divided by EBITDA, up to and including December 31, 2019; and 4:1, thereafter until the maturity date.

· A ratio of EBITDA to interest expense no less than 2.25:1; and

· A tangible net worth that is no less than 75% of the tangible net worth as reflected in the September 30, 2017 financial statements provided to the administrative agent as a condition precedent to closing, plus 50% of the positive net income for each subsequent quarter date.

· Permitted distributions (which include dividends) are subject to the Company having a net debt to EBITDA ratio of less than or equal to 2.75:1 in 2018, 2.25:1 in 2019, and 1.75:1 in 2020. Net debt is equal to total debt, less cash and cash equivalents. The aggregate amount of all distributions paid during the rolling four quarters up to and including the date of such distribution does not exceed 25% of free cash flows (“FCF”) during such period. FCF is defined as EBITDA minus, without duplication, (a) capital expenditures, (b) cash taxes, (c) any applicable standby fee, other fees or finance costs payable to the finance parties in connection with the RCF, (d) interest expenses and (e) any indebtedness (including mandatory prepayments) permitted under the existing agreement.

Page | 21

The Company is in compliance with all financial covenants as at December 31, 2018.

The indenture governing the secured notes contains certain restrictive covenants that limit the Company’s ability to, among other things, incur additional indebtedness, make certain dividend payments and other restricted payments, and create certain liens, in each case subject to certain exceptions. The restrictive covenant on the Company’s ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.

Cash flow provided by operating activities, including changes in non-cash working capital for the three months and year ended December 31, 2018, respectively, were $41,818 and $135,903 compared to $36,389 and $42,651 for the same period in 2017. The increase in cash provided for the three months and year ended December 31, 2018 was a result of the earnings from mine operations of $12,726 and $81,031, respectively. Although the net loss for the year ended was $18,934, significant areas which were non-cash expenses included foreign exchange losses of $32,474, depreciation and depletion of $79,441, deferred income taxes of $2,970, and share-based payment expense of $1,685. Also, the comparative three months and year ended December 31, 2017 experienced lower cash inflows, since June 2017 was the first sale which was included in operating activities, as that was when the first diamonds produced post commercial production declaration was included in earnings from mine operations.

Investing activities for the three months and year ended December 31, 2018, respectively, were ($14,915) and ($79,673) compared to $54,079 and $41,177 for the same period in 2017. For the three months and year ended December 31, 2018, the outflow for the purchase of equipment of the GK Mine, acquired KNP assets and other commissioned assets were $76,062 compared to $105,824 for the same period in 2017. Capitalized interest paid for the year ended December 31, 2018 was $nil compared to $5,451 for the same period in 2017. Also, net cash acquired and transaction costs on the acquisition of KNP assets were ($4,193). Cash used for investing activities for the year ended December 31, 2018 included $76,062 in property, plant and equipment, $nil for capitalized interest paid and offset by $582 of interest income. Cash used for investing activities for the year ended December 31, 2017 included $105,824 in property, plant and equipment, $5,451 for capitalized interest paid, offset by $67,493 in pre-production sales, $83,878 in restricted cash and $1,081 of interest income. The most significant reason for the increase in cash outflows compared to the same period in 2017 is the pre-commercial production revenue which was included in 2017. Also, included in the $76,062 and $105,824 for property, plant and equipment was $32,776 and $2,777, respectively, related to deferred stripping costs.

Financing activities for the three months and year ended December 31, 2018, respectively, were ($23,398) and ($68,137) compared to ($62,970) and ($48,693) for the same period in 2017. Cash flows used in financing activities for the three months and year ended December 31, 2018, related to stand-by charges on the RCF, and interest paid on the secured noted payable of $33,371, repurchased of outstanding secured notes of $26,366 (US$20,060) and a dividend payment of $8,400. Under the terms of the secured notes payable, interest payments occur semi-annually, and as such will result in the June and December quarters having significantly higher cash outflows under financing activities. Cash flows from financing activities for the three months and year ended December 31, 2017 related to cash draws of US$25 million or approximately $32.4 million Canadian dollar equivalent from January 1, 2017 to March 1, 2017 from the Loan Facility and the repayment of US$357 million or $458.9 million Canadian dollar equivalent. On December 11, 2017, US$330 million or approximately $424.4 of secured notes payable were issued. Total financing costs in the year ended December 31, 2017 were approximately $48.2 million relating to interest incurred on the Loan Facility and the transaction costs related to the secured notes payable. Proceeds from option exercises were $1,577.

Page | 22

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

FINANCIAL INSTRUMENT RISKS

The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include credit risk, liquidity risk, market risk, foreign currency risk and interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The Company’s exposure to credit risk is for its amounts receivable of which all of the outstanding amounts of $2,478 and $2,679 as at December 31, 2018 and 2017, respectively, were collected.

On December 31, 2018 and 2017, the Company does not have any allowance for doubtful accounts, and does not consider that any such allowance is necessary.

All of the Company’s cash and restricted cash is held with a major Canadian financial institution and thus the exposure to credit risk is considered insignificant. Management actively monitors the Company’s exposure to credit risk under its financial instruments, including with respect to amounts receivable. The Company considers the risk of loss for its amounts receivable to be remote and significantly mitigated due to the financial strength of the parties from whom most of the amounts receivable are due - the Canadian government for harmonized sales tax (“HST”) refunds receivable in the amount of approximately $1,247 (2017 - $2,068).

The Company’s current policy is to hold excess cash in bank accounts. It periodically monitors the investment income it makes and is satisfied with the credit ratings of its bank.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to monitor forecast cash flows so that it will have sufficient liquidity to meet liabilities when due. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support its ongoing requirements. The Company coordinates this planning and budgeting process with its financing activities through its capital management process. The Company expects that it will be able to meet its obligations as they come due from the positive cash flows of ongoing operations. Also, the Company entered into an undrawn US$50 million first lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. In order for the RCF to remain available, certain financial covenants must be met (Financial statements Note 11). Being able to maintain positive cash flows from operations and the ability to comply with the RCF covenants, and/or maintain sufficient liquidity, is dependent upon many factors including, but not limited to, diamond prices, exchange rates, operating costs and levels of production. Adverse changes in one or more of these factors negatively impact the Company’s ability to comply with the covenants and/or maintain sufficient liquidity.

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent (2017 – US$330 million or $414.8 Canadian dollar equivalent) from the secured notes payable. The notes are secured by a second-priority lien on substantially all of the assets which includes the 49% participating rights to the GK Mine, as mentioned in Note 1 and Note 8. The parties under the RCF are granted first priority, if amounts become drawn. Failure to meet the obligations of the secured notes payable as they come due may lead to the sale of the 49% participating interest in the GK Mine.

Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Company’s income and the value of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing returns.

(i)       Interest rate risk

The Company does not have significant exposure to interest rate risk at December 31, 2018 and 2017, since the secured notes payable does not have a variable interest rate. At December 31, 2018, the total secured notes payable was US$309.9 million (2017 – US$330 million).

Page | 23

(ii)          Foreign currency

The Company is exposed to market risk related to foreign exchange rates. The Company operates in Canada and has foreign currency exposure to transactions in U.S. dollars. The majority of the ongoing operational costs of the GK Mine are in Canadian dollars, and are funded through operating cash flows. The Company’s operating cash flows include the sale of its 49% share of the GK Mine diamonds produced in U.S. dollars.

As at December 31, 2018 and 2017, the Company had cash, accounts payable and accrued liabilities, derivative assets, derivative liabilities, financing costs payable and the secured notes payable that are in U.S. dollars. The Canadian dollar equivalent is as follows:

	December 31,			December 31,
	2018			2017
Cash	$	16,837		$	25,509
Derivative assets		1,670			963
Accounts payable and accrued liabilities		(2,248	)		(3,783	)
Derivative liabilities		(653	)		-
Secured notes payable		(422,262	)		(414,843	)
Total	$	(406,656	)	$	(392,154	)

A 10% appreciation or depreciation of the Canadian dollar relative to the U.S. dollar at December 31, 2018 and 2017 would have resulted in an increase or decrease to net income for the year of approximately $40.7 million and $39.2 million, respectively.

SIGNIFICANT ACCOUNTING POLICIES ADOPTED IN THE CURRENT YEAR

Significant accounting policies adopted in the current year are disclosed in Note 3 of the financial statements.

SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

Significant accounting judgments, estimates and assumptions are disclosed in Note 4 of the financial statements.

STANDARDS AND AMENDMENTS TO EXISTING STANDARDS

Standards and amendments to existing standards are disclosed in Note 3 (xv) of the financial statements

Page | 24

RELATED PARTY TRANSACTIONS

The Company’s related parties include the Operator of the GK Mine, Dermot Desmond, Bottin and Vertigol Unlimited Company (“Vertigol”) (corporations ultimately beneficially owned by Dermot Desmond), key management and their close family members, and the Company’s directors. During the year ended December 31, 2018, Dermot Desmond and Bottin transferred all owned shares of the Company to Vertigol. Dermot Desmond, indirectly through Vertigol, is the ultimate beneficial owner of greater than 10% of the Company’s shares. Kennady Diamonds Inc. (“Kennady Diamonds”) was also a related party since the Company and Kennady Diamonds had a common member of key management, until the date of acquisition on April 13, 2018. International Investment and Underwriting Unlimited (“IIU”) is also a related party since it is ultimately beneficially owned by Mr. Dermot Desmond.

Related party transactions are recorded at their exchange amount, being the amount agreed to by the parties.

The Company had the following transactions and balances with its related parties including key management personnel including the Company’s directors, Dermot Desmond, Vertigol, IIU, the Operator of the GK Mine, and Kennady Diamonds. The transactions with key management personnel are in the nature of remuneration. The transactions with the Operator of the GK Mine relate to the funding of the Company’s interest in the GK Mine for the current year’s expenditures, capital additions, management fee, and pre-production sales related to the 49% share of fancies and special diamonds. The transactions with Kennady Diamonds are for a monthly management fee charged by the Company for reimbursement of expenses paid on behalf of Kennady Diamonds. The transactions with IIU are for the director fees and travel expenses of the Chairman of the Company.

Between 2014 and 2016, the Company and De Beers signed agreements allowing De Beers (“the Operator”) to utilize De Beers’ credit facilities to issue reclamation and restoration security deposits to the federal and territorial governments. In accordance with these agreements, the Company agreed to a 3% fee annually for their share of the letters of credit issued. As at December 31, 2018, the Company’s share of the letters of credit issued were $23.4 million (December 31, 2017 - $23.4 million).

The balances as at December 31, 2018 and 2017 were as follows:

	December 31,		December 31,
	2018		2017
Payable De Beers Canada Inc. as the operator of the GK Mine*	$	1,430	$	523
Payable to De Beers Canada Inc. for interest on letters of credit		352		339
Receivable from De Beers Canada Inc. for sunk cost overpayment		-		21
Payable to International Investment and Underwriting		-		32
Payable to key management personnel		57		178

*included in accounts payable and accrued liabilities

The transactions for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
The total of the transactions:
Kennady Diamonds	$	30	$	90
International Investment and Underwriting		99		82
Remuneration to key management personnel		2,917		3,828
Sunk cost repayment to De Beers Canada Inc.		-		49,063
Diamonds sold to De Beers Canada Inc.		2,028		8,791
Diamonds purchased from De Beers Canada Inc.		29,774		19,470
Finance costs incurred from De Beers Canada Inc.		705		339
Assets purchased from De Beers Canada Inc.		-		324
Management fee charged by the Operator of the GK Mine		4,153		4,153

The remuneration expense of directors and other members of key management personnel for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Consulting fees, payroll, director fees, bonus and other short-term benefits	$	1,643	$	2,707
Share-based payments		1,324		1,171
	$	2,967	$	3,878

In accordance with International Accounting Standard 24 Related Parties, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

Page | 25

CONTRACTUAL OBLIGATIONS

The following table summarizes the contractual maturities of the Company’s significant financial liabilities and capital commitments, including contractual obligations:

	Less than			1 to 3		4 to 5		After 5
	1 Year			Years		Years		Years		Total
Operating lease obligations	$	231		$	471	$	473	$	79	$	1,254
Gahcho Kué Diamond Mine commitments		1,578			-		-		-		1,578
Gahcho Kué Diamond Mine operating lease obligations		798			806		190		-		1,794
Revolving credit facility stand by charges		843			808		-		-		1,651
Notes payable - Principal		-			-		422,262		-		422,262
Notes payable - Interest		34,250			68,594		34,250		-		137,094
Forward Exchange Contracts:
(Inflows)		(33,500	)		-		-		-		(33,500	)
Outflows		34,060			-		-		-		34,060
	$	38,260		$	70,679	$	457,175	$	79	$	566,193

Subsequent event

Subsequent to the year ended December 31, 2018, the Company executed foreign currency forward contracts to buy Canadian dollars and sell U.S. dollars for the period from April 9, 2019 to October 9, 2019 for notional amounts of US$15,000 or $20,093 with a weighted average price of $1.3395/US$1.

NON-IFRS MEASURES

The MD&A refers to the terms “Cash costs of production per tonne of ore processed” and “Cash costs of production per carat recovered”, both including and net of capitalized stripping costs and “Adjusted Earnings Before Interest, Taxes Depreciation and Amortization (Adjusted EBITDA)”. Each of these is a non-IFRS performance measure and is referenced in order to provide investors with information about the measures used by management to monitor performance. These measures are 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. They do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.

Cash costs of production per tonne of ore processed and cash costs of production per carat recovered are used by management to analyze the actual cash costs associated with processing the ore, and for each recovered carat. Differences from production costs reported within cost of sales are attributed to the amount of production cost included in ore stockpile and rough diamond inventories.

Adjusted EBITDA is used by management to analyze the operational cash flows of the Company, as compared to the net income for accounting purposes. It is also a measure which is defined in the secured notes payable documents. Adjusted EBITDA margin is used by management to analyze the operational margin % on cash flows of the Company.

The following table provides a reconciliation of the Adjusted EBITDA and Adjusted EBITDA margin with the net (loss) income on the consolidated statements of comprehensive (loss) income:

	Three months ended			Three months ended			Year ended			Year ended
	December 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Net (loss) income  for the period	$	(30,204	)	$	(15,927	)	$	(18,934	)	$	17,152
Add/deduct:
Non-cash depreciation and depletion		19,031			23,028			79,419			44,615
Share-based payment expense		424			293			1,685			1,582
Net finance expenses		9,938			25,939			40,564			52,219
Derivative losses (gains)		4,297			(1,763	)		247			(3,178	)
Current and deferred income taxes		2,105			-			4,118			-
Unrealized foreign exchange losses (gains)		20,921			23,970			32,058			(9,014	)
Adjusted earnings before  interest, taxes, depreciation and depletion (Adjusted EBITDA)	$	26,512		$	55,540		$	139,157		$	103,376
Sales		70,744			77,242			310,969			170,108
Adjusted EBITDA margin		37	%		72	%		45	%		61	%

Page | 26

The following table provides a reconciliation of the cash costs of production per tonne of ore processed and per carat recovered and the production costs reported within cost of sales on the consolidated statements of comprehensive (loss) income:

		Three months ended		Three months ended			Year ended		Year ended
(in thousands of Canadian dollars, except where otherwise noted)		December 31, 2018		December 31, 2017			December 31, 2018		December 31, 2017
Cost of sales production costs	$		31,668		34,594			117,908		64,420
Timing differences due to inventory and other non-cash adjustments	$		2,252		(13,509	)		7,917		21,824
Cash cost of production of ore processed, net of capitalized stripping	$		33,920		21,085			125,825		86,244
Cash costs of production of ore processed, including capitalized stripping	$		46,328		21,085			158,601		89,021
Tonnes processed	kilo tonnes		368		340			1,565		1,214
Carats recovered	000's carats		758		798			3,399		2,661
Cash costs of production per tonne of ore, net of capitalized stripping	$		92		62			80		71
Cash costs of production per tonne of ore, including capitalized stripping	$		126		62			101		73
Cash costs of production per carat recovered, net of capitalized stripping	$		45		26			37		32
Cash costs of production per carat recovered, including capitalized stripping	$		61		26			47		33

Other Management Discussion and Analysis Requirements

Risks

Mountain Province’s business of developing and operating mineral resources involves a variety of operational, financial and regulatory risks that are typical in the mining industry. The Company attempts to mitigate these risks and minimize their effect on its financial performance, but there is no guarantee that the Company will be profitable in the future, and investing in the Company’s common shares should be considered speculative.

Mountain Province’s business of developing and operating mineral properties is subject to a variety of risks and uncertainties, including, without limitation:

§ risk that the production from the mine will not be consistent with the Company’s expectation;

§ risk that production and operating costs are not within the Company’s estimates;

§ risk of lack of operating history and new mining operation;

§ risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;

§ results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with the Company's expectations; mining exploration risks, including risks related to accidents, equipment breakdowns or other unanticipated difficulties with or interruptions in production;

§ the potential for delays in exploration activities or the completion of studies;

§ risks related to the inherent uncertainty of exploration and cost estimates and the potential for unexpected costs and expenses;

§ risks related to foreign exchange fluctuations, prices of diamond, and emergence of lab grown diamonds;

§ risks related to commodity price fluctuations;

§ the uncertainty of profitability based upon the Company's lack of operating history;

§ risks related to failure of its joint venture partner;

§ risks relating to complying with the covenants in our revolver credit facility;

§ development and production risks including and particularly risks for weather conducive to the building and use of the Tibbitt to Contwoyto Winter Road;

§ risks related to environmental regulation, permitting and liability;

§ risks related to legal challenges to operating permits that are approved and/or issued;

§ political and regulatory risks associated with mining, exploration and development;

§ the ability to operate the Company’s GK Mine on an economic basis;

§ aboriginal rights and title;

§ failure of plant, equipment, processes and transportation services to operate as anticipated;

§ possible variations in ore grade or recovery rates, permitting timelines, capital expenditures, reclamation activities, land titles, and social and political developments, and other risks of the mining industry; and

§ other risks and uncertainties related to the Company's prospects, properties and business strategy.

Page | 27

As well, there can be no assurance that any further funding required by the Company will become available to it, and if so, that it will be offered on reasonable terms, or that the Company will be able to secure such funding. Furthermore, there is no assurance that the Company will be able to secure new mineral properties or Projects, or that they can be secured on competitive terms.

Disclosure of Outstanding Share Data

The Company’s common shares are traded on the Toronto Stock Exchange and the NASDAQ under the symbol MPVD.

At March 20, 2019, there were 210,109,142 shares issued, 2,980,000 stock options and 362,331 restricted share units outstanding. There were no warrants outstanding.

There are an unlimited number of common shares without par value authorized to be issued by the Company.

Controls and Procedures

Disclosure Controls and Procedures and internal control over financial reporting

The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) based on the Internal Control – Integrated Framework (2013) developed by COSO (Committee of Sponsoring Organizations of the Treadway Commission).

Pursuant to regulations adopted by the U.S. Securities and Exchange Commission, under the Sarbanes-Oxley Act of 2002, the CEO and CFO evaluates the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and internal control over financial reporting.

DC&P are designed to provide reasonable assurance that material information relating to the Corporation is made known to the CEO and CFO during the reporting period and the information required to be disclosed by the Corporation under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Due to the inherent limitations associated with any such controls and procedures, management recognizes that, no matter how well designed and operated, they may not prevent or detect misstatements on a timely basis.

The Corporation’s management, under the supervision of, and with the participation of, the CEO and the CFO, has evaluated its DC&P and ICFR as defined under 52-109 and concluded that, as of December 31, 2018, they were designed effectively to provide reasonable assurance regarding required disclosures and the reliability of financial reporting and the preparation of financial statements for external purposes.

NI 52-109 also requires Canadian public companies to disclose in their MD&A any change in ICFR that has materially affected, or is reasonably likely to materially affect, ICFR. No material changes were made to the internal controls during the year ended December 31, 2018.

Page | 28

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This MD&A contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian and United States securities laws concerning the business, operations and financial performance and condition of Mountain Province Diamonds Inc. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and mine life of the project of Mountain Province; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; the future price of diamonds; the estimation of mineral reserves and resources; the ability to manage debt; capital expenditures; the ability to obtain permits for operations; liquidity; tax rates; and currency exchange rate fluctuations. Except for statements of historical fact relating to Mountain Province, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be”, “potential” and other similar words, or statements that certain events or conditions “may”, “should” or “will” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of Mountain Province and there is no assurance they will prove to be correct.

Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include variations in ore grade or recovery rates, changes in market conditions, changes in project parameters, mine sequencing; production rates; cash flow; risks relating to the availability and timeliness of permitting and governmental approvals; supply of, and demand for, diamonds; fluctuating commodity prices and currency exchange rates, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated.

These factors are discussed in greater detail in this MD&A and in Mountain Province's most recent Annual Information Form filed on SEDAR, which also provide additional general assumptions in connection with these statements. Mountain Province cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Mountain Province believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A.

Although Mountain Province has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Mountain Province undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve and resource estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the mineralization that will be encountered as the property is developed.

Further, Mountain Province may make changes to its business plans that could affect its results. The principal assets of Mountain Province are administered pursuant to a joint venture under which Mountain Province is not the operator. Mountain Province is exposed to actions taken or omissions made by the operator within its prerogative and/or determinations made by the joint venture under its terms. Such actions or omissions may impact the future performance of Mountain Province. Under its current note and revolving credit facilities Mountain Province is subject to certain limitations on its ability to pay dividends on common stock. The declaration of dividends is at the discretion of Mountain Province’s Board of Directors, subject to the limitations under the Company’s debt facilities, and will depend on Mountain Province’s financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

Page | 29

Cautionary Note to U.S. Investors – Information Concerning Preparation of Resource Estimates

This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws.  Unless otherwise indicated, all resource and reserve estimates included in this MD&A have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining and Metallurgy Classification System.  NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. 

Canadian standards, including NI 43-101, differ significantly from the requirements of Industry Guide 7 (“Guide 7”) promulgated by the United States Securities and Exchange Commission (“SEC”) under the United States Securities Act of 1933, as amended, and resource and reserve information contained herein may not be comparable to similar information disclosed by U.S. companies pursuant to Guide 7.  In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”.  Under Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.  The SEC's disclosure standards under Industry Guide 7 do not define the terms and normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by Guide 7 standards in documents filed with the SEC pursuant to Guide 7.  U.S. Investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility.  It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category.  Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases.  Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable.

Disclosure of “contained ounces” (or “contained carats”) in a resource is permitted disclosure under Canadian regulations; however, the Guide 7 normally only permits issuers to report mineralization that does not constitute “reserves” by Guide 7 standards as in place tonnage and grade without reference to unit measures.  The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the Guide 7, and reserves reported by the Company in compliance with NI 43-101 may not qualify as “reserves” under Guide 7 standards.  Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with Guide 7.

Page | 30

EX-99.3

Exhibit 99.3

CERTIFICATION

I, Stuart Brown, certify that:

1.     I have reviewed this annual report on Form 40-F of Mountain Province Diamonds Inc. (the "Company");

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.     The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5.     The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Date: March 20, 2019
	/s/ Stuart Brown
	Stuart Brown
	Chief Executive Officer

EX-99.4

Exhibit 99.4

CERTIFICATION

I, Perry Ing, certify that:

1.     I have reviewed this annual report on Form 40-F of Mountain Province Diamonds Inc. (the "Company");

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.     The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(e) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(f) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(g) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(h) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5.     The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(c) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(d) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Date: March 20, 2019
	/s/ Perry Ing
	Perry Ing
	Chief Financial Officer

EX-99.5

Exhibit 99.5

CERTIFICATION OF INTERIM CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Stuart Brown, Chief Executive Officer of Mountain Province Diamonds Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. the Annual Report on Form 40-F of the Company for the year ended December 31, 2018 (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Annual Report fairly presents in all material respects the financial condition and results of operations of the Company.

By:	/s/ Stuart Brown
Name:	Stuart Brown
Title:	Chief Executive Officer
Date:	March 20, 2019

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 40-F. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Annual Report on Form 40-F pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-99.6

Exhibit 99.6

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Perry Ing, Chief Financial Officer of Mountain Province Diamonds Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. the Annual Report on Form 40-F of the Company for the year ended December 31, 2018 (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Annual Report fairly presents in all material respects the financial condition and results of operations of the Company.

By:	/s/ Perry Ing
Name:	Perry Ing
Title:	Chief Financial Officer
Date:	March 20, 2019

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 40-F. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Annual Report on Form 40-F pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-99.7

Exhibit 99.7

kpmg LLP Bay Adelaide Centre 333 Bay Street, Suite 4600 Toronto, ON M5H 2S5 Canada
Tel 416-777-8500
Fax 416-777-8818

Consent of Independent Registered Public Accounting Firm

The Board of Directors of Mountain Province Diamonds Inc.

We consent to the inclusion in this annual report on Form 40-F of:

· our Report of Independent Registered Public Accounting firm dated March 20, 2019, addressed to the board of directors and shareholders of Mountain Province Diamonds Inc. (the “Company”), on the consolidated financial statements of the Company comprising the consolidated balance sheets of the Company as at December 31, 2018 and December 31, 2017, the related consolidated statements of comprehensive (loss) income, equity and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes; and

· our Report of Independent Registered Public Accounting Firm dated March 20, 2019 on the effectiveness of internal control over financial reporting as of December 31, 2018,

each of which is contained in this annual report on Form 40-F of the Company for the fiscal year ended December 31, 2018.

Chartered Professional Accountants, Licensed Public Accountants

March 20, 2019

Toronto, Canada

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.

EX-99.8

Exhibit 99.8

CONSENT OF AUTHOR

Keyvan Salehi, P.Eng, MBA

VP Corporate Development – Mountain Province Diamonds Inc.

161 Bay Street Suite 1410

Toronto ON M5J 2S1

United States Securities and Exchange Commission

Re: Mountain Province Diamonds Inc.’s Incorporation by Reference of the 2018 “Mineral Reserve Statement Estimate” with effective date of December 31^st, 2018, and published on March 20^th, 2019.

I, Keyvan Salehi, P.Eng. MBA, consent to the incorporation by Reference of the 2018 “Mineral Reserve Statement Estimate” with effective date of December 31st, 2018, and published on March 20th, 2019.

I confirm that I have read the relevant sections of the Form 40F filing for Mountain Province Diamonds Inc. for the year ended December 31, 2018.

Dated this 20th day of March, 2019.

/s/ Keyvan Salehi, P.Eng. MBA

Signature of Qualified Person

Keyvan Salehi, P.Eng. MBA

Name of Qualified Person

EX-99.9

Exhibit 99.9

CONSENT OF AUTHOR

Tom E. McCandless, Ph.D., P.Geo.

VP Exploration – Mountain Province Diamonds Inc.

161 Bay Street Suite 1410

Toronto ON M5J 2S1

United States Securities and Exchange Commission

Re: Mountain Province Diamonds Inc.’s Incorporation by Reference of the 2018 “Mineral Resource Statement Estimate” with effective date of December 31^st, 2018, and published on March 20^th, 2019.

I, Tom E. McCandless, Ph.D., P.Geo., consent to the incorporation by Reference of the 2018 “Mineral Resource Statement Estimate” with effective date of December 31st, 2018, and published on March 20th, 2019.

I confirm that I have read the relevant sections of the Form 40F filing for Mountain Province Diamonds Inc. for the year ended December 31, 2018.

Dated this 20th day of March, 2019.

/s/ Tom E. McCandless, Ph.D., P.Geo.

Signature of Qualified Person

Tom E. McCandless, Ph.D., P.Geo.

Name of Qualified Person

EX-99.10

Exhibit 99.10

CONSENT OF AUTHOR

Gary Vivian, M.Sc., P.Geo.

Chairman – Aurora Geosciences Ltd

3506 McDonald Drive

Yellowknife, NT X1A 2H1

United States Securities and Exchange Commission

Re: Mountain Province Diamonds Inc.’s Incorporation by Reference of the “2016 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” and “2017 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31^st, 2018, and inclusion of references to the 2016 and 2017 Technical Reports in the Company’s Form 40-F for the year ended December 31, 2018.

I, Gary Vivian, M.Sc., P.Geol., consent to the incorporation by reference of the extracts of the 2016 and 2017 Technical Reports entitled “Project Exploration Update and Faraday Inferred Mineral Resource Estimate” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31st, 2018 and inclusion of references to the 2016 and 2017 Technical Reports in the Company’s Form 40-F for the year ended December 31, 2018.

I consent to extracts from, or a summary of, the 2016 and 2017 Technical Reports in Items 14 and 17 (the “relevant sections”) of Mountain Province Diamonds Inc.’s Form 40-F filing with the Securities and Exchange Commission, for the year ended December 31, 2018.

I confirm that I have read the relevant sections of the Form 40F filing for Mountain Province Diamonds Inc. for the year ended December 31, 2018, and that it fairly and accurately represents the information in the Technical Reports that supports the disclosure.

Dated this 20th day of March, 2019.

(original signed and sealed) “Gary Vivian, M.Sc., P.Geol.”

Signature of Qualified Person

Gary Vivian, M.Sc., P.Geol.

Name of Qualified Person

EX-99.11

Exhibit 99.11

CONSENT OF AUTHOR

Tom E. Nowicki, Ph.D., P.Geo.

Technical Director - Mineral Services Canada Inc.

501, 88 Lonsdale Avenue

North Vancouver, BC, V7M2E6

United States Securities and Exchange Commission

Re: Mountain Province Diamonds Inc.’s Incorporation by Reference of the “2016 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” and “2017 Technical Report, Project Exploration Update and Faraday Inferred Mineral Resource Estimate, Kennady North Project” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31^st, 2018, and inclusion of references to the 2016 and 2017 Technical Reports in the Company’s Form 40-F for the year ended December 31, 2018.

I, Tom E. Nowicki, Ph.D., P.Geo., consent to the incorporation by reference of the extracts of the 2016 and 2017 Technical Reports entitled “Project Exploration Update and Faraday Inferred Mineral Resource Estimate” as dated January 24, 2017 and November 16, 2017 respectively, with effective date of December 31st, 2018 and inclusion of references to the 2016 and 2017 Technical Reports in the Company’s Form 40-F for the year ended December 31, 2018.

I consent to extracts from, or a summary of, the 2016 and 2017 Technical Reports in Items 14 and 17 (the “relevant sections”) of Mountain Province Diamonds Inc.’s Form 40-F filing with the Securities and Exchange Commission, for the year ended December 31, 2018.

I confirm that I have read the relevant sections of the Form 40F filing for Mountain Province Diamonds Inc. for the year ended December 31, 2018, and that it fairly and accurately represents the information in the Technical Reports that supports the disclosure.

Dated this 20th day of March, 2019.

/s/ Tom E. Nowicki, Ph.D., P.Geo.

Signature of Qualified Person

Tom E. Nowicki, Ph.D., P.Geo.

Name of Qualified Person

EX-99.12

Exhibit 99.12

Mountain Province Diamonds Inc.

Business Conduct Policy

A. Ethical Behaviour

1. Legality

2. Honesty

3. Fair dealing

All activities by Mountain Province Diamonds Inc (“MPV” and the “Company”) and its directors, officers, employees and consultants must be lawful.

Lawfulness, however, is merely a starting point. It is equally important that all activities be conducted in an ethical manner. Ethical conduct means conduct that is honest, fair and free from deception and impropriety. Employees and other representatives of MPV must, at all times, act in accordance with a high standard of ethical behaviour and with constant regard for MPV’s reputation. As discussed in the next several pages, these requirements apply to dealings with MPV, fellow employees, shareholders, other businesses and the community at large.

Ultimately, each individual should test his or her own behaviour by asking: “Is there any reason why I would not want another person - MPV, a co-worker, a business associate, and any government - to be fully aware of my conduct and motives?” If this question causes any discomfort, the individual should reconsider his or her conduct.

B. Ethical Business Practices

For MPV’s reputation in the business community to be maintained, all dealings on MPV’s behalf must reflect high standards of ethical behaviour. In particular, the following specific principles must be observed:

1. Compliance with Laws

All directors, officers, employees and consultants must be aware of and comply with all relevant laws and regulations in all jurisdictions in which MPV conducts business. Individual directors, officers, employees and consultants have a duty to inform themselves of any laws relevant to their particular activities. Anyone with questions regarding legal issues should consult with the CEO, who will consult with MPV’s legal counsel.

2. Integrity in Business Dealings

Directors, officers, employees and consultants must act with integrity in dealings with all persons inside and outside the Company, including government officials, customers, suppliers and members of the community. Employees must follow established standards in procurement, and must treat tenderers fairly and equally.

-2- 

3. Gifts

No person may give to outside companies or individuals, or accept from them, any material gift or extravagant entertainment, or any similar benefit. (A “material” gift is one of such value that it constitutes a personal enrichment for the recipient such that it could be a factor in influencing that person’s behaviour. Entertainment will be considered “extravagant” if it would appear excessive to an objective observer and would typically be of a value greater than $500). Employees must properly record in MPV’s accounts any amounts spent on gifts or entertainment.

4. Questionable or Improper Payments

Where commissions, consultant fees, retainers and similar payments are required to be made and can be justified in the normal course of business, those payments must be clearly commensurate with the services performed and must be properly recorded in the accounts of MPV.

5. Political Donations

It is MPV’s policy not to make political donations of any description.

6. Compliance with Accounting Policies

Employees must comply strictly with prescribed accounting policies, audit procedures and other such controls. All accounts must properly describe and accurately reflect the transactions recorded and all assets, liabilities, revenues and expenses must be properly recorded in the books of MPV. No secret or unrecorded funds or other assets are to be established or maintained.

7. Contract Workers

The Company considers that the compliance obligations arising out of this Policy apply not only to employees of the Company, but also to independent contract workers to the extent that they conduct activities on the Company’s behalf. The Company therefore expects all such contractor personnel to familiarise themselves with this Policy, and to comply with it, in the same manner as is expected of MPV directors, officers and employees.

8. Business Associates

The Company will make all reasonable efforts to promote the application of these ethical business practices by our third party suppliers.

C. International Business

MPV’s international activities results in increased exposure to legal and ethical issues.

-3- 

1. Compliance with Anti-Bribery Legislation

MPV is subject to legislation in Canada that prohibits corrupt practices in dealing with foreign governments. The Canadian Corruption of Foreign Public Officials Act, makes it an offence to make or offer a payment, gift or benefit to a foreign government official in order to induce favourable business treatment, such as obtaining or retaining business or some other advantage in the course of business. Violation of this legislation may result in substantial penalties to MPV and to individuals.

MPV, as well as individual employees, must take all reasonable steps to ensure that the requirements of this legislation are strictly met. No payments, material gifts or other benefits are to be given, directly or indirectly, to foreign government officials, political parties or political candidates for the purpose of influencing government decisions in MPV’s favour. Furthermore, no such payments are to be made to agents or other third parties in circumstances where it is likely that part or all of the payment will be passed on to a foreign government official, political party or political candidate. For the purpose of this paragraph, a material gift or benefit has a value in excess of $500.

2. Facilitation Payments

There are certain types of payments to foreign government officials that are allowed under Canadian legislation, called “facilitation” or “facilitating” payments. These are small payments or tips that are accepted custom in certain foreign countries in the context of having routine administrative actions performed by government officials. Employees should be aware that such payments are permissible only under very limited circumstances and must be properly documented. As well, they must advise the CEO or CFO in advance of any anticipated payments and provide written request for reimbursement of any such payment. If there are any questions regarding the permissibility of any particular payment, advice should be sought from the CEO or CFO. Moreover, employees must ensure that any such payments are properly recorded in accordance with the Company’s accounting procedures.

A copy of the Canadian foreign corrupt practices legislation is available from the Corporate Secretary. Anyone with questions regarding these legal issues should consult the CEO or CFO.

D. Personal Conduct

1. Work-related Conduct and Conflicts of Interest

MPV employees must comply with the standards of ethical behaviour in all aspects of their employment. This includes their dealings with people outside the Company as well as their relationships with their fellow employees and with MPV as their employer. In addition, MPV expects that employees will act with loyalty to the Company at all times.

In particular, individuals must not:

-4- 

(i) Pursue personal gain or advantage from their employment activities;

(ii) Misuse Company resources, including computer systems;

(iii) Engage in insider trading;

(iv) Compromise the confidentiality of corporate information; and

(v) Permit any actual or perceived conflict of interest between their personal interests and those of the Company. Employees must not enter into outside activities, including business interests or other employment, that might interfere with or be perceived to interfere with their performance at MPV or otherwise compromise their duty of loyalty to MPV.

2. Personal Conduct

In general, MPV does not wish to dictate the personal conduct of individual employees outside working hours. Nevertheless, it expects employees to act lawfully at all times and to conduct their personal affairs as good and responsible citizens, in such a manner that reflects well on MPV.

E. Employment Practices

1. MPV recognizes that it must earn the loyalty that it expects from its employees. MPV is committed to treating its employees ethically and fairly. In particular, MPV strives to ensure the following:

(i) No discrimination on the basis of gender, disability, age, marital status, sexual orientation, religious belief, race, ethnicity, ancestry or place of origin;

(ii) Fair and competitive compensation;

(iii) Fairness in performance appraisals and job advancement;

(iv) Protection of employees from harassment; and

(v) Confidentiality of employee records.

2. All officers must maintain and promote these principles in their hiring practices and in their relationships with other employees.

F. Health, Safety and Environment

1. Effectiveness in occupational health, safety and environmental standards is an essential part of achieving efficiency and profitability in the mining industry. MPV will therefore work at continuous improvement in these areas and will be guided by the following principles:

(i) Creating a safe work environment;

-5- 

(ii) Minimizing the environmental impacts of its activities;

(iii) Building co-operative working relationships with local communities and governments in the Company’s areas of operation;

(iv) Reviewing and monitoring environmental and safety performance; and

(v) Prompt and effective response to any environmental and safety concerns.

G. Disclosure of Information

1. All corporate information is the property of MPV. Corporate information includes trademarks, patents, software developments and applications, strategic and operational knowledge and financial information. It also includes any confidential information received by MPV from third parties.

2. Employees are in a position of trust with respect to corporate information in the same manner as with any other corporate property. Employees must take care to protect the confidentiality of corporate information. In particular:

(i) Employees must not use corporate information for personal gain;

(ii) Employees may not disclose corporate information other than for legitimate purposes and with appropriate safeguards, unless written approval is obtained from the CEO or CFO;

(iii) Media and investor communications are to be handled by the CEO or CFO;

(iv) Employees must not disclose undisclosed corporate information.

H. Ensuring Compliance with this Policy

1. Compliance

(i) As part of its efforts to ensure compliance with this Policy, MPV requires that each employee complete an annual Compliance Certificate certifying compliance with this Policy. Employees whose positions may include involvement with foreign operations may be asked to complete more frequent Compliance Certificates so as to ensure corporate compliance with anti-bribery legislation. Completed certificates are to be returned directly to the Corporate Secretary.

(ii) Any proposed non-compliance such as a proposed material gift, must be pre-approved by the CEO.

(iii) The Company requires that employees report any observed breaches of this Policy to the CEO or CFO.

(iv) An employee or consultant who violates this Policy may face disciplinary action up to and including termination of employment, in the case of an employee, and, in the case of a consultant, termination of the consulting contract with the Company. Violation of this Policy may also cause violation of certain laws. If it is discovered that laws have been violated, this matter may be referred to the appropriate regulatory authorities. Questions with respect to this Policy may be referred to the Company's Secretary.

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2018 shares
Document and Entity Information [Abstract]
Document Type	40-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Entity Registrant Name	Mountain Province Diamonds Inc.
Entity Central Index Key	0001004530
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Trading Symbol	MPVD
Entity Common Stock, Shares Outstanding	210,102,476
Entity Emerging Growth Company	false

XML

Consolidated Balance Sheets $ in Thousands, $ in Thousands	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Current assets
Cash	$ 30,708	$ 43,129
Amounts receivable	2,478	2,679
Prepaid expenses and other	1,269	3,464
Inventories	102,261	82,173
Total current assets	136,716	131,445
Reclamation deposit	250	0
Derivative assets	1,670	963
Property, plant and equipment	841,241	662,658
Total assets	979,877	795,066
Current liabilities
Accounts payable and accrued liabilities	48,295	34,615
Derivative liabilities	653	0
Income taxes payable	574	0
Total current liabilities	49,522	34,615
Secured notes payable	408,144	396,509
Decommissioning and restoration liability	54,922	29,200
Deferred income tax liabilities	3,174	0
Shareholders' equity:
Share capital	629,796	475,624
Share-based payments reserve	6,750	5,549
Deficit	(173,765)	(146,431)
Accumulated other comprehensive income	1,334	0
Total shareholders' equity	464,115	334,742
Total liabilities and shareholders' equity	$ 979,877	$ 795,066

XML

Consolidated Statements of Comprehensive (Loss) Income - CAD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017
Statement of comprehensive income [abstract]
Sales		$ 310,969	$ 170,108
Cost of sales:
Production costs		117,908	64,420
Cost of acquired diamonds		32,611	8,940
Depreciation and depletion		79,419	44,615
Earnings from mine operations		81,031	52,133
Exploration and evaluation expenses		8,204	472
Selling, general and administrative expenses		14,439	15,593
Operating income		58,388	36,068
Net finance expenses		(40,564)	(52,219)
Derivative (losses) gains		(247)	3,178
Foreign exchange (losses) gains		(32,474)	30,035
Other income		81	90
(Loss) income before taxes		(14,816)	17,152
Current income taxes	[1]	(1,148)	0
Deferred income taxes		(2,970)	0
Total income taxes		(4,118)	0
Net (loss) income for the year		(18,934)	17,152
Items that will not be reclassified subsequently to profit and loss:
Change in fair value of equity securities		1,334	0
Other comprehensive income		1,334	0
Total comprehensive (loss) income for the year		$ (17,600)	$ 17,152
Basic and diluted (loss) earnings per share		$ (0.10)	$ 0.11
Basic weighted average number of shares outstanding		195,968,588	160,189,858
Diluted weighted average number of shares outstanding		195,968,588	161,024,354

[1] In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

XML

Consolidated Statements of Equity - CAD ($) $ in Thousands	Total	Share capital	Share-based payments reserve	Deficit	Accumulated other comprehensive income
Balance at Dec. 31, 2016	$ 314,431	$ 472,995	$ 5,019	$ (163,583)	$ 0
Balance (in Shares) at Dec. 31, 2016		159,818,833
Net income (loss) for the year	17,152	$ 0	0	17,152	0
Issuance of common shares – exercise of options	1,577	$ 1,577	0	0	0
Issuance of common shares – exercise of options (in Shares)		355,000
Fair value of options exercised from share-based payments reserve	0	$ 538	(538)	0	0
Share-based payment	1,582	0	1,582	0	0
Issuance of common shares – restricted share unit	0	$ 514	(514)	0	0
Issuance of common shares – restricted share unit (in Shares)		79,668
Dividends declared and paid	0
Financial assets at fair value through other comprehensive income
Gain on equity securities	0
Balance at Dec. 31, 2017	334,742	$ 475,624	5,549	(146,431)	0
Balance (in Shares) at Dec. 31, 2017		160,253,501
Net income (loss) for the year	(18,934)	$ 0	0	(18,934)	0
Share-based payment	1,685	0	1,685	0	0
Issuance of common shares – restricted share unit	0	$ 484	(484)	0	0
Issuance of common shares – restricted share unit (in Shares)		111,668
Share issuance to acquire Kennady Diamonds Inc.	153,688	$ 153,688	0	0	0
Share issuance to acquire Kennady Diamonds Inc. (in shares)		49,737,307
Dividends declared and paid	(8,400)	$ 0	0	(8,400)	0
Financial assets at fair value through other comprehensive income
Gain on equity securities	1,334	0	0	0	1,334
Balance at Dec. 31, 2018	$ 464,115	$ 629,796	$ 6,750	$ (173,765)	$ 1,334
Balance (in Shares) at Dec. 31, 2018		210,102,476

XML

Consolidated Statements of Cash Flows $ in Thousands		12 Months Ended
		Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Operating activities:
Net (loss) income for the year		$ (18,934)	$ 17,152
Adjustments:
Net financing expenses		40,564	52,219
Depreciation and depletion		79,441	44,634
Share-based payment expense		1,685	1,582
Derivative losses (gains)		247	(3,178)
Foreign exchange losses (gains)		32,474	(30,035)
Current income taxes	[1]	1,148	0
Deferred income taxes		2,970	0
Income taxes paid		(574)	0
Adjustments		139,021	82,374
Changes in non-cash operating working capital:
Amounts receivable		842	(643)
Prepaid expenses and other		2,314	(2,146)
Inventories		(15,633)	(53,534)
Accounts payable and accrued liabilities		9,359	16,600
Cash flows from (used in) operating activities		135,903	42,651
Investing activities:
Restricted cash		0	83,878
Pre-production sales capitalized		0	67,493
Interest income		582	1,081
Capitalized interest paid		0	(5,451)
Purchase of property, plant and equipment		(76,062)	(105,824)
Cash acquired and transaction costs on asset acquisition of Kennady Diamonds Inc.		(4,193)	0
Cash flows from (used in) investing activities		(79,673)	41,177
Financing activities:
Loan facility proceeds		0	32,403
Repayment of loan facility		0	(458,888)
Secured notes payable		0	424,365
Repurchase of secured notes		(26,366)	0
Financing costs		(33,371)	(48,150)
Payment of dividends		(8,400)	0
Proceeds from option exercises		0	1,577
Cash flows from (used in) financing activities		(68,137)	(48,693)
Effect of foreign exchange rate changes on cash		(514)	1,150
(Decrease) increase in cash		(12,421)	36,285
Cash, beginning of year		43,129	6,844
Cash, end of year		$ 30,708	$ 43,129

[1] In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

XML

NATURE OF OPERATIONS

12 Months Ended

Dec. 31, 2018

NATURE OF OPERATIONS [Abstract]

Disclosure of going concern [text block]

1. Nature of Operations

Mountain Province Diamonds Inc. (“Mountain Province” and together with its subsidiaries collectively, the “Company”) was incorporated on December 2, 1986 under the British Columbia Company Act. The Company amended its articles and continued incorporation under the Ontario Business Corporations Act effective May 8, 2006. The Company holds a 49% interest in the Gahcho Kué Project (“Gahcho Kué Diamond Mine” or “GK Mine” or “GK Project”) in Canada’s Northwest Territories. On April 13, 2018, the Company completed the asset acquisition of Kennady Diamonds Inc. (formerly KDI.V on the TSX Venture exchange), which included 100% of the mineral rights of the Kennady North Project (“KNP”).

Effective March 1, 2017, the GK Mine declared commercial production for accounting purposes.

The address of the Company’s registered office and its principal place of business is 161 Bay Street, Suite 1410, PO Box 216, Toronto, ON, Canada, M5J 2S1. The Company’s shares are listed on the Toronto Stock Exchange (“TSX”) and NASDAQ under the symbol ‘MPVD’.

The underlying value and recoverability of the amounts shown as “Property, Plant and Equipment” (Note 8) are dependent upon future profitable production and proceeds from disposition of the Company’s mineral properties.

KNP is involved in the exploration, discovery, evaluation and development of diamond properties in Canada’s Northwest Territories. The underlying value and recoverability of amounts shown as “Mineral Properties” is dependent upon the ability of the Company to discover economically recoverable reserves, to have successful exploration, permitting and development, and upon future profitable production or proceeds from disposition of the Company’s mineral properties. Failure to discover and develop economically recoverable reserves will require the Company to write off costs capitalized to date.

Authorization of Financial Statements

These consolidated financial statements were approved by the Board of Directors on March 20, 2019.

XML

BASIS OF PRESENTATION

12 Months Ended

Dec. 31, 2018

Disclosure of basis of preparation [Abstract]

Disclosure of basis of preparation of financial statements [text block]

2. BASIS OF PRESENTATION

These consolidated financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The policies set out below were consistently applied to all the periods presented.

These financial statements were prepared under the historical cost convention, as modified by the revaluation of equity securities and derivative assets and liabilities and are presented in thousands of Canadian dollars.

The consolidated financial statements include the accounts of Mountain Province and its wholly-owned subsidiaries:

 2435572 Ontario Inc. (100% owned)

 2435386 Ontario Inc. (100% owned by 2435572 Ontario Inc.)

 Kennady Diamonds Inc. (100% owned) (from the date of acquisition – See Note 6)

The Company’s interest in the GK Mine is held through 2435386 Ontario Inc. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have been eliminated on consolidation.

The Company has determined that its interest in the GK Mine through its joint arrangement is a joint operation under IFRS 11, Joint Arrangements, and, accordingly has recorded the assets, liabilities, revenues and expenses in relation to its interest in the joint operation. The Company’s interest in the GK Mine is bound by a contractual arrangement establishing joint control over the mine through required unanimous consent of the Company and De Beers Canada Inc. (“De Beers” or the “Operator”, and together with the Company, the “Participants”) for strategic, financial and operating policies of the GK Mine. The GK Mine management committee has two representatives of each of the Company and De Beers. The Participants have appointed De Beers as the operator of the GK Mine.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2018

Disclosure Of Significant Accounting Policies [Abstract]

Disclosure of significant accounting policies [text block]

3. Significant accounting policies

(i) Foreign currency

The functional currency of the Company and its subsidiaries is the Canadian Dollar.

In preparing the consolidated financial statements, transactions in currencies other than the Company’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Exchange differences are recognized in profit or loss in the period in which they arise and presented in the consolidated statements of comprehensive (loss) income.

(ii) Share-based payments

The Company maintains a Restricted Share Unit (“RSU”), Deferred Share Unit (“DSU”) and stock option plan for employees, directors, and other qualified individuals.

Equity-settled transactions, which include RSUs, DSUs and stock options, are measured by reference to their fair value at the grant date. The fair value for RSU’s is determined using the market value of the share price, as listed on the TSX, at the close of business at the grant date. The fair value for stock options is determined using a Black-Scholes option pricing model, which relies on estimates of the future risk-free interest rate, future dividend payments, future share price volatility and the expected average life of options. The Company believes this model adequately captures the substantive features of the option awards, and is appropriate to calculate their fair values. The fair value determined for both RSUs and stock options at grant date is recognized over the vesting period in accordance with the vesting terms and conditions, with a corresponding increase to share-based payments reserve.

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed in profit or loss over the vesting period, if any, which is the period during which the employee becomes unconditionally entitled to equity instruments. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest, if any.

(iii) Income taxes and deferred taxes

The income tax expense or benefit for the year consists of two components: current and deferred.

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the balance sheet date in each of the jurisdictions and includes any adjustments for taxes payable or recovery in respect of prior periods.

Taxable profit or loss differs from profit or loss as reported in the Consolidated Statements of Comprehensive Income because of items of income or expenses that are taxable or deductible in other years, and items that are never taxable or deductible.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, loss carryforwards and tax credit carryforwards to the extent that it is probable that taxable profits will be available against which they can be utilized. To the extent that the Company does not consider it to be probable that taxable profits will be available against which deductible temporary differences, loss carryforwards, and tax credit carryforwards can be utilized, a deferred tax asset is not recognized.

Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

(iv) Mineral properties and exploration and evaluation costs and development costs

Exploration and evaluation (“E&E”) costs are those costs required to find a mineral property and determine commercial viability and technical feasibility. E&E costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be converted to proven and probable reserves.

Exploration and evaluation costs consist of:

 gathering exploration data through topographical and geological studies;

 exploratory drilling, trenching and sampling;

 determining the volume and grade of the resource;

 test work on geology, metallurgy, mining, geotechnical and environmental; and

 conducting and refining engineering, marketing and financial studies.

Costs in relation to these activities are expensed as incurred until such time that the technical feasibility and commercial viability of extracting the mineral resource are demonstrable. At such time, mineral properties are assessed for impairment, and an impairment loss, if any, is recognized, and future development costs will be capitalized to assets under construction.

The key factors management used in determining technical feasibility and commercial viability were the following;

 completion of a feasibility study;

 obtaining required permits to construct the mine;

 completion of an evaluation of the financial resources required to construct the mine;

 availability of financial resources necessary to commence development activities to construct the mine; and

 management’s determination that a satisfactory return on investment, in relation to the risks to be assumed, is likely to be obtained.

The Company also recognizes exploration and evaluation costs as assets when acquired as part of a business combination, or asset purchase, or as a result of rights acquired relating to a mineral property.

(v) Commencement of commercial production

There are a number of quantitative and qualitative measures the Company considers when determining if conditions exist for the transition from pre-commercial production to commencement of commercial production of an operating mine, which include:

 all major capital expenditures have been completed to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management;

 mineral recoveries are at or near expected production levels; 

 the ability to sustain ongoing production of ore; and

 the ability to operate the plant as intended, achieving 30 days at an average of 70% design capacity.

The list of measures is not exhaustive and management takes into account the surrounding circumstances before making any specific decision.

(vi) Impairment of non-financial assets

The carrying value of the Company’s capitalized property, plant and equipment, and evaluation and exploration assets are assessed for impairment when indicators of potential impairment are identified to exist. If any indication of impairment is identified, an estimate of the asset’s recoverable amount is calculated to determine the extent of the impairment loss, if any. The recoverable amount is determined as the higher of the fair value less costs of disposal for the asset and the asset’s value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

Impairment is determined on an asset by asset basis, whenever possible. If it is not possible to determine impairment on an individual asset basis, then impairment is considered on the basis of a cash generating unit (“CGU”). CGUs represent the lowest level for which there are separately identifiable cash inflows that are largely independent of the cash flows from other assets or the Company’s other group of assets. The Company has determined that it has two CGUs.

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged immediately to profit or loss so as to reduce the carrying amount to its recoverable amount.

(vii) Capitalized interest

Interest costs for qualifying assets are capitalized. Qualifying assets are assets that require a significant amount of time to prepare for their intended use, including projects that are in development or construction stages. Capitalized interest costs are considered an element of the cost of the qualifying asset. Capitalization ceases when the asset is substantially complete or if active development is suspended or ceases. Where funds borrowed are directly attributable to a qualifying asset, the amount capitalized represents the borrowing costs specific to those borrowings.

(viii) Provisions

Provisions represent liabilities to the Company for which the amount or timing is uncertain. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expected expenditures to settle the obligation, applying a pre-tax risk-free discount rate. The increase in the provision due to passage of time is recognized as accretion expense. The Company does not have any provisions as of December 31, 2018 and 2017 other than the provision for decommissioning and restoration associated with the property, plant and equipment.

The Company records as decommissioning and restoration liability the present value of estimated costs of legal and constructive obligations required to restore locations in the period in which the obligation is incurred. The nature of these decommissioning and restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation of affected areas.

The obligation generally arises when the asset is installed or the ground and/or environment is disturbed at the production location. When the liability is initially recognized, the present value of the estimated cost is capitalized if the Company has a related asset on its balance sheet, or expensed. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and is added to inventory, and then in production costs as inventory is sold. Over time, the discounted liability is increased for the change in present value. The periodic unwinding of the discount is recognized in profit or loss as a finance cost called “accretion expense on decommissioning and restoration liability”. Additional disturbances or changes in rehabilitation costs will be recognized as additional capitalized costs (or exploration and evaluation expense depending on whether there was a related asset when the liability was initially recognized) and additional decommissioning and restoration liability when they occur. If it is determined that the expected costs for decommissioning and restoration are reduced, the change in the present value of the reduction is recorded as a reduction in the capitalized costs (expensed), and a reduction of the decommissioning and restoration liability.

(ix) Loss or earnings per share

Basic loss or earnings per share is calculated by dividing loss or earnings attributable to common shares divided by the weighted average number of shares outstanding during the year.

Diluted loss or earnings per share is calculated using the denominator of the basic calculation described above adjusted to include the potentially dilutive effect of outstanding stock options. The denominator is increased by the weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares.

(x) Revenue recognition

The Company utilizes a sales agent to facilitate the sale of rough and/or fancies and specials diamonds to the end-customer. The Company recognizes revenue when consideration has been received by the Company’s sales agent, which represents the completion of the performance obligation of the Company and when control is passed to the customer.

As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and specials diamonds produced at the GK mine are subject to a bid process. When De Beers is the successful bidder, the Company recognizes 49% of the bid price as revenue at the completion of the bid process, as De Beers receives the fancies and specials diamonds and the Company is paid immediately for its share by De Beers.

(xi) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated amortization and accumulated impairment losses. Cost comprises the fair value of consideration given to acquire an asset and includes the direct charges associated with bringing the asset to the location and condition necessary to put the asset into use, as well as the future cost of dismantling and removing the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Replacement cost, including major inspection and overhaul expenditures are capitalized for components of property, plant and equipment, which are accounted for separately.

Development costs are capitalized under assets under construction. Expenditures, including engineering to design the size and scope of the project, environmental assessment and permitting and borrowing costs are capitalized to assets under construction.

Amortization is provided on property, plant and equipment. Amortization is calculated so as to allocate the cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and amortization method are reviewed at the end of each annual reporting period. Mineral properties are not amortized until the properties to which they relate are placed into commercial production, at which time the costs will be amortized on a unit-of-production method following commencement of commercial production. Assets under construction are not amortized; rather costs are deferred until the asset is ready for use, at which point the deferred amount is transferred to the appropriate asset category and amortized as set out below.

The Company has changed its estimate of the useful life of the earthmoving equipment category within property, plant and equipment to better reflect the pattern of consumption being the straight line over the shorter of remaining life of the mine or life of the asset, rather than estimated hours. This change has been applied prospectively. This change in estimate did not result in a material difference to the depreciation in the current period. It is estimated it will not have a material impact on future periods’ depreciation.

The Company has changed its estimate of the basis for units of production over proven and probable reserves from carats recovered to ore treated. This change has been applied prospectively to better reflect the pattern of consumption over the remaining life of mine. This change only affects the production and related equipment, general infrastructure, mineral properties and deferred stripping categories within property, plant and equipment.

Upon entering commercial production stage, capitalized costs associated with the acquisition of the mineral property or the development of the mine, are amortized using the various methods based in the asset categories as follows:

Corporate assets	two to seven years, straight line
Vehicles	three to five years, straight line
Production and related equipment	units of production over proven and probable reserves
General infrastructure	units of production over proven and probable reserves
Earthmoving equipment	straight line over shorter of life of mine or life of the asset
Mineral properties	units of production over proven and probable reserves
Assets under construction	not depreciated until ready for use

(xii) Inventories

Inventories are recorded at the lower of cost and net realizable values. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion. An impairment adjustment is made when the carrying amount is higher than the net realizable value.

Rough diamonds classified as finished goods comprise diamonds that have been subject to the sorting process. Cost is determined on a weighted average cost per carat basis including production costs and value-added processing activity. As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and special diamonds produced at the GK Mine are subject to a bid process. Upon a successful bid by the Company, the fancies and specials diamonds will be included in inventories and 51% of the bid amount will be paid to De Beers and capitalized to the cost of inventory. Cost for fancies and specials diamonds is determined on a weighted average cost basis including production costs and value-added processing activity plus the direct cost of acquiring the fancies and specials diamonds from De Beers.

Stockpiled ore represents coarse ore that has been extracted from the mine and is available for future processing. Stockpiled ore value is based on costs incurred in bringing ore to the stockpile. Costs are added to the stockpiled ore based on current mining costs per tonne and are removed at the average cost per tonne of ore in the stockpile.

Supplies inventory are consumable materials which are measured at the lower of weighted average cost and net realizable value.

(xiii) Capitalized stripping costs

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of removing overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as mine development costs. These amounts were capitalized under assets under construction.

It may be also required to remove waste materials and to incur stripping costs during the production phase of the mine. The Company recognizes a stripping activity asset if all of the below conditions are met:

 It is probable that the future economic benefit (improved access to the component of the ore body) associated with the stripping activity will flow to the Company.

 The Company can identify the component of the ore body for which access has been improved.

 The costs relating to the stripping activity associated with that component can be measured reliably.

The Company measures the stripping activity at cost based on an accumulation of costs incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable costs. The waste to ore strip ratio projected for the life of the specific orebody must be exceeded for the costs to be capitalized as stripping costs.

After initial recognition, the stripping activity asset is carried at cost less depreciation and impairment losses in the same way as the existing asset of which it is a part.

The stripping activity asset is depreciated over the expected useful life of the identified components of the ore body that becomes more accessible as a result of the stripping activity using the units of production method.

(xiv) New accounting policies adopted in the current year

(a) Financial instruments

The Company has adopted all of the requirements of IFRS 9 Financial Instruments (“IFRS 9”), as of January 1, 2018. IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 utilizes a revised model for recognition and measurement of financial instruments and a single, forward-looking “expected loss” impairment model. There are differences between IFRS 9 and IAS 39, however, most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, so the Company’s accounting policy with respect to financial liabilities, including the accounting for the embedded derivative related to the secured notes payable, is unchanged.

As a result of the adoption of IFRS 9, the Company has changed its accounting policy for financial assets retrospectively, for assets that were recognized at the date of application. The change did not impact the carrying value of any financial assets on transition date. The main area of change is the accounting for cash previously classified as fair value through profit and loss.

The following is the Company’s new accounting policy for financial instruments under IFRS 9.

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Financial liabilities are measured at amortized cost unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

Asset/Liability	Original classifciation IAS 39	New classification IFRS 9
Cash	FVTPL	Amortized cost
Equity securities	Available-for-sale	FVTOCI
Amounts receivable	Loans and receivables	Amortized cost
Derivative assets	FVTPL	FVTPL
Accounts payable and accrued liabilities	Other liabilties	Amortized cost
Secured notes payable	Other liabilties	Amortized cost

The Company is not required to restate prior periods. The adoption of IFRS 9 resulted in no change to the opening accumulated deficit on January 1, 2018.

The Company’s cash consists of balances with banks.

The Company had no held-to-maturity financial assets at December 31, 2018 and 2017.

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income.

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value, plus transaction costs, and subsequently carried at amortized cost less any impairment. Financial liabilities carried at amortized cost utilize the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of comprehensive (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of comprehensive (loss) income in the period in which they arise.

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive (loss) income. However, gains and losses on derecognition of financial assets classified as FVTOCI are reclassified to retained earnings (deficit) as a reclassification within equity.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of comprehensive (loss) income.

(b) Foreign currency transactions and advance consideration

In December 2016, the IASB issued IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” (“IFRIC 22”). IFRIC 22 is applicable for annual periods beginning on or after January 1, 2018 and permits early adoption. IFRIC 22 clarifies which date should be used for translation when a foreign currency transaction involves an advance payment or receipt. The interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of the advance consideration. The adoption of IFRIC 22 did not have an effect on the consolidated financial statements for the period.

(xv) Standards and amendments to existing standards

At the date of authorization of these financial statements, certain new standards and amendments to existing standards have been published but are not yet effective, and have not been adopted early by the Company. The Company anticipates that all of the relevant standards will be adopted by the Company in the first period beginning after the effective date of the standard. Information on new standards and amendments that are expected to be relevant to the Company’s financial statements is provided below.

Leases

On January 13, 2016, the IASB issued IFRS 16, Leases (“IFRS 16”). The new standard will replace existing lease guidance in IFRS and related interpretations and requires companies to bring most leases on balance sheet. The significant change will affect the accounting treatment of leases currently classified as operating leases. The new standard is effective for annual periods beginning on or after January 1, 2019. The Company has concluded that the adoption of IFRS 16 will have an increase in lease liabilities, representing the present value of future payments under arrangements currently classified as operating leases, along with a corresponding increase in property, plant and equipment. Upon increasing property, plant and equipment, there will be an impact on the statement of comprehensive (loss) income, with an increase to depreciation, depletion and finance costs rather than operating expenses. There will be an impact on the statement of cash flows with an increase to financing activities rather than operating activities. Management believes the quantitative impact of this adoption will not be material.

Uncertainty over income tax treatments

On June 7, 2017, the IASB issued IFRIC Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”). IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. IFRIC 23 is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. Management concludes there will be no material impact on the effect of adopting IFRIC 23 on the consolidated financial statements for annual periods beginning January 1, 2019.

XML

SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

12 Months Ended

Dec. 31, 2018

Disclosure Of Accounting Judgements And Estimates Assumptions [Abstract]

Disclosure of accounting judgements and estimates [text block]

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements requires management to make judgments and/or estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. These judgments and estimates are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Actual results may differ from the estimates. The key areas where judgments, estimates and assumptions have been made are summarized below.

i) Significant judgments in applying accounting policies

The areas which require management to make significant judgments in applying the Company’s accounting policies are:

a)           Impairment analysis – property, plant and equipment and evaluation and exploration assets

As required under IAS 36 and IFRS 6, the Company reviews its property, plant and equipment and its evaluation and exploration assets for impairment based on results to date and when events and changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company is required to make certain judgments in assessing indicators of impairment. The Company’s assessment was that as at December 31, 2018 no indicator of an impairment in the carrying value of its property, plant and equipment and evaluation and exploration assets had occurred. The Company assessed for impairment as at December 31, 2017, but determined no impairment existed.

ii) Significant accounting estimates and assumptions

The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:

a)           Mineral reserves and resources

Mineral reserve and resource estimates include numerous uncertainties and depend heavily on geological interpretations and statistical inferences drawn from drilling and other data, and require estimates of the future price for the commodity and future cost of operations. The mineral reserve and resources are subject to uncertainty and actual results may vary from these estimates. Results from drilling, testing and production, as well as material changes in commodity prices and operating costs subsequent to the date of the estimate, may justify revision of such estimates. Changes in the proven and probable mineral reserves or measured and indicated and inferred mineral resources estimates may impact the carrying value of the properties. This will also impact the carrying value of the decommissioning and restoration liability and future depletion charges.

b)           Provision for decommissioning and restoration

The decommissioning and restoration liability and the accretion recorded are based on estimates of future cash flows, discount rates, and assumptions regarding timing. The estimates are subject to change and the actual costs for the decommissioning and restoration liability may change significantly. Significant assumptions exist for the determination of what constitutes decommissioning and restoration. Judgment has been applied by management to determine which decommissioning and restoration costs have been appropriately capitalized to inventory, based on the nature of the costs incurred upon reaching commercial production.

c)           Deferred taxes

Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and on unused losses carried forward, and are measured using the substantively enacted tax rates that are expected to be in effect when the differences are expected to reverse or losses are expected to be utilized. Deferred tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, including forecasts which include taxable profits, it is probable that they will be realized. Significant judgement is involved in determining when an adequate track record has been established to support the accuracy of the assumptions related to the forecasts of taxable profits.

d)            Business combinations

Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require may require the Company to make certain judgments as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 – Business Combinations. Based on an assessment of the relevant facts and circumstances, the Company concluded that the acquisition of Kennady Diamonds Inc. on April 13, 2018 did not meet the criteria for accounting as a business combination (Note 6).

XML

AMOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2018

Disclosure Of Amounts Receivable [Abstract]

Disclosure of trade and other receivables [text block]

5. AMOUNTS RECEIVABLE

	December 31,		December 31,
	2018		2017
Sales receivable	$	180	$	-
GST/HST receivable		1,247		2,068
Other receivable		1,051		611
Total	$	2,478	$	2,679

XML

ACQUISITION OF KENNADY DIAMONDS INC.

12 Months Ended

Dec. 31, 2018

Disclosure Of Business Combinations Abstract

Disclosure of detailed information about business combination [text block]

6. ACQUISITION OF KENNADY DIAMONDS INC.

On January 29, 2018, the Company announced a definitive arrangement agreement pursuant to which the Company would acquire all of the issued and outstanding shares of Kennady Diamonds Inc. (“Kennady”) by way of a court-approved plan of arrangement (the “Transaction”). Under the terms of the Transaction, Kennady shareholders would receive 0.975 of a Mountain Province common share for each Kennady common share. During the three-month period ended March 31, 2018, the Company obtained 3,000,000 Kennady shares, by way of a private placement. On April 9, 2018, approval of the Transaction was obtained from both Mountain Province and Kennady shareholders. On April 11, 2018, final approval of the Ontario Superior Court of Justice for the proposed transaction took place. On April 13, 2018, after all conditions precedent were satisfied, the Transaction was closed. Kennady shareholders received 49,737,307 shares of Mountain Province for 51,012,599 shares of Kennady. The transaction was valued based on the share price of the Company on April 13, 2018.

Until April 13, 2018, the 3,000,000 shares of Kennady obtained were held as equity securities. During the year ended December 31, 2018, the Company recognized a realized gain of $1,334, net of income taxes, related to the fair value adjustment of its equity securities. All equity securities owned by the Company are classified as FVTOCI, with fair value gains, net of income taxes, of $1,334 recorded in other comprehensive income for the year ended December 31, 2018. All $1,334 recorded in other comprehensive income arose by April 13, 2018, as a result of the acquisition.

The acquisition of Kennady Diamonds Inc. is considered an asset acquisition, and not a business combination in accordance with IFRS 3. The following table summarizes the fair value of the consideration transferred to the Kennady shareholders and the final estimates of the fair values of identified assets acquired and liabilities assumed.

The purchase price allocation and the net assets acquired were as follows:

Purchase price:
Common shares issued	$	153,688
Purchase of equity securities prior to April 13, 2018		9,038
Company transaction costs		4,247
Total	$	166,973
Net assets acquired:
Assets
Cash	$	54
Amounts receivable		641
Prepaid expenses		119
Reclamation deposit		250
Property, plant and equipment		168,609
Liabilities
Accounts payable and accrued liabilities		(2,527	)
Decommissioning and restoration liability		(173	)
Total	$	166,973

XML

INVENTORIES

12 Months Ended

Dec. 31, 2018

Disclosure Of Inventories Explanatory [Abstract]

Disclosure of inventories [text block]

7. INVENTORIES

	December 31,		December 31,
	2018		2017
Ore stockpile	$	17,714	$	19,972
Rough diamonds		56,300		45,999
Supplies inventory		28,247		16,202
Total	$	102,261	$	82,173

Depreciation and depletion included in inventories at December 31, 2018 is $21,519 (2017 - $17,225).

The amount of inventory expensed approximates cost of sales with respect to production costs incurred, and the cost of acquired diamonds.

Included in production costs for the year ended December 31, 2018 are the Company’s 49% share of payroll and employee benefits for staff of the GK Mine of $34,017 (2017 - $15,037).

XML

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2018

Disclosure of detailed information about property, plant and equipment [abstract]

Disclosure of property, plant and equipment [text block]

8. PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment as at December 31, 2018 and 2017 are as follows:

	Property,			Assets under			Property,			Exploration and		Assets under
	plant and equipment GK			construction GK			plant and equipment KNP			evaluation assets KNP		construction KNP		Total
Cost
At January 1, 2017	$	91,936		$	590,680		$	-		$	-	$	-	$	682,616
Decommissioning and restoration adjustment		2,979			-			-			-		-		2,979
Additions/transfers*		612,484			(566,701	)		-			-		-		45,783
At December 31, 2017		707,399			23,979			-			-		-		731,378
Decommissioning and restoration adjustment		23,553			-			-			-		-		23,553
Additions/transfers*		89,154			(19,085	)		90			166,947		1,564		238,670
At December 31, 2018	$	820,106		$	4,894		$	90		$	166,947	$	1,564	$	993,601
Accumulated depreciation
At January 1, 2017	$	(6,563	)	$	-		$	-		$	-	$	-	$	(6,563	)
Depreciation		(62,157	)		-			-			-		-		(62,157	)
At December 31, 2017		(68,720	)		-			-			-		-		(68,720	)
Depreciation and depletion		(83,630	)		-			(10	)		-		-		(83,640	)
At December 31, 2018	$	(152,350	)	$	-		$	(10	)	$	-	$	-	$	(152,360	)
Carrying amounts
At December 31, 2017	$	638,679		$	23,979		$	-		$	-	$	-	$	662,658
At December 31, 2018	$	667,756		$	4,894		$	80		$	166,947	$	1,564	$	841,241

*Included in the additions of assets under construction for the year ended December 31, 2018 is $Nil (2017 - $10,168) of borrowing and other costs and is net of $Nil (2017 - $67,493) of pre-production sales. Amounts were transferred to their appropriate asset class upon the declaration of commercial production. On April 13, 2018, KNP assets were acquired at their fair value for share consideration of the Company. Please see Note 6 for further details. Included in additions of property, plant and equipment for GK is $32,776 (2017 - $2,777) related to deferred stripping.

The Company’s primary project, the 49% owned GK Mine, declared commercial production on March 1, 2017. Failure to meet the obligations for cash calls to fund the Company’s share in the GK Mine may lead to dilution of the interest in the GK Mine.

On April 13, 2018, KNP mineral asset rights under the KNP were acquired. Kennady is involved in the exploration, discovery, evaluation and development of diamond properties in Canada’s Northwest Territories.

XML

DECOMMISSIONING AND RESTORATION LIABILITY

12 Months Ended

Dec. 31, 2018

Disclosure Of Decommissioning And Restoration Liability [Abstract]

Disclosure of contingent liabilities [text block]

9. Decommissioning and restoration liability

The decommissioning and restoration liability is the addition of the liabilities for both for the GK Mine and the Kennady North Project, which are broken down separately below.

The GK Mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018 and 2017:

	December 31, 2018			December 31, 2017
Expected undiscounted cash flows	$	56,122		$	30,045
Discount rate		2.18	%		2.26	%
Inflation rate		1.95	%		1.99	%
Periods		2029			2028

The Kennady North Project mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018:

	December 31, 2018
Expected undiscounted cash flows	$	175
Discount rate		1.86	%
Inflation rate		1.95	%
Periods		2021

The decommissioning and restoration liability has been calculated using expected cash flows that are current dollars, with inflation.

During the year ended December 31, 2018, the decommissioning and restoration liability was increased by $24,892 (2017 - $4,372) for a change in estimate, reflecting primarily an increase in estimated reclamation and restoration costs due to the construction work completed at the GK mine site, the mining operations on the property, and a decrease in estimated reclamation and restoration costs due minimal construction and exploration work performed at the KNP mine site.

The continuity of the decommissioning and restoration liability at December 31, 2018 and 2017 is as follows:

	GK Mine		KNP			Total
Balance, at January 1, 2017	$	24,266	$	-		$	24,266
Change in estimate of discounted cash flows		4,372		-			4,372
Accretion recorded during the year		562		-			562
Balance, at December 31, 2017	$	29,200	$	-		$	29,200
Addition of balance at the time of KDI acquisition (Note 6)		-		173			173
Change in estimate of discounted cash flows		24,900		(8	)		24,892
Accretion recorded during the year		656		1			657
Balance, at December 31, 2018	$	54,756	$	166		$	54,922

XML

SECURED NOTES PAYABLE

12 Months Ended

Dec. 31, 2018

Disclosure of secured notes payable [Abstract]

Disclosure of secured notes payable [text block]

10. secured notes payable

On December 11, 2017, the Company completed an offering of US$330 million aggregate principal amount of senior secured notes, secured by a second-ranking lien on all present and future assets, property and undertakings of the Company. The secured notes were sold at 97.992% of par, resulting in total proceeds of US$323.4 million. The secured notes pay interest in semi-annual instalments on June 15 and December 15 of each year, commencing on June 15, 2018, at a rate of 8.00% per annum, and mature on December 15, 2022. The Company incurred transaction costs of approximately $10 million, which have been offset against the carrying amount of the secured notes and are amortized using the effective interest rate method. The indenture governing the secured notes contains certain restrictive covenants that limit the Company’s ability to, among other things, incur additional indebtedness, make certain dividend payments and other restricted payments, and create certain liens, in each case subject to certain exceptions. The restrictive covenant on the Company’s ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.

During the year ended December 31, 2018, the Company repurchased US$20.1 million ($26.4 million) of outstanding secured notes. During the year ended December 31, 2017, no repurchases were made.

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent from the secured notes payable.

	December 31,		December 31,
	2018		2017
Total outstanding secured notes payable	$	422,262	$	414,843
Less: unamortized deferred transaction costs and issuance discount		14,118		18,334
Total secured notes payable	$	408,144	$	396,509

The secured notes payable is carried at amortized cost on the consolidated balance sheet.

Despite the repurchase of US$20.1 million secured notes payable, during the year ended December 31, 2018, due to the relative weakening of the Canadian dollar as compared to the U.S. dollar, an unrealized foreign exchange translation caused the secured notes payable balance to increase over the amount as at December 31, 2017.

The senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded derivatives and are outlined below. The Company may redeem the secured notes:

 during each of the two twelve-month periods commencing on December 11, 2017, in an amount not to exceed 10% of the aggregate principal amount of the secured notes at a redemption price equal to 103% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; 

 at any time and from time to time prior to December 15, 2019, in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the secured notes, with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 108% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

 in whole or in part at any time during the twelve-month period beginning on December 15, 2019 at a redemption price equal to 104% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

 in whole or in part at any time during the twelve-month period beginning on December 15, 2020 at a redemption price equal to 102% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; and

 in whole or in part at any time during the twelve-month period beginning on December 15, 2021 at a redemption price equal to 100% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption.

Revolving Credit Facility

Concurrent with the closing of the Notes offering, the Company entered into an undrawn US$50 million first ranking lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. The RCF has a term of three years and the Company is subject to a quarterly commitment between 0.9625% and 1.2375%, depending on certain leverage ratio calculations at the time. Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time. As at December 31, 2018, the RCF remained undrawn. The RCF is subject to several financial covenants, in order to remain available. The following financial covenants are calculated on a quarterly basis:

 Total leverage ratio of less than or equal to 4.50:1 calculated as total debt divided by EBITDA, up to and including December 31, 2019; and 4:1, thereafter until the maturity date.

 A ratio of EBITDA to interest expense no less than 2.25:1; and

 A tangible net worth that is no less than 75% of the tangible net worth as reflected in the September 30, 2017 financial statements provided to the administrative agent as a condition precedent to closing, plus 50% of the positive net income for each subsequent quarter date.

 Permitted distributions are subject to the Company having a net debt to EBITDA ratio of less than or equal to 2.75:1 in 2018, 2.25:1 in 2019, and 1.75:1 in 2020. Net debt is equal to total debt, less cash and cash equivalents. The aggregate amount of all distributions paid during the rolling four quarters up to and including the date of such distribution does not exceed 25% of free cash flows (“FCF”) during such period. FCF is defined as EBITDA minus, without duplication, (a) capital expenditures, (b) cash taxes, (c) any applicable standby fee, other fees or finance costs payable to the finance parties in connection with the RCF, (d) interest expenses and (e) any indebtedness (including mandatory prepayments) permitted under the existing agreement.

The Company is in compliance with all financial covenants as at December 31, 2018.

XML

NET FINANCE EXPENSES

12 Months Ended

Dec. 31, 2018

Disclosure Of Net Finance Income Expense Explanatory [Abstract]

Disclosure of finance income (cost) [text block]

11. net finance expenses

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Interest income	$	582		$	1,081
Accretion expense on decommissioning and restoration liability		(657	)		(562	)
Interest expense		(34,628	)		(30,419	)
Amortization of deferred financing costs		(4,216	)		(20,790	)
Other finance costs		(1,645	)		(1,529	)
	$	(40,564	)	$	(52,219	)

Finance costs include interest expense calculated using the effective interest method, adjusted for interest paid on interest rate swaps and foreign exchange on the interest paid and accrued. These financing costs, until the declaration of commercial production had been capitalized to assets under construction.

XML

SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2018

Disclosure of Shareholder's Equity [Abstract]

Disclosure of share-based payment arrangements [text block]

12. SHAREHOLDERS’ EQUITY

i. Authorized share capital

Unlimited common shares, without par value.

There is no other class of shares in the Company.

ii. Share capital

The number of common shares issued and fully paid as at December 31, 2018 is 210,102,470. There are no shares issued but not fully paid. As part of the Transaction which took place on April 13, 2018 to acquire all of the outstanding shares of Kennady, 49,737,307 shares of the Company were issued.

In the year ended December 31, 2018, the Company declared and paid a dividend of $0.04 per common share totalling $8,400.

iii. Stock options, RSUs, DSUs and share-based payments reserve

On June 21, 2016, the Company, through its Board of Directors and shareholders, adopted a long-term equity incentive plan (the “Plan”) which, among other things, allows for the maximum number of shares that may be reserved for issuance under the Plan to be 10% of the Company’s issued and outstanding shares at the time of the grant. The Board of Directors has the authority and discretion to grant stock option, RSU and DSU awards within the limits identified in the Plan, which includes provisions limiting the issuance of options to qualified persons and employees of the Company to maximums identified in the Plan.

As at December 31, 2018, the aggregate maximum number of shares pursuant to options granted under the Plan will not exceed 21,010,248 shares, and there were 17,511,251 shares available to be issued under the Plan. All stock options are settled by the issuance of common shares.

The following table summarizes information about the stock options outstanding and exercisable:

	December 31, 2018					December 31, 2017
	Number of options			Weighted average exercise price		Number of options			Weighted average exercise price
Balance at beginning of year		3,640,000		$	4.40		3,020,000		$	4.68
Granted during the year		240,000			3.30		1,110,000			3.69
Exercised during the year		-			-		(355,000	)		4.44
Expired during the year		(750,000	)		5.00		(135,000	)		4.84
Balance at end of the year		3,130,000		$	4.17		3,640,000		$	4.40
Options exercisable at the end of the year		2,183,334		$	4.45		2,530,000		$	4.70

The fair values of the stock options granted have been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions are presented below. Expected volatility is calculated by reference to the weekly closing share price for a period that reflects the expected life of the options. The 200,000 stock options issued on June 30, 2018 vest 1/3 on June 30, 2019, 1/3 on June 30, 2020 and 1/3 on June 30, 2021. The 40,000 stock options issued on June 30, 2018 vest 1/2 on June 30, 2019 and 1/2 on June 30, 2020. The 100,000 stock options issued on February 6, 2017 vested 1/3 immediately and 1/3 vested on February 6, 2018 and the remaining 1/3 vest on February 6, 2019. The 1,010,000 stock options issued on December 22, 2017 vest 1/3 on December 22, 2018, 1/3 on December 22, 2019, and 1/3 on December 22, 2020.

	December 31,		December 31,
	2018		2017
Exercise price		$3.30		$3.48 - $5.86
Expected volatility		30.78%		31.03% - 31.14%
Expected option life		5 years		5 years
Contractual option life		5 years		5 years
Expected forfeiture		none		none
Expected dividend yield		0%		0%
Risk-free interest rate		2.06%		1.11% - 1.82%

During the year ended December 31, 2017, 355,000 stock options were exercised for proceeds of $1,577. The aggregate market price of the common shares on the exercise dates was $2,316.

The following tables reflect the number of stock options outstanding, the weighted average of options outstanding, and the exercise price of stock options outstanding at December 31, 2018. The Black-Scholes values are measured at the grant date.

At December 31, 2018
	Black-Scholes		Number of		Number of		Exercise
Expiry Date	Value		Options		Exercisable Options		Price
February 13, 2019		206		150,000		150,000		5.29
April 13, 2020		1,242		785,000		785,000		4.66
October 14, 2020		133		100,000		100,000		4.21
December 10, 2020		614		545,000		545,000		3.57
June 30, 2021		120		100,000		100,000		6.35
November 3, 2021		214		100,000		100,000		6.96
February 5, 2022		171		100,000		66,667		5.86
December 21, 2022		1,075		1,010,000		336,667		3.48
June 30, 2023		203		200,000		-		3.30
June 30, 2023		41		40,000		-		3.30
	$	4,019		3,130,000		2,183,334	$	4.17

The weighted average remaining contractual life of the options outstanding at December 31, 2018 is 2.63 years (2017 – 2.85 years).

Subsequent to the year ended December 31, 2018, 150,000 stock options, with an exercise price of $5.29, expired.

The restricted and deferred share unit plans are full value phantom shares that mirror the value of the Company’s publicly traded common shares. Grants under the RSU and DSU plan are made on a discretionary basis to qualified persons and employees of the Company subject to the Board of Directors’ approval. Under the RSU and DSU plan, RSUs vest according to the terms set out in the award agreement which are determined on an individual basis at the discretion of the Board of Directors. Vesting under the RSU and DSU plan is subject to special rules for death, disability and change in control. The awards can be settled through issuance of common shares or paid in cash, at the discretion of the Board of Directors. These awards are accounted for as equity settled RSUs.

The fair value of each RSU issued is determined at the closing share price on the grant date.

The following table shows the RSU awards which have been granted and settled during the year:

	December 31, 2018					December 31, 2017
RSU	Number of units			Weighted average value		Number of units			Weighted average value
Balance at beginning of year		488,665		$	4.88		320,000		$	6.48
Awards and payouts during the period (net):
RSUs awarded		-			-		265,000			3.52
RSUs settled and common shares issued*		(111,668	)		4.33		(79,668	)		6.45
RSUs forfeited		(8,000	)		6.49		(16,667	)		6.49
Balance at end of the year		368,997		$	5.01		488,665		$	4.88

*As at December 31, 2018, 106,668 RSUs at a weighted average value of $6.49 have vested and have not yet been settled.

As at December 31, 2018, no DSU awards have been granted.

The share-based payments recognized as an expense for the years ended December 31, 2018 and 2017 are as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Expense recognized in the year for share-based payments	$	1,685	$	1,582

The share-based payment expense for the years ended December 31, 2018 and 2017 is included in selling, general and administrative expenses.

iv. (Loss) earnings per share

The following table sets forth the computation of basic and diluted (loss) earnings per share:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Numerator
Net (loss) income for the year	$	(18,934	)	$	17,152
Denominator
For basic - weighted average number of shares outstanding		195,968,588			160,189,858
Effect of dilutive securities		-			834,496
For diluted - adjusted weighted average number of shares outstanding		195,968,588			161,024,354
(Loss) Earnings Per Share
Basic	$	(0.10	)	$	0.11
Diluted	$	(0.10	)	$	0.11

For the year ended December 31, 2018, 3,130,000 stock options and 368,997 RSUs were not included in the calculation of diluted loss per share since to include them would be anti-dilutive (2017 – 2,805,504 stock options).

XML

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

12 Months Ended

Dec. 31, 2018

Disclosure of Selling, General And Administrative Expense [Abstract]

Disclosure of general and administrative expense [text block]

13. Selling, general and administrative expenses

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Selling and marketing	$	6,607	$	6,493
General and administrative:
Consulting fees and payroll		2,297		3,238
Share-based payment expense		1,685		1,582
Depreciation		21		19
Office and administration		879		870
Professional fees		1,579		2,161
Promotion and investor relations		264		162
Director fees		328		325
Transfer agent and regulatory fees		536		390
Travel		243		353
	$	14,439	$	15,593

XML

DERIVATIVE ASSETS AND LIABILITIES

12 Months Ended

Dec. 31, 2018

Disclosure of Derivative Liabilities [Abstract]

Disclosure of derivative financial instruments [text block]

14. Derivative assets and liabilities

(a) Derivative Assets

The senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded derivatives and are outlined below. The Company may redeem the secured notes:

 during each of the two twelve-month periods commencing on December 11, 2017, in an amount not to exceed 10% of the aggregate principal amount of the secured notes at a redemption price equal to 103% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; 

 at any time and from time to time prior to December 15, 2019 in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the secured notes with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 108% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

 in whole or in part at any time during the twelve-month period beginning on December 15, 2019 at a redemption price equal to 104% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption;

 in whole or in part at any time during the twelve-month period beginning on December 15, 2020 at a redemption price equal to 102% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption; and

 in whole or in part at any time during the twelve-month period beginning on December 15, 2021 at a redemption price equal to 100% of the principal amount of the secured notes redeemed, plus accrued and unpaid interest to the date of redemption.

As at December 31, 2018, the fair value of the prepayment option embedded derivative was US$1,226 ($1,670 Canadian dollar equivalent) (2017 – US$766 or $963 Canadian dollar equivalent), and has been presented as a derivative asset on the consolidated balance sheet. The Company recorded a gain of approximately $406 for the year ended December 31, 2018 (2017 - $971), which is recorded in derivative gains.

(b) Derivative Liabilities

The Company entered into foreign currency forward strip contracts to mitigate the risk that a devaluation of the U.S. dollar against the Canadian dollar would reduce the Canadian dollar equivalent of the U.S. dollar sales proceeds and the Company would not have sufficient Canadian dollar funds to contribute to the operations of the GK Mine.

These derivatives have been classified as “non-hedge derivatives”. Changes in fair value of the foreign currency forward strip contracts are recognized in net income or loss as gains or losses on derivatives.

Foreign Currency Forward Contracts

On December 19, 2018, the Company executed foreign currency forward contracts to buy Canadian dollars and sell U.S. dollars for the period from January 31, 2019 to July 2, 2019 for notional amounts of US$25,000 or $33,500 with a weighted average price of $1.34/US$1. As at December 31, 2017, the Company did not have any foreign currency forward contracts outstanding.

The table below provides a summary of currency contracts outstanding as at December 31, 2018.

Period of Currency Contracts	Notional Amount (CAD)		Weighted Average Price (USD)		Notional Amount (USD)
January 31, 2019 to July 2, 2019	$	33,500	$	1.34	$	25,000
Total	$	33,500	$	1.34	$	25,000

The following table presents amounts recognized in the Consolidated Statement of Comprehensive (Loss) Income for the year ended December 31, 2018 and 2017:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Gain on derivative contracts - interest rate swap contracts	$	-		$	2,207
Loss on derivative contracts - currency contracts		(653	)		-
Gain on prepayment option embedded derivative		406			971
Total	$	(247	)	$	3,178

Subsequent to the year ended December 31, 2018, the Company executed foreign currency forward contracts to buy Canadian dollars and sell U.S. dollars for the period from April 9, 2019 to October 9, 2019 for notional amounts of US$15,000 or $20,093 with a weighted average price of $1.3395/US$1.

XML

FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2018

Disclosure of detailed information about financial instruments [abstract]

Disclosure of financial instruments [text block]

15. Financial instruments

Fair value measurement

The Company categorizes each of its fair value measurements in accordance with a fair value hierarchy. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity).

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

The fair values of the amounts receivable and accounts payable and accrued liabilities approximate their carrying values due to the relatively short-term maturity of these financial instruments.

The following table shows the carrying amounts and fair values of the Company’s financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

	Carrying amount										Fair value
December 31, 2018	Assets at amortized cost		Fair value through profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	1,670	$	-	$	-	$	1,670	$	-	$	1,670	$	-	$	1,670
	$	-	$	1,670	$	-	$	-	$	1,670
Financial assets not measured at fair value
Cash	$	30,708	$	-	$	-	$	-	$	30,708		30,708		-		-		30,708
Amounts receivable		2,478		-		-		-		2,478		2,478		-		-		2,478
	$	33,186	$	-	$	-	$	-	$	33,186
Financial liabilities measures at fair value
Derivative liabilities	$	-	$	653	$	-	$	-	$	653		-		653		-		653
	$	-	$	653	$	-	$	-	$	653
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	48,295	$	48,295		48,295		-		-		48,295
Secured notes payable		-		-		-		408,144		408,144		425,860		-		-		425,860
	$	-	$	-	$	-	$	456,439	$	456,439

	Carrying amount										Fair value
December 31, 2017	Assets at amortized cost		Fair value through profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	963	$	-	$	-	$	963	$	-	$	963	$	-	$	963
	$	-	$	963	$	-	$	-	$	963
Financial assets not measured at fair value
Cash	$	43,129	$	-	$	-	$	-	$	43,129		43,129		-		-		43,129
Amounts receivable		2,679		-		-		-		2,679		2,679		-		-		2,679
	$	45,808	$	-	$	-	$	-	$	45,808
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	34,615	$	34,615		34,615		-		-		34,615
Secured notes payable		-		-		-		396,509		396,509		412,976				-		412,976
	$	-	$	-	$	-	$	431,124	$	431,124

Fair values of assets and liabilities classified as Level 2 are valued using discounted cash flow (“DCF”) models. These models require a variety of observable inputs including market prices, forward price curves, yield curves and credit spreads. These inputs are obtained from or verified with the market where possible. The financial assets relate to the embedded derivative assets, which are prepayment options on the secured notes payable (Note 10).

Derivative instruments are valued using DCF models. These models require a variety of observable inputs including market prices, forward price curves and yield curves. These inputs are obtained from or verified with the market where possible.

The fair value of the secured notes payable is determined using market quoted prices.

Financial instruments risks

The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include credit risk, liquidity risk, market risk, foreign currency risk and interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The Company’s exposure to credit risk is for its amounts receivable of which all of the outstanding amounts of $2,478 and $2,679 as at December 31, 2018 and 2017, respectively, were collected.

On December 31, 2018 and 2017, the Company does not have any allowance for doubtful accounts, and does not consider that any such allowance is necessary.

All of the Company’s cash and restricted cash is held with a major Canadian financial institution and thus the exposure to credit risk is considered insignificant. Management actively monitors the Company’s exposure to credit risk under its financial instruments, including with respect to amounts receivable. The Company considers the risk of loss for its amounts receivable to be remote and significantly mitigated due to the financial strength of the parties from whom most of the amounts receivable are due - the Canadian government for harmonized sales tax (“HST”) refunds receivable in the amount of approximately $1,247 (2017 - $2,068).

The Company’s current policy is to hold excess cash in bank accounts. It periodically monitors the investment income it makes and is satisfied with the credit ratings of its bank.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to monitor forecast cash flows so that it will have sufficient liquidity to meet liabilities when due. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support its ongoing requirements. The Company coordinates this planning and budgeting process with its financing activities through its capital management process. The Company expects that it will be able to meet its obligations as they come due from the positive cash flows of ongoing operations. Also, the Company entered into an undrawn US$50 million first lien revolving credit facility (the “RCF”) with Scotiabank and Nedbank Ltd. in order to maintain a liquidity cushion for general corporate purposes. In order for the RCF to remain available, certain financial covenants must be met (Note 10). Being able to maintain positive cash flows from operations and the ability to comply with the RCF covenants, and/or maintain sufficient liquidity, is dependent upon many factors including, but not limited to, diamond prices, exchange rates, operating costs and levels of production. Adverse changes in one or more of these factors negatively impact the Company’s ability to comply with the covenants and/or maintain sufficient liquidity.

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent (2017 – US$330 million or $414.8 Canadian dollar equivalent) from the secured notes payable. The notes are secured by a second-priority lien on substantially all of the assets which includes the 49% participating rights to the GK Mine, as mentioned in Note 1 and Note 8. The parties under the RCF are granted first priority, if amounts become drawn. Failure to meet the obligations of the secured notes payable as they come due may lead to the sale of the 49% participating interest in the GK Mine.

The following table summarizes the contractual maturities of the Company’s significant financial liabilities and capital commitments, including contractual obligations:

	Less than			1 to 3		4 to 5		After 5
	1 Year			Years		Years		Years		Total
Operating lease obligations	$	231		$	471	$	473	$	79	$	1,254
Gahcho Kué Diamond Mine commitments		1,578			-		-		-		1,578
Gahcho Kué Diamond Mine operating lease obligations		798			806		190		-		1,794
Revolving credit facility stand by charges		843			808		-		-		1,651
Notes payable - Principal		-			-		422,262		-		422,262
Notes payable - Interest		34,250			68,594		34,250		-		137,094
Forward Exchange Contracts:
(Inflows)		(33,500	)		-		-		-		(33,500	)
Outflows		34,060			-		-		-		34,060
	$	38,260		$	70,679	$	457,175	$	79	$	566,193

Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Company’s income and the value of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing returns.

(i) Interest rate risk

The Company does not have significant exposure to interest rate risk at December 31, 2018 and 2017, since the secured notes payable does not have a variable interest rate. At December 31, 2018, the total secured notes payable was US$309.9 million (2017 – US$330 million).

(ii) Foreign currency

The Company is exposed to market risk related to foreign exchange rates. The Company operates in Canada and has foreign currency exposure to transactions in U.S. dollars. The majority of the ongoing operational costs of the GK Mine are in Canadian dollars, and are funded through operating cash flows. The Company’s operating cash flows include the sale of its 49% share of the GK Mine diamonds produced in U.S. dollars.

As at December 31, 2018 and 2017, the Company had cash, accounts payable and accrued liabilities, derivative assets, derivative liabilities, financing costs payable and the secured notes payable that are in U.S. dollars. The Canadian dollar equivalent is as follows:

	December 31,			December 31,
	2018			2017
Cash	$	16,837		$	25,509
Derivative assets		1,670			963
Accounts payable and accrued liabilities		(2,248	)		(3,783	)
Derivative liabilities		(653	)		-
Secured notes payable		(422,262	)		(414,843	)
Total	$	(406,656	)	$	(392,154	)

A 10% appreciation or depreciation of the Canadian dollar relative to the U.S. dollar at December 31, 2018 and 2017 would have resulted in an increase or decrease to net income for the year of approximately $40.7 million and $39.2 million, respectively.

XML

RELATED PARTIES

12 Months Ended

Dec. 31, 2018

Disclosure Of Related Party [Abstract]

Disclosure of related party [text block]

16. RELATED PARTIES

The Company’s related parties include the Operator of the GK Mine, Dermot Desmond, Bottin and Vertigol Unlimited Company (“Vertigol”) (corporations ultimately beneficially owned by Dermot Desmond), key management and their close family members, and the Company’s directors. During the year ended December 31, 2018, Dermot Desmond and Bottin transferred all owned shares of the Company to Vertigol. Dermot Desmond, indirectly through Vertigol, is the ultimate beneficial owner of greater than 10% of the Company’s shares. Kennady Diamonds Inc. (“Kennady Diamonds”) was also a related party since the Company and Kennady Diamonds had a common member of key management, until the date of acquisition on April 13, 2018. International Investment and Underwriting Unlimited (“IIU”) is also a related party since it is ultimately beneficially owned by Mr. Dermot Desmond.

Related party transactions are recorded at their exchange amount, being the amount agreed to by the parties.

The Company had the following transactions and balances with its related parties including key management personnel including the Company’s directors, Dermot Desmond, Vertigol, IIU, the Operator of the GK Mine, and Kennady Diamonds. The transactions with key management personnel are in the nature of remuneration. The transactions with the Operator of the GK Mine relate to the funding of the Company’s interest in the GK Mine for the current year’s expenditures, capital additions, management fee, and production sales related to the 49% share of fancies and special diamonds. The transactions with Kennady Diamonds are for a monthly management fee charged by the Company for reimbursement of expenses paid on behalf of Kennady Diamonds. The transactions with IIU are for the director fees and travel expenses of the Chairman of the Company.

Between 2014 and 2016, the Company and De Beers signed agreements allowing De Beers (“the Operator”) to utilize De Beers’ credit facilities to issue reclamation and restoration security deposits to the federal and territorial governments. In accordance with these agreements, the Company agreed to a 3% fee annually for their share of the letters of credit issued. As at December 31, 2018, the Company’s share of the letters of credit issued were $23.4 million (December 31, 2017 - $23.4 million).

The balances as at December 31, 2018 and 2017 were as follows:

	December 31,		December 31,
	2018		2017
Payable De Beers Canada Inc. as the operator of the GK Mine*	$	1,430	$	523
Payable to De Beers Canada Inc. for interest on letters of credit		352		339
Receivable from De Beers Canada Inc. for sunk cost overpayment		-		21
Payable to International Investment and Underwriting		-		32
Payable to key management personnel		57		178

*included in accounts payable and accrued liabilities

The transactions for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
The total of the transactions:
Kennady Diamonds	$	30	$	90
International Investment and Underwriting		99		82
Remuneration to key management personnel		2,917		3,828
Sunk cost repayment to De Beers Canada Inc.		-		49,063
Diamonds sold to De Beers Canada Inc.		2,028		8,791
Diamonds purchased from De Beers Canada Inc.		29,774		19,470
Finance costs incurred from De Beers Canada Inc.		705		339
Assets purchased from De Beers Canada Inc.		-		324
Management fee charged by the Operator of the GK Mine		4,153		4,153

The remuneration expense of directors and other members of key management personnel for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Consulting fees, payroll, director fees, bonus and other short-term benefits	$	1,643	$	2,707
Share-based payments		1,324		1,171
	$	2,967	$	3,878

In accordance with International Accounting Standard 24 Related Parties, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

XML

INCOME TAXES

12 Months Ended

Dec. 31, 2018

Disclosure Of Income Tax [Abstract]

Disclosure of income tax [text block]

17. INCOME TAXES

Rate Reconciliation

The provision for income tax differs from the amount that would have resulted by applying the combined Canadian statutory income tax rates of approximately 26.5% (2017 – 26.5%):

	December 31, 2018			December 31, 2017
(Loss) income before income taxes	$	(14,816	)	$	17,152
		26.5	%		26.5	%
Tax expense calculated using statutory rates		(3,926	)		4,545
Expenses not deductible (earnings not taxable)		4,656			(3,491	)
Change in tax benefits not recognized		(934	)		(1,054	)
Current and deferred mining taxes		4,322			-
Income tax expenses	$	4,118		$	-
Current income tax expense*	$	1,148		$	-
Deferred tax expense	$	2,970		$	-

*In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

Components of deferred tax assets and liabilities

	December 31, 2018			December 31, 2017
Deferred tax liabilities
Inventory	$	(4,993	)	$	(4,724	)
Property, plant & equipment		(25,275	)		(31,606	)
Derivative assets		(443	)		(255	)
Deferred tax asset
Non-capital loss carryforwards		27,537			36,585
	$	(3,174	)	$	-

Unrecognized deferred tax assets

Deductible temporary differences for which deferred tax assets have not been recognized are attributable to the following:

	December 31, 2018		December 31, 2017
Property, plant and equipment	$	4,693	$	-
Decommissioning and restoration liability		57,929		29,200
Capital losses		3,200		3,420
Non-capital losses, expiring 2034 to 2038		34,247		95,730
Share issuance cost		1,250		3,150
Secured notes payable		36,995		2,439
	$	138,314	$	133,939

The Company also has deductible temporary differences of $6,669 (2017 -$34,580) related to the Northwest Territories mining royalty that are not recognized in these financial statements.

XML

CAPITAL MANAGEMENT

12 Months Ended

Dec. 31, 2018

Disclosure of objectives, policies and processes for managing capital [abstract]

Disclosure of objectives, policies and processes for managing capital [text block]

18. CAPITAL MANAGEMENT

The Company considers its capital structure to consist of debt, share capital, share-based payments reserve, and net of deficit. The Company manages its capital structure and makes adjustments to it, in order to have the funds available to support the acquisition, exploration and development of mineral properties and ongoing operations (Note 1). The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

The declaration and payment of dividends on the Company’s common shares and the amount thereof are at the discretion of the Board of Directors, which takes into account the Company’s financial results, capital requirements, available cash flow, future prospects of the Company’s business and other factors considered relevant from time to time. There is a restrictive covenant on the Company’s ability to pay potential future dividends, which relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. The amount of the dividend, is limited to a maximum dollar threshold which is calculated at an opening basket of US$10 million, plus 50% of the historical consolidated net income reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment.

Management reviews its capital management approach on an ongoing basis.

The Company’s capital is summarized as follows:

	December 31,			December 31,
	2018			2017
Secured notes payable	$	408,144		$	396,509
Share capital		629,796			475,624
Share-based payments reserve		6,750			5,549
Deficit		(173,765	)		(146,431	)
	$	870,925		$	731,251

XML

SEGMENTED REPORTING

12 Months Ended

Dec. 31, 2018

Disclosure of Segmented Reporting [Abstract]

Disclosure of entity's operating segments [text block]

19. SEGMENTED REPORTING

The reportable operating segments are those operations for which operating results are reviewed by the Chief Executive Officer who is the chief operating decision maker regarding decisions about resources to be allocated to the segment and to assess performance provided those operations pass certain quantitative thresholds. Operations with revenues, earnings or losses or assets that exceed 10% of total consolidated revenue, earnings or losses or assets are reportable segments.

As a result of the asset acquisition of Kennady Diamonds Inc. (formerly KDI.V on the TSX Venture exchange), which included all mineral rights of the KNP, the Company now owns multiple diamond projects in the North West Territories, Canada. The GK Mine is a diamond mine in operations, while the KNP resource continues to be developed through exploration and evaluation programs.

As at and for the year ended December 31, 2018
	GK Mine			KNP*			Total
Sales	$	310,969		$	-		$	310,969
Cost of sales:
Production costs		117,908			-			117,908
Cost of acquired diamonds		32,611			-			32,611
Depreciation and depletion		79,419			-			79,419
Earnings from mine operations		81,031			-			81,031
Exploration and evaluation expenses		3,511			4,693			8,204
Selling, general and administrative expenses		14,391			48			14,439
Operating income (loss)		63,129			(4,741	)		58,388
Net finance (expenses) income		(40,567	)		3			(40,564	)
Derivative losses		(247	)		-			(247	)
Foreign exchange losses		(32,473	)		(1	)		(32,474	)
Other income		81			-			81
Net loss before taxes	$	(10,077	)	$	(4,739	)	$	(14,816	)
Total assets	$	810,901		$	168,976		$	979,877
Total liabilities	$	515,246		$	516		$	515,762

*From the date of acquisition April 13, 2018 (Note 6)

XML

SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2018

Disclosure Of Significant Accounting Policies [Abstract]

Description of accounting policy for foreign currency translation

(i) Foreign currency

The functional currency of the Company and its subsidiaries is the Canadian Dollar.

In preparing the consolidated financial statements, transactions in currencies other than the Company’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Exchange differences are recognized in profit or loss in the period in which they arise and presented in the consolidated statements of comprehensive (loss) income.

Description of accounting policy for share-based payment transactions

(ii) Share-based payments

The Company maintains a Restricted Share Unit (“RSU”), Deferred Share Unit (“DSU”) and stock option plan for employees, directors, and other qualified individuals.

Equity-settled transactions, which include RSUs, DSUs and stock options, are measured by reference to their fair value at the grant date. The fair value for RSU’s is determined using the market value of the share price, as listed on the TSX, at the close of business at the grant date. The fair value for stock options is determined using a Black-Scholes option pricing model, which relies on estimates of the future risk-free interest rate, future dividend payments, future share price volatility and the expected average life of options. The Company believes this model adequately captures the substantive features of the option awards, and is appropriate to calculate their fair values. The fair value determined for both RSUs and stock options at grant date is recognized over the vesting period in accordance with the vesting terms and conditions, with a corresponding increase to share-based payments reserve.

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed in profit or loss over the vesting period, if any, which is the period during which the employee becomes unconditionally entitled to equity instruments. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest, if any.

Description of accounting policy for income tax

(iii) Income taxes and deferred taxes

The income tax expense or benefit for the year consists of two components: current and deferred.

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the balance sheet date in each of the jurisdictions and includes any adjustments for taxes payable or recovery in respect of prior periods.

Taxable profit or loss differs from profit or loss as reported in the Consolidated Statements of Comprehensive Income because of items of income or expenses that are taxable or deductible in other years, and items that are never taxable or deductible.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, loss carryforwards and tax credit carryforwards to the extent that it is probable that taxable profits will be available against which they can be utilized. To the extent that the Company does not consider it to be probable that taxable profits will be available against which deductible temporary differences, loss carryforwards, and tax credit carryforwards can be utilized, a deferred tax asset is not recognized.

Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

Description of accounting policy for mining assets

(iv) Mineral properties and exploration and evaluation costs and development costs

Exploration and evaluation (“E&E”) costs are those costs required to find a mineral property and determine commercial viability and technical feasibility. E&E costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be converted to proven and probable reserves.

Exploration and evaluation costs consist of:

 gathering exploration data through topographical and geological studies;

 exploratory drilling, trenching and sampling;

 determining the volume and grade of the resource;

 test work on geology, metallurgy, mining, geotechnical and environmental; and

 conducting and refining engineering, marketing and financial studies.

Costs in relation to these activities are expensed as incurred until such time that the technical feasibility and commercial viability of extracting the mineral resource are demonstrable. At such time, mineral properties are assessed for impairment, and an impairment loss, if any, is recognized, and future development costs will be capitalized to assets under construction.

The key factors management used in determining technical feasibility and commercial viability were the following;

 completion of a feasibility study;

 obtaining required permits to construct the mine;

 completion of an evaluation of the financial resources required to construct the mine;

 availability of financial resources necessary to commence development activities to construct the mine; and

 management’s determination that a satisfactory return on investment, in relation to the risks to be assumed, is likely to be obtained.

The Company also recognizes exploration and evaluation costs as assets when acquired as part of a business combination, or asset purchase, or as a result of rights acquired relating to a mineral property.

Description of accounting policy for commencement of commercial production

(v) Commencement of commercial production

There are a number of quantitative and qualitative measures the Company considers when determining if conditions exist for the transition from pre-commercial production to commencement of commercial production of an operating mine, which include:

 all major capital expenditures have been completed to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management;

 mineral recoveries are at or near expected production levels; 

 the ability to sustain ongoing production of ore; and

 the ability to operate the plant as intended, achieving 30 days at an average of 70% design capacity.

The list of measures is not exhaustive and management takes into account the surrounding circumstances before making any specific decision.

Description of accounting policy for impairment of non-financial assets

(vi) Impairment of non-financial assets

The carrying value of the Company’s capitalized property, plant and equipment, and evaluation and exploration assets are assessed for impairment when indicators of potential impairment are identified to exist. If any indication of impairment is identified, an estimate of the asset’s recoverable amount is calculated to determine the extent of the impairment loss, if any. The recoverable amount is determined as the higher of the fair value less costs of disposal for the asset and the asset’s value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

Impairment is determined on an asset by asset basis, whenever possible. If it is not possible to determine impairment on an individual asset basis, then impairment is considered on the basis of a cash generating unit (“CGU”). CGUs represent the lowest level for which there are separately identifiable cash inflows that are largely independent of the cash flows from other assets or the Company’s other group of assets. The Company has determined that it has two CGUs.

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged immediately to profit or loss so as to reduce the carrying amount to its recoverable amount.

Description of accounting policy for borrowing costs

(vii) Capitalized interest

Interest costs for qualifying assets are capitalized. Qualifying assets are assets that require a significant amount of time to prepare for their intended use, including projects that are in development or construction stages. Capitalized interest costs are considered an element of the cost of the qualifying asset. Capitalization ceases when the asset is substantially complete or if active development is suspended or ceases. Where funds borrowed are directly attributable to a qualifying asset, the amount capitalized represents the borrowing costs specific to those borrowings.

Description of accounting policy for provisions

(viii) Provisions

Provisions represent liabilities to the Company for which the amount or timing is uncertain. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expected expenditures to settle the obligation, applying a pre-tax risk-free discount rate. The increase in the provision due to passage of time is recognized as accretion expense. The Company does not have any provisions as of December 31, 2018 and 2017 other than the provision for decommissioning and restoration associated with the property, plant and equipment.

The Company records as decommissioning and restoration liability the present value of estimated costs of legal and constructive obligations required to restore locations in the period in which the obligation is incurred. The nature of these decommissioning and restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation of affected areas.

The obligation generally arises when the asset is installed or the ground and/or environment is disturbed at the production location. When the liability is initially recognized, the present value of the estimated cost is capitalized if the Company has a related asset on its balance sheet, or expensed. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and is added to inventory, and then in production costs as inventory is sold. Over time, the discounted liability is increased for the change in present value. The periodic unwinding of the discount is recognized in profit or loss as a finance cost called “accretion expense on decommissioning and restoration liability”. Additional disturbances or changes in rehabilitation costs will be recognized as additional capitalized costs (or exploration and evaluation expense depending on whether there was a related asset when the liability was initially recognized) and additional decommissioning and restoration liability when they occur. If it is determined that the expected costs for decommissioning and restoration are reduced, the change in the present value of the reduction is recorded as a reduction in the capitalized costs (expensed), and a reduction of the decommissioning and restoration liability.

Description of accounting policy for earnings per share

(ix) Loss or earnings per share

Basic loss or earnings per share is calculated by dividing loss or earnings attributable to common shares divided by the weighted average number of shares outstanding during the year.

Diluted loss or earnings per share is calculated using the denominator of the basic calculation described above adjusted to include the potentially dilutive effect of outstanding stock options. The denominator is increased by the weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares.

Description of accounting policy for recognition of revenue

(x) Revenue recognition

The Company utilizes a sales agent to facilitate the sale of rough and/or fancies and specials diamonds to the end-customer. The Company recognizes revenue when consideration has been received by the Company’s sales agent, which represents the completion of the performance obligation of the Company and when control is passed to the customer.

As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and specials diamonds produced at the GK mine are subject to a bid process. When De Beers is the successful bidder, the Company recognizes 49% of the bid price as revenue at the completion of the bid process, as De Beers receives the fancies and specials diamonds and the Company is paid immediately for its share by De Beers.

Description of accounting policy for property, plant and equipment

(xi) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated amortization and accumulated impairment losses. Cost comprises the fair value of consideration given to acquire an asset and includes the direct charges associated with bringing the asset to the location and condition necessary to put the asset into use, as well as the future cost of dismantling and removing the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Replacement cost, including major inspection and overhaul expenditures are capitalized for components of property, plant and equipment, which are accounted for separately.

Development costs are capitalized under assets under construction. Expenditures, including engineering to design the size and scope of the project, environmental assessment and permitting and borrowing costs are capitalized to assets under construction.

Amortization is provided on property, plant and equipment. Amortization is calculated so as to allocate the cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and amortization method are reviewed at the end of each annual reporting period. Mineral properties are not amortized until the properties to which they relate are placed into commercial production, at which time the costs will be amortized on a unit-of-production method following commencement of commercial production. Assets under construction are not amortized; rather costs are deferred until the asset is ready for use, at which point the deferred amount is transferred to the appropriate asset category and amortized as set out below.

The Company has changed its estimate of the useful life of the earthmoving equipment category within property, plant and equipment to better reflect the pattern of consumption being the straight line over the shorter of remaining life of the mine or life of the asset, rather than estimated hours. This change has been applied prospectively. This change in estimate did not result in a material difference to the depreciation in the current period. It is estimated it will not have a material impact on future periods’ depreciation.

The Company has changed its estimate of the basis for units of production over proven and probable reserves from carats recovered to ore treated. This change has been applied prospectively to better reflect the pattern of consumption over the remaining life of mine. This change only affects the production and related equipment, general infrastructure, mineral properties and deferred stripping categories within property, plant and equipment.

Upon entering commercial production stage, capitalized costs associated with the acquisition of the mineral property or the development of the mine, are amortized using the various methods based in the asset categories as follows:

Corporate assets	two to seven years, straight line
Vehicles	three to five years, straight line
Production and related equipment	units of production over proven and probable reserves
General infrastructure	units of production over proven and probable reserves
Earthmoving equipment	straight line over shorter of life of mine or life of the asset
Mineral properties	units of production over proven and probable reserves
Assets under construction	not depreciated until ready for use

Description of accounting policy for measuring inventories

(xii) Inventories

Inventories are recorded at the lower of cost and net realizable values. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion. An impairment adjustment is made when the carrying amount is higher than the net realizable value.

Rough diamonds classified as finished goods comprise diamonds that have been subject to the sorting process. Cost is determined on a weighted average cost per carat basis including production costs and value-added processing activity. As outlined in the joint venture agreement between the Company and De Beers Canada, fancies and special diamonds produced at the GK Mine are subject to a bid process. Upon a successful bid by the Company, the fancies and specials diamonds will be included in inventories and 51% of the bid amount will be paid to De Beers and capitalized to the cost of inventory. Cost for fancies and specials diamonds is determined on a weighted average cost basis including production costs and value-added processing activity plus the direct cost of acquiring the fancies and specials diamonds from De Beers.

Stockpiled ore represents coarse ore that has been extracted from the mine and is available for future processing. Stockpiled ore value is based on costs incurred in bringing ore to the stockpile. Costs are added to the stockpiled ore based on current mining costs per tonne and are removed at the average cost per tonne of ore in the stockpile.

Supplies inventory are consumable materials which are measured at the lower of weighted average cost and net realizable value.

Description of accounting policy for stripping costs

(xiii) Capitalized stripping costs

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of removing overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as mine development costs. These amounts were capitalized under assets under construction.

It may be also required to remove waste materials and to incur stripping costs during the production phase of the mine. The Company recognizes a stripping activity asset if all of the below conditions are met:

 It is probable that the future economic benefit (improved access to the component of the ore body) associated with the stripping activity will flow to the Company.

 The Company can identify the component of the ore body for which access has been improved.

 The costs relating to the stripping activity associated with that component can be measured reliably.

The Company measures the stripping activity at cost based on an accumulation of costs incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable costs. The waste to ore strip ratio projected for the life of the specific orebody must be exceeded for the costs to be capitalized as stripping costs.

After initial recognition, the stripping activity asset is carried at cost less depreciation and impairment losses in the same way as the existing asset of which it is a part.

The stripping activity asset is depreciated over the expected useful life of the identified components of the ore body that becomes more accessible as a result of the stripping activity using the units of production method.

Disclosure of changes in accounting policies

(xiv) New accounting policies adopted in the current year

(a) Financial instruments

The Company has adopted all of the requirements of IFRS 9 Financial Instruments (“IFRS 9”), as of January 1, 2018. IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 utilizes a revised model for recognition and measurement of financial instruments and a single, forward-looking “expected loss” impairment model. There are differences between IFRS 9 and IAS 39, however, most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, so the Company’s accounting policy with respect to financial liabilities, including the accounting for the embedded derivative related to the secured notes payable, is unchanged.

As a result of the adoption of IFRS 9, the Company has changed its accounting policy for financial assets retrospectively, for assets that were recognized at the date of application. The change did not impact the carrying value of any financial assets on transition date. The main area of change is the accounting for cash previously classified as fair value through profit and loss.

The following is the Company’s new accounting policy for financial instruments under IFRS 9.

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Financial liabilities are measured at amortized cost unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

Asset/Liability	Original classifciation IAS 39	New classification IFRS 9
Cash	FVTPL	Amortized cost
Equity securities	Available-for-sale	FVTOCI
Amounts receivable	Loans and receivables	Amortized cost
Derivative assets	FVTPL	FVTPL
Accounts payable and accrued liabilities	Other liabilties	Amortized cost
Secured notes payable	Other liabilties	Amortized cost

The Company is not required to restate prior periods. The adoption of IFRS 9 resulted in no change to the opening accumulated deficit on January 1, 2018.

The Company’s cash consists of balances with banks.

The Company had no held-to-maturity financial assets at December 31, 2018 and 2017.

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income.

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value, plus transaction costs, and subsequently carried at amortized cost less any impairment. Financial liabilities carried at amortized cost utilize the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of comprehensive (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of comprehensive (loss) income in the period in which they arise.

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive (loss) income. However, gains and losses on derecognition of financial assets classified as FVTOCI are reclassified to retained earnings (deficit) as a reclassification within equity.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of comprehensive (loss) income.

(b) Foreign currency transactions and advance consideration

In December 2016, the IASB issued IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” (“IFRIC 22”). IFRIC 22 is applicable for annual periods beginning on or after January 1, 2018 and permits early adoption. IFRIC 22 clarifies which date should be used for translation when a foreign currency transaction involves an advance payment or receipt. The interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of the advance consideration. The adoption of IFRIC 22 did not have an effect on the consolidated financial statements for the period.

Description of accounting policy for standards and amendments to existing standards that are not yet effective and have not yet been adopted early by the company

(xv) Standards and amendments to existing standards

At the date of authorization of these financial statements, certain new standards and amendments to existing standards have been published but are not yet effective, and have not been adopted early by the Company. The Company anticipates that all of the relevant standards will be adopted by the Company in the first period beginning after the effective date of the standard. Information on new standards and amendments that are expected to be relevant to the Company’s financial statements is provided below.

Leases

On January 13, 2016, the IASB issued IFRS 16, Leases (“IFRS 16”). The new standard will replace existing lease guidance in IFRS and related interpretations and requires companies to bring most leases on balance sheet. The significant change will affect the accounting treatment of leases currently classified as operating leases. The new standard is effective for annual periods beginning on or after January 1, 2019. The Company has concluded that the adoption of IFRS 16 will have an increase in lease liabilities, representing the present value of future payments under arrangements currently classified as operating leases, along with a corresponding increase in property, plant and equipment. Upon increasing property, plant and equipment, there will be an impact on the statement of comprehensive (loss) income, with an increase to depreciation, depletion and finance costs rather than operating expenses. There will be an impact on the statement of cash flows with an increase to financing activities rather than operating activities. Management believes the quantitative impact of this adoption will not be material.

Uncertainty over income tax treatments

On June 7, 2017, the IASB issued IFRIC Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”). IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. IFRIC 23 is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. Management concludes there will be no material impact on the effect of adopting IFRIC 23 on the consolidated financial statements for annual periods beginning January 1, 2019.

XML

SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Significant Accounting Policies [Abstract]

Disclosure of detailed information about property, plant and equipment useful life [text block]

The Company has changed its estimate of the useful life of the earthmoving equipment category within property, plant and equipment to better reflect the pattern of consumption being the straight line over the shorter of remaining life of the mine or life of the asset, rather than estimated hours. This change has been applied prospectively. This change in estimate did not result in a material difference to the depreciation in the current period. It is estimated it will not have a material impact on future periods’ depreciation.

The Company has changed its estimate of the basis for units of production over proven and probable reserves from carats recovered to ore treated. This change has been applied prospectively to better reflect the pattern of consumption over the remaining life of mine. This change only affects the production and related equipment, general infrastructure, mineral properties and deferred stripping categories within property, plant and equipment.

Upon entering commercial production stage, capitalized costs associated with the acquisition of the mineral property or the development of the mine, are amortized using the various methods based in the asset categories as follows:

Corporate assets	two to seven years, straight line
Vehicles	three to five years, straight line
Production and related equipment	units of production over proven and probable reserves
General infrastructure	units of production over proven and probable reserves
Earthmoving equipment	straight line over shorter of life of mine or life of the asset
Mineral properties	units of production over proven and probable reserves
Assets under construction	not depreciated until ready for use

XML

AMOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Amounts Receivable [Abstract]

Disclosure of detailed information about amounts receivable [Text Block]

	December 31,		December 31,
	2018		2017
Sales receivable	$	180	$	-
GST/HST receivable		1,247		2,068
Other receivable		1,051		611
Total	$	2,478	$	2,679

XML

ACQUISITION OF KENNADY DIAMONDS INC. (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Business Combinations Abstract

Disclosure Of Detailed Information About Purchase Price Allocation and Net Assets Acquired [Text Block]

The purchase price allocation and the net assets acquired were as follows:

Purchase price:
Common shares issued	$	153,688
Purchase of equity securities prior to April 13, 2018		9,038
Company transaction costs		4,247
Total	$	166,973
Net assets acquired:
Assets
Cash	$	54
Amounts receivable		641
Prepaid expenses		119
Reclamation deposit		250
Property, plant and equipment		168,609
Liabilities
Accounts payable and accrued liabilities		(2,527	)
Decommissioning and restoration liability		(173	)
Total	$	166,973

XML

INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Inventories Explanatory [Abstract]

Disclosure of detailed information about inventories [Text Block]

	December 31,		December 31,
	2018		2017
Ore stockpile	$	17,714	$	19,972
Rough diamonds		56,300		45,999
Supplies inventory		28,247		16,202
Total	$	102,261	$	82,173

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of detailed information about property, plant and equipment [abstract]

Disclosure of detailed information about property, plant and equipment [text block]

The Company’s property, plant and equipment as at December 31, 2018 and 2017 are as follows:

	Property,			Assets under			Property,			Exploration and		Assets under
	plant and equipment GK			construction GK			plant and equipment KNP			evaluation assets KNP		construction KNP		Total
Cost
At January 1, 2017	$	91,936		$	590,680		$	-		$	-	$	-	$	682,616
Decommissioning and restoration adjustment		2,979			-			-			-		-		2,979
Additions/transfers*		612,484			(566,701	)		-			-		-		45,783
At December 31, 2017		707,399			23,979			-			-		-		731,378
Decommissioning and restoration adjustment		23,553			-			-			-		-		23,553
Additions/transfers*		89,154			(19,085	)		90			166,947		1,564		238,670
At December 31, 2018	$	820,106		$	4,894		$	90		$	166,947	$	1,564	$	993,601
Accumulated depreciation
At January 1, 2017	$	(6,563	)	$	-		$	-		$	-	$	-	$	(6,563	)
Depreciation		(62,157	)		-			-			-		-		(62,157	)
At December 31, 2017		(68,720	)		-			-			-		-		(68,720	)
Depreciation and depletion		(83,630	)		-			(10	)		-		-		(83,640	)
At December 31, 2018	$	(152,350	)	$	-		$	(10	)	$	-	$	-	$	(152,360	)
Carrying amounts
At December 31, 2017	$	638,679		$	23,979		$	-		$	-	$	-	$	662,658
At December 31, 2018	$	667,756		$	4,894		$	80		$	166,947	$	1,564	$	841,241

*Included in the additions of assets under construction for the year ended December 31, 2018 is $Nil (2017 - $10,168) of borrowing and other costs and is net of $Nil (2017 - $67,493) of pre-production sales. Amounts were transferred to their appropriate asset class upon the declaration of commercial production. On April 13, 2018, KNP assets were acquired at their fair value for share consideration of the Company. Please see Note 6 for further details. Included in additions of property, plant and equipment for GK is $32,776 (2017 - $2,777) related to deferred stripping.

XML

DECOMMISSIONING AND RESTORATION LIABILITY (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Decommissioning And Restoration Liability [Abstract]

Disclosure of detailed information about decommissioning and restoration liability assumptions [Text Block]

The GK Mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018 and 2017:

	December 31, 2018			December 31, 2017
Expected undiscounted cash flows	$	56,122		$	30,045
Discount rate		2.18	%		2.26	%
Inflation rate		1.95	%		1.99	%
Periods		2029			2028

The Kennady North Project mine decommissioning and restoration liability was calculated using the following assumptions as at December 31, 2018:

	December 31, 2018
Expected undiscounted cash flows	$	175
Discount rate		1.86	%
Inflation rate		1.95	%
Periods		2021

Disclosure of detailed information about decommissioning and restoration liability activity [Text Block]

The continuity of the decommissioning and restoration liability at December 31, 2018 and 2017 is as follows:

	GK Mine		KNP			Total
Balance, at January 1, 2017	$	24,266	$	-		$	24,266
Change in estimate of discounted cash flows		4,372		-			4,372
Accretion recorded during the year		562		-			562
Balance, at December 31, 2017	$	29,200	$	-		$	29,200
Addition of balance at the time of KDI acquisition (Note 6)		-		173			173
Change in estimate of discounted cash flows		24,900		(8	)		24,892
Accretion recorded during the year		656		1			657
Balance, at December 31, 2018	$	54,756	$	166		$	54,922

XML

SECURED NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of secured notes payable [Abstract]

Disclosure of detailed information about secured notes [Text Block]

As at December 31, 2018, the Company has an obligation for US$309.9 million or $422.3 million Canadian dollar equivalent from the secured notes payable.

	December 31,		December 31,
	2018		2017
Total outstanding secured notes payable	$	422,262	$	414,843
Less: unamortized deferred transaction costs and issuance discount		14,118		18,334
Total secured notes payable	$	408,144	$	396,509

XML

NET FINANCE EXPENSES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Net Finance Income Expense Explanatory [Abstract]

Disclosure of detailed information about finance income expenses [Text Block]

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Interest income	$	582		$	1,081
Accretion expense on decommissioning and restoration liability		(657	)		(562	)
Interest expense		(34,628	)		(30,419	)
Amortization of deferred financing costs		(4,216	)		(20,790	)
Other finance costs		(1,645	)		(1,529	)
	$	(40,564	)	$	(52,219	)

XML

SHAREHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Shareholder's Equity [Line Items]

Disclosure of number and weighted average exercise prices of share options [text block]

The following table summarizes information about the stock options outstanding and exercisable:

	December 31, 2018					December 31, 2017
	Number of options			Weighted average exercise price		Number of options			Weighted average exercise price
Balance at beginning of year		3,640,000		$	4.40		3,020,000		$	4.68
Granted during the year		240,000			3.30		1,110,000			3.69
Exercised during the year		-			-		(355,000	)		4.44
Expired during the year		(750,000	)		5.00		(135,000	)		4.84
Balance at end of the year		3,130,000		$	4.17		3,640,000		$	4.40
Options exercisable at the end of the year		2,183,334		$	4.45		2,530,000		$	4.70

Disclosure of indirect measurement of fair value of goods or services received, share options granted during period [text block]

The fair values of the stock options granted have been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions are presented below. Expected volatility is calculated by reference to the weekly closing share price for a period that reflects the expected life of the options. The 200,000 stock options issued on June 30, 2018 vest 1/3 on June 30, 2019, 1/3 on June 30, 2020 and 1/3 on June 30, 2021. The 40,000 stock options issued on June 30, 2018 vest 1/2 on June 30, 2019 and 1/2 on June 30, 2020. The 100,000 stock options issued on February 6, 2017 vested 1/3 immediately and 1/3 vested on February 6, 2018 and the remaining 1/3 vest on February 6, 2019. The 1,010,000 stock options issued on December 22, 2017 vest 1/3 on December 22, 2018, 1/3 on December 22, 2019, and 1/3 on December 22, 2020.

	December 31,		December 31,
	2018		2017
Exercise price		$3.30		$3.48 - $5.86
Expected volatility		30.78%		31.03% - 31.14%
Expected option life		5 years		5 years
Contractual option life		5 years		5 years
Expected forfeiture		none		none
Expected dividend yield		0%		0%
Risk-free interest rate		2.06%		1.11% - 1.82%

Disclosure of number and weighted average exercise prices of other equity instruments [text block]

The following table shows the RSU awards which have been granted and settled during the year:

	December 31, 2018					December 31, 2017
RSU	Number of units			Weighted average value		Number of units			Weighted average value
Balance at beginning of year		488,665		$	4.88		320,000		$	6.48
Awards and payouts during the period (net):
RSUs awarded		-			-		265,000			3.52
RSUs settled and common shares issued*		(111,668	)		4.33		(79,668	)		6.45
RSUs forfeited		(8,000	)		6.49		(16,667	)		6.49
Balance at end of the year		368,997		$	5.01		488,665		$	4.88

*As at December 31, 2018, 106,668 RSUs at a weighted average value of $6.49 have vested and have not yet been settled.

Explanation of effect of share-based payments on entity's profit or loss [text block]

The share-based payments recognized as an expense for the years ended December 31, 2018 and 2017 are as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Expense recognized in the year for share-based payments	$	1,685	$	1,582

Earnings per share [text block]

The following table sets forth the computation of basic and diluted (loss) earnings per share:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Numerator
Net (loss) income for the year	$	(18,934	)	$	17,152
Denominator
For basic - weighted average number of shares outstanding		195,968,588			160,189,858
Effect of dilutive securities		-			834,496
For diluted - adjusted weighted average number of shares outstanding		195,968,588			161,024,354
(Loss) Earnings Per Share
Basic	$	(0.10	)	$	0.11
Diluted	$	(0.10	)	$	0.11

Black scholes [Member]

Disclosure of Shareholder's Equity [Line Items]

Disclosure of number and weighted average exercise prices of share options [text block]

The following tables reflect the number of stock options outstanding, the weighted average of options outstanding, and the exercise price of stock options outstanding at December 31, 2018. The Black-Scholes values are measured at the grant date.

At December 31, 2018
	Black-Scholes		Number of		Number of		Exercise
Expiry Date	Value		Options		Exercisable Options		Price
February 13, 2019		206		150,000		150,000		5.29
April 13, 2020		1,242		785,000		785,000		4.66
October 14, 2020		133		100,000		100,000		4.21
December 10, 2020		614		545,000		545,000		3.57
June 30, 2021		120		100,000		100,000		6.35
November 3, 2021		214		100,000		100,000		6.96
February 5, 2022		171		100,000		66,667		5.86
December 21, 2022		1,075		1,010,000		336,667		3.48
June 30, 2023		203		200,000		-		3.30
June 30, 2023		41		40,000		-		3.30
	$	4,019		3,130,000		2,183,334	$	4.17

XML

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Selling, General And Administrative Expense [Abstract]

Disclosure of detailed information about Selling, general and administrative expense [Text Block]

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Selling and marketing	$	6,607	$	6,493
General and administrative:
Consulting fees and payroll		2,297		3,238
Share-based payment expense		1,685		1,582
Depreciation		21		19
Office and administration		879		870
Professional fees		1,579		2,161
Promotion and investor relations		264		162
Director fees		328		325
Transfer agent and regulatory fees		536		390
Travel		243		353
	$	14,439	$	15,593

XML

DERIVATIVE ASSETS AND LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Derivative Liabilities [Abstract]

Disclosure And Detailed Information About Currency Contracts Outstanding [Text Block]

The table below provides a summary of currency contracts outstanding as at December 31, 2018.

Period of Currency Contracts	Notional Amount (CAD)		Weighted Average Price (USD)		Notional Amount (USD)
January 31, 2019 to July 2, 2019	$	33,500	$	1.34	$	25,000
Total	$	33,500	$	1.34	$	25,000

Disclosure of information about amounts that affected statement of comprehensive income as result of hedge accounting [Text block]

The following table presents amounts recognized in the Consolidated Statement of Comprehensive (Loss) Income for the year ended December 31, 2018 and 2017:

	Year ended			Year ended
	December 31, 2018			December 31, 2017
Gain on derivative contracts - interest rate swap contracts	$	-		$	2,207
Loss on derivative contracts - currency contracts		(653	)		-
Gain on prepayment option embedded derivative		406			971
Total	$	(247	)	$	3,178

XML

FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of detailed information about financial instruments [abstract]

Disclosure of detailed information about financial instruments [text block]

The following table shows the carrying amounts and fair values of the Company’s financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

	Carrying amount										Fair value
December 31, 2018	Assets at amortized cost		Fair value through profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	1,670	$	-	$	-	$	1,670	$	-	$	1,670	$	-	$	1,670
	$	-	$	1,670	$	-	$	-	$	1,670
Financial assets not measured at fair value
Cash	$	30,708	$	-	$	-	$	-	$	30,708		30,708		-		-		30,708
Amounts receivable		2,478		-		-		-		2,478		2,478		-		-		2,478
	$	33,186	$	-	$	-	$	-	$	33,186
Financial liabilities measures at fair value
Derivative liabilities	$	-	$	653	$	-	$	-	$	653		-		653		-		653
	$	-	$	653	$	-	$	-	$	653
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	48,295	$	48,295		48,295		-		-		48,295
Secured notes payable		-		-		-		408,144		408,144		425,860		-		-		425,860
	$	-	$	-	$	-	$	456,439	$	456,439

	Carrying amount										Fair value
December 31, 2017	Assets at amortized cost		Fair value through profit and loss		Fair value through other comprehensive income		Liabilities at amortized cost		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Derivative assets	$	-	$	963	$	-	$	-	$	963	$	-	$	963	$	-	$	963
	$	-	$	963	$	-	$	-	$	963
Financial assets not measured at fair value
Cash	$	43,129	$	-	$	-	$	-	$	43,129		43,129		-		-		43,129
Amounts receivable		2,679		-		-		-		2,679		2,679		-		-		2,679
	$	45,808	$	-	$	-	$	-	$	45,808
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities	$	-	$	-	$	-	$	34,615	$	34,615		34,615		-		-		34,615
Secured notes payable		-		-		-		396,509		396,509		412,976				-		412,976
	$	-	$	-	$	-	$	431,124	$	431,124

Disclosure of detailed information about financial liabilities and capital commitments including contractual obligations [text block]

The following table summarizes the contractual maturities of the Company’s significant financial liabilities and capital commitments, including contractual obligations:

	Less than			1 to 3		4 to 5		After 5
	1 Year			Years		Years		Years		Total
Operating lease obligations	$	231		$	471	$	473	$	79	$	1,254
Gahcho Kué Diamond Mine commitments		1,578			-		-		-		1,578
Gahcho Kué Diamond Mine operating lease obligations		798			806		190		-		1,794
Revolving credit facility stand by charges		843			808		-		-		1,651
Notes payable - Principal		-			-		422,262		-		422,262
Notes payable - Interest		34,250			68,594		34,250		-		137,094
Forward Exchange Contracts:
(Inflows)		(33,500	)		-		-		-		(33,500	)
Outflows		34,060			-		-		-		34,060
	$	38,260		$	70,679	$	457,175	$	79	$	566,193

Disclosure of detailed information about net assets (liabilities) [text block]

As at December 31, 2018 and 2017, the Company had cash, accounts payable and accrued liabilities, derivative assets, derivative liabilities, financing costs payable and the secured notes payable that are in U.S. dollars. The Canadian dollar equivalent is as follows:

	December 31,			December 31,
	2018			2017
Cash	$	16,837		$	25,509
Derivative assets		1,670			963
Accounts payable and accrued liabilities		(2,248	)		(3,783	)
Derivative liabilities		(653	)		-
Secured notes payable		(422,262	)		(414,843	)
Total	$	(406,656	)	$	(392,154	)

XML

RELATED PARTIES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Related Party [Abstract]

Disclosure of detailed information about related parties outstanding balances [Text Block]

The balances as at December 31, 2018 and 2017 were as follows:

	December 31,		December 31,
	2018		2017
Payable De Beers Canada Inc. as the operator of the GK Mine*	$	1,430	$	523
Payable to De Beers Canada Inc. for interest on letters of credit		352		339
Receivable from De Beers Canada Inc. for sunk cost overpayment		-		21
Payable to International Investment and Underwriting		-		32
Payable to key management personnel		57		178

*included in accounts payable and accrued liabilities

Disclosure of transactions between related parties [Text block]

The transactions for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
The total of the transactions:
Kennady Diamonds	$	30	$	90
International Investment and Underwriting		99		82
Remuneration to key management personnel		2,917		3,828
Sunk cost repayment to De Beers Canada Inc.		-		49,063
Diamonds sold to De Beers Canada Inc.		2,028		8,791
Diamonds purchased from De Beers Canada Inc.		29,774		19,470
Finance costs incurred from De Beers Canada Inc.		705		339
Assets purchased from De Beers Canada Inc.		-		324
Management fee charged by the Operator of the GK Mine		4,153		4,153

Disclosure of amounts incurred by entity for provision of key management personnel services provided by separate management entities [Text block]

The remuneration expense of directors and other members of key management personnel for the years ended December 31, 2018 and 2017 were as follows:

	Year ended		Year ended
	December 31, 2018		December 31, 2017
Consulting fees, payroll, director fees, bonus and other short-term benefits	$	1,643	$	2,707
Share-based payments		1,324		1,171
	$	2,967	$	3,878

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Income Tax [Abstract]

Disclosure of detailed information about income tax reconciliation [text block]

The provision for income tax differs from the amount that would have resulted by applying the combined Canadian statutory income tax rates of approximately 26.5% (2017 – 26.5%):

	December 31, 2018			December 31, 2017
(Loss) income before income taxes	$	(14,816	)	$	17,152
		26.5	%		26.5	%
Tax expense calculated using statutory rates		(3,926	)		4,545
Expenses not deductible (earnings not taxable)		4,656			(3,491	)
Change in tax benefits not recognized		(934	)		(1,054	)
Current and deferred mining taxes		4,322			-
Income tax expenses	$	4,118		$	-
Current income tax expense*	$	1,148		$	-
Deferred tax expense	$	2,970		$	-

*In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

Disclosure of deferred taxes [text block]

	December 31, 2018			December 31, 2017
Deferred tax liabilities
Inventory	$	(4,993	)	$	(4,724	)
Property, plant & equipment		(25,275	)		(31,606	)
Derivative assets		(443	)		(255	)
Deferred tax asset
Non-capital loss carryforwards		27,537			36,585
	$	(3,174	)	$	-

Disclosure of temporary difference, unused tax losses and unused tax credits [text block]

Deductible temporary differences for which deferred tax assets have not been recognized are attributable to the following:

	December 31, 2018		December 31, 2017
Property, plant and equipment	$	4,693	$	-
Decommissioning and restoration liability		57,929		29,200
Capital losses		3,200		3,420
Non-capital losses, expiring 2034 to 2038		34,247		95,730
Share issuance cost		1,250		3,150
Secured notes payable		36,995		2,439
	$	138,314	$	133,939

XML

CAPITAL MANAGEMENT (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of objectives, policies and processes for managing capital [abstract]

Disclosure of detailed information about capital management [Text Block]

The Company’s capital is summarized as follows:

	December 31,			December 31,
	2018			2017
Secured notes payable	$	408,144		$	396,509
Share capital		629,796			475,624
Share-based payments reserve		6,750			5,549
Deficit		(173,765	)		(146,431	)
	$	870,925		$	731,251

XML

SEGMENTED REPORTING (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Segmented Reporting [Abstract]

Disclosure And Detailed Information About Revenue From Segments [Text Block]

As at and for the year ended December 31, 2018
	GK Mine			KNP*			Total
Sales	$	310,969		$	-		$	310,969
Cost of sales:
Production costs		117,908			-			117,908
Cost of acquired diamonds		32,611			-			32,611
Depreciation and depletion		79,419			-			79,419
Earnings from mine operations		81,031			-			81,031
Exploration and evaluation expenses		3,511			4,693			8,204
Selling, general and administrative expenses		14,391			48			14,439
Operating income (loss)		63,129			(4,741	)		58,388
Net finance (expenses) income		(40,567	)		3			(40,564	)
Derivative losses		(247	)		-			(247	)
Foreign exchange losses		(32,473	)		(1	)		(32,474	)
Other income		81			-			81
Net loss before taxes	$	(10,077	)	$	(4,739	)	$	(14,816	)
Total assets	$	810,901		$	168,976		$	979,877
Total liabilities	$	515,246		$	516		$	515,762

*From the date of acquisition April 13, 2018 (Note 6)

XML

NATURE OF OPERATIONS (Details Textual)	1 Months Ended		12 Months Ended
	Apr. 13, 2018	Mar. 01, 2017	Dec. 31, 2018
Disclosure Of Nature of Operations and going concern [Line Items]
Proportion of ownership interest in joint operation		49.00%
Kennady North Project [Member]
Disclosure Of Nature of Operations and going concern [Line Items]
Proportion of ownership interest in joint operation	100.00%
Gahcho Kué Diamond Mine [Member]
Disclosure Of Nature of Operations and going concern [Line Items]
Proportion of ownership interests held by non-controlling interests			49.00%

XML

BASIS OF PRESENTATION (Details Textual)	12 Months Ended
	Dec. 31, 2018
Ontario Inc. 2435572 [Member]
Disclosure of basis of preparation [Line Items]
Proportion of ownership interest in subsidiary	(100.00%)
Ontario Inc 2435386 [Member]
Disclosure of basis of preparation [Line Items]
Proportion of ownership interest in subsidiary	(100.00%)
Kennady Diamonds Inc [Member]
Disclosure of basis of preparation [Line Items]
Proportion of ownership interest in subsidiary	(100.00%)

XML

SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2018
Corporate assets [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	two to seven years, straight line
Vehicles [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	three to five years, straight line
Production and related equipment [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	units of production over proven and probable reserves
General infrastructure [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	units of production over proven and probable reserves
Earthmoving equipment [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	straight line over shorter of life of mine or life of the asset
Assets under construction [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	not depreciated until ready for use
Mineral properties [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Useful lives or depreciation rates, property, plant and equipment	units of production over proven and probable reserves

XML

SIGNIFICANT ACCOUNTING POLICIES (Details Textual)	12 Months Ended
	Dec. 31, 2018
Disclosure Of Significant Accounting Policies [Line Items]
Percentage Of Plant Capacity	70.00%
Percentage Of Bid Amount to be included in inventory	51.00%
De Beers [Member]
Disclosure Of Significant Accounting Policies [Line Items]
Percentage Of Bid price As Revenue	49.00%

XML

AMOUNTS RECEIVABLE (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Amounts Receivable [Abstract]
Current trade receivables	$ 180	$ 0
GST/HST receivable	1,247	2,068
Other receivable	1,051	611
Total	$ 2,478	$ 2,679

XML

ACQUISITION OF KENNADY DIAMONDS INC. (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($)
Purchase price:
Common shares issued	$ 153,688
Purchase of equity securities prior to April 13, 2018	9,038
Company transaction costs	4,247
Total	166,973
Assets
Cash	54
Amounts receivable	641
Prepaid expenses	119
Reclamation deposit	250
Property, plant and equipment	168,609
Liabilities
Accounts payable and accrued liabilities	(2,527)
Decommissioning and restoration liability	(173)
Total	$ 166,973

XML

ACQUISITION OF KENNADY DIAMONDS INC. (Details Textual)	1 Months Ended		3 Months Ended		12 Months Ended
	Apr. 13, 2018 CAD ($) shares	Jan. 29, 2018	Apr. 13, 2018 shares	Mar. 31, 2018 shares	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Disclosure Of Business Combinations Abstract
Stock Exchange Ratio		0.975
No Of Shares Acquired Through Private Placement			3,000,000	3,000,000
No Of Shares Issued Through Business Acquisition	49,737,307
No Of Shares Acquired Through Business Acquisition	51,012,599
Other comprehensive income, net of tax, financial assets measured at fair value through other comprehensive income | $					$ 1,334
Other comprehensive income | $	$ 1,334,000				$ 1,334,000	$ 0

XML

INVENTORIES (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Inventories Explanatory [Abstract]
Ore stockpile	$ 17,714	$ 19,972
Rough diamonds	56,300	45,999
Supplies inventory	28,247	16,202
Total	$ 102,261	$ 82,173

XML

INVENTORIES (Details Textual) $ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2017 USD ($)
Disclosure Of Inventories Explanatory [Abstract]
Depreciation and depletion included in inventories	$ 21,519		$ 17,225
Employee benefits expense		$ 34,017		$ 15,037
Percentage of payroll and employee benefits included in production costs	49.00%	49.00%

XML

PROPERTY, PLANT AND EQUIPMENT (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	$ 662,658
Ending balance	841,241	$ 662,658
Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	731,378	682,616
Decommissioning and restoration adjustment	23,553	2,979
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	238,670	45,783	[1]
Ending balance	993,601	731,378
Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(68,720)	(6,563)
Depreciation and depletion	(83,640)	(62,157)
Ending balance	(152,360)	(68,720)
Property, plant and equipment [Member] | Kennady North Project [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0
Ending balance	80	0
Property, plant and equipment [Member] | Kennady North Project [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Decommissioning and restoration adjustment	0	0
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	90	0	[1]
Ending balance	90	0
Property, plant and equipment [Member] | Kennady North Project [Member] | Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Depreciation and depletion	(10)	0
Ending balance	(10)	0
Property, plant and equipment [Member] | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	638,679
Ending balance	667,756	638,679
Property, plant and equipment [Member] | Gahcho Kue Diamond Mine [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	707,399	91,936
Decommissioning and restoration adjustment	23,553	2,979
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	89,154	612,484	[1]
Ending balance	820,106	707,399
Property, plant and equipment [Member] | Gahcho Kue Diamond Mine [Member] | Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(68,720)	(6,563)
Depreciation and depletion	(83,630)	(62,157)
Ending balance	(152,350)	(68,720)
Assets under construction [Member] | Kennady North Project [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0
Ending balance	1,564	0
Assets under construction [Member] | Kennady North Project [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Decommissioning and restoration adjustment	0	0
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	1,564	0	[1]
Ending balance	1,564	0
Assets under construction [Member] | Kennady North Project [Member] | Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Depreciation and depletion	0	0
Ending balance	0	0
Assets under construction [Member] | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	23,979
Ending balance	4,894	23,979
Assets under construction [Member] | Gahcho Kue Diamond Mine [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	23,979	590,680
Decommissioning and restoration adjustment	0	0
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	(19,085)	(566,701)	[1]
Ending balance	4,894	23,979
Assets under construction [Member] | Gahcho Kue Diamond Mine [Member] | Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Depreciation and depletion	0	0
Ending balance	0	0
Mining assets [member] | Kennady North Project [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0
Ending balance	166,947	0
Mining assets [member] | Kennady North Project [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Decommissioning and restoration adjustment	0	0
Increase Decrease In Additions and Transfer Other Than Through Business Combinations Property Plant And Equipment	166,947	0	[1]
Ending balance	166,947	0
Mining assets [member] | Kennady North Project [Member] | Accumulated depreciation, amortisation and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	0	0
Depreciation and depletion	0	0
Ending balance	$ 0	$ 0

[1] Included in the additions of assets under construction for the year ended December 31, 2018 is $Nil (2017 - $10,168) of borrowing and other costs and is net of $Nil (2017 - $67,493) of pre-production sales. Amounts were transferred to their appropriate asset class upon the declaration of commercial production. On April 13, 2018, KNP assets were acquired at their fair value for share consideration of the Company. Please see Note 6 for further details. Included in additions of property, plant and equipment for GK is $32,776 (2017 - $2,777) related to deferred stripping.

XML

PROPERTY, PLANT AND EQUIPMENT (Details Textual) - CAD ($) $ in Thousands	1 Months Ended			12 Months Ended
	Apr. 13, 2018	Apr. 13, 2018	Mar. 01, 2017	Dec. 31, 2018	Dec. 31, 2017
Disclosure of detailed information about property, plant and equipment [line items]
Borrowing costs capitalised				$ 0	$ 10,168
Proceeds from pre-production sales				$ 0	67,493
Proportion of ownership interest in joint operation			49.00%
Kennady North Project [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Proportion of ownership interest in joint operation	100.00%
Acquisitions through business combinations, property, plant and equipment		$ 32,776			$ 2,777

XML

DECOMMISSIONING AND RESTORATION LIABILITY (Details) - Provision for decommissioning, restoration and rehabilitation costs [member] - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
GK Mine [Member]
Decommissioning And Restoration Liability [Line Items]
Expected undiscounted cash flows	$ 56,122	$ 30,045
Discount rate	2.18%	2.26%
Inflation rate	1.95%	1.99%
Periods	2029	2028
KNP [Member]
Decommissioning And Restoration Liability [Line Items]
Expected undiscounted cash flows	$ 175
Discount rate	1.86%
Inflation rate	1.95%
Periods	2021

XML

DECOMMISSIONING AND RESTORATION LIABILITY (Details 1) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Decommissioning And Restoration Liability [Line Items]
Balance, beginning of year	$ 29,200	$ 24,266
Addition of balance at the time of KDI acquisition (Note 6)	173
Change in estimate of discounted cash flows	24,892	4,372
Accretion recorded during the year	657	562
Balance, end of the year	54,922	29,200
GK Mine [Member]
Decommissioning And Restoration Liability [Line Items]
Balance, beginning of year	29,200	24,266
Addition of balance at the time of KDI acquisition (Note 6)	0
Change in estimate of discounted cash flows	24,900	4,372
Accretion recorded during the year	656	562
Balance, end of the year	54,756	29,200
KNP [Member]
Decommissioning And Restoration Liability [Line Items]
Balance, beginning of year	0	0
Addition of balance at the time of KDI acquisition (Note 6)	173
Change in estimate of discounted cash flows	(8)	0
Accretion recorded during the year	1	0
Balance, end of the year	$ 166	$ 0

XML

DECOMMISSIONING AND RESTORATION LIABILITY (Details Textual) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Increase decrease in discounted cash flows of decommissioning restoration and rehabilitation provision	$ 24,892	$ 4,372

XML

SECURED NOTES PAYABLE (Details) $ in Thousands, $ in Thousands	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 11, 2017 USD ($)
Disclosure of secured notes payable [Line Items]
Total outstanding secured notes payable	$ 33,500	$ 25,000
Total secured notes payable	408,144		$ 396,509
Senior secured notes [Member]
Disclosure of secured notes payable [Line Items]
Total outstanding secured notes payable	422,262	$ 309,900	414,843	$ 330,000
Less: unamortized deferred transaction costs and issuance discount	14,118		18,334
Total secured notes payable	$ 408,144		$ 396,509

XML

SECURED NOTES PAYABLE (Details Textual) $ in Thousands			12 Months Ended
	Dec. 11, 2017 CAD ($)	Dec. 11, 2017 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2018 USD ($)
Disclosure of secured notes payable [Line Items]
Notional amount			$ 33,500			$ 25,000,000
Proceeds from issue of bonds, notes and debentures			$ 0		$ 424,365
Undrawn borrowing facilities						$ 50,000,000
Description of range of percentages of commitment fee payable on credit facilities			The RCF has a term of three years and the Company is subject to a quarterly commitment between 0.9625% and 1.2375%, depending on certain leverage ratio calculations at the time.	The RCF has a term of three years and the Company is subject to a quarterly commitment between 0.9625% and 1.2375%, depending on certain leverage ratio calculations at the time.
Description of range of percentages of commitment fee payable on drawn credit facilities			Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time.	Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time.
Description of financial ratios			Permitted distributions are subject to the Company having a net debt to EBITDA ratio of less than or equal to 2.75:1 in 2018, 2.25:1 in 2019, and 1.75:1 in 2020. Net debt is equal to total debt, less cash and cash equivalents. The aggregate amount of all distributions paid during the rolling four quarters up to and including the date of such distribution does not exceed 25% of free cash flows (“FCF”) during such period. FCF is defined as EBITDA minus, without duplication, (a) capital expenditures, (b) cash taxes, (c) any applicable standby fee, other fees or finance costs payable to the finance parties in connection with the RCF, (d) interest expenses and (e) any indebtedness (including mandatory prepayments) permitted under the existing agreement.	Permitted distributions are subject to the Company having a net debt to EBITDA ratio of less than or equal to 2.75:1 in 2018, 2.25:1 in 2019, and 1.75:1 in 2020. Net debt is equal to total debt, less cash and cash equivalents. The aggregate amount of all distributions paid during the rolling four quarters up to and including the date of such distribution does not exceed 25% of free cash flows (“FCF”) during such period. FCF is defined as EBITDA minus, without duplication, (a) capital expenditures, (b) cash taxes, (c) any applicable standby fee, other fees or finance costs payable to the finance parties in connection with the RCF, (d) interest expenses and (e) any indebtedness (including mandatory prepayments) permitted under the existing agreement.
Information about restrictions or covenants imposed debt agreement			The restrictive covenant on the Company's ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.	The restrictive covenant on the Company's ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.
Repayments of bonds, notes and debentures			$ 26,366	$ 20,100	0
Leverage ratio [Member]
Disclosure of secured notes payable [Line Items]
Description of financial ratios			Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time.	Upon drawing on the RCF, an interest rate of LIBOR plus 2.5% to 4.5% per annum is charged for the number of days the funds are outstanding, based on certain leverage ratio calculations at the time.
Borrowings, interest rate basis			LIBOR plus 2.5% to 4.5% per annum	LIBOR plus 2.5% to 4.5% per annum
Leverage ratio [Member] | Bottom of range [member]
Disclosure of secured notes payable [Line Items]
Borrowings, adjustment to interest rate basis			2.50%			2.50%
Leverage ratio [Member] | Top of range [member]
Disclosure of secured notes payable [Line Items]
Borrowings, adjustment to interest rate basis			4.50%			4.50%
EBITDA to interest expense ratio [Member]
Disclosure of secured notes payable [Line Items]
Description of financial ratios			A ratio of EBITDA to interest expense no less than 2.25:1; and	A ratio of EBITDA to interest expense no less than 2.25:1; and
Tangible net worth ratio [Member]
Disclosure of secured notes payable [Line Items]
Description of financial ratios			A tangible net worth that is no less than 75% of the tangible net worth as reflected in the September 30, 2017 financial statements provided to the administrative agent as a condition precedent to closing, plus 50% of the positive net income for each subsequent quarter date.	A tangible net worth that is no less than 75% of the tangible net worth as reflected in the September 30, 2017 financial statements provided to the administrative agent as a condition precedent to closing, plus 50% of the positive net income for each subsequent quarter date.
Senior secured notes [Member]
Disclosure of secured notes payable [Line Items]
Notional amount		$ 330,000,000	$ 422,262		$ 414,843	$ 309,900,000
Par value percentage		97.992%
Proceeds from issue of bonds, notes and debentures		$ 323,400
Borrowings, interest rate		8.00%
Borrowing costs incurred	$ 10,000
Borrowings, maturity			mature on December 15, 2022.	mature on December 15, 2022.
Reverse repurchase agreements and cash collateral on securities borrowed						20,100,000
Revolving Credit Facility1 [Member]
Disclosure of secured notes payable [Line Items]
Undrawn borrowing facilities						$ 50,000,000
Percentage of commitment fee			1.2375%	1.2375%

XML

NET FINANCE EXPENSES (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Net Finance Income Expense Explanatory [Abstract]
Interest income	$ 582	$ 1,081
Accretion expense on decommissioning and restoration liability	(657)	(562)
Interest expense	(34,628)	(30,419)
Amortization of deferred financing costs	(4,216)	(20,790)
Other finance costs	(1,645)	(1,529)
Finance income (expense)	$ (40,564)	$ (52,219)

XML

SHAREHOLDERS' EQUITY (Details)		1 Months Ended		12 Months Ended
	Feb. 06, 2017 shares	Jun. 30, 2018 shares	Dec. 22, 2017 shares	Dec. 31, 2018 CAD ($) Decimalitem	Dec. 31, 2017 CAD ($) Decimalitem	Dec. 31, 2017 CAD ($) shares Decimalitem	Dec. 31, 2017 CAD ($) Decimalitem
Disclosure of Shareholder's Equity [Abstract]
Number of options, Balance at beginning of year | Decimalitem				3,640,000			3,020,000
Number of options, Granted during the year	100,000	200,000	1,010,000	240,000			1,110,000
Number of options, Exercised during the year				0		355,000	(355,000)
Number of options, Expired during the year | Decimalitem				(750,000)			(135,000)
Number of options, Balance at end of the year | Decimalitem				3,130,000			3,640,000
Number of options, Options exercisable at the end of the year | Decimalitem				2,183,334	2,530,000	2,530,000	2,530,000
Weighted average exercise price, Balance at beginning of year				$ 4.40	$ 4.68
Weighted average exercise price, Granted during the year				3.30	3.69
Weighted average exercise price, Exercised during the year				0	4.44
Weighted average exercise price, Expired during the year				5.00	4.84
Weighted average exercise price, Balance at end of the year				4.17	4.40
Weighted average exercise price, Options exercisable at the end of the year				$ 4.45	$ 4.70	$ 4.70	$ 4.70

XML

SHAREHOLDERS' EQUITY (Details 1) - CAD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of Shareholder's Equity [Line Items]
Exercise price	$ 3.30
Expected volatility	30.78%
Expected option life (in years)	5	5
Contractual option life (in years)	5	5
Expected dividend yield	0.00%	0.00%
Risk-free interest rate	2.06%
Bottom of range [member]
Disclosure of Shareholder's Equity [Line Items]
Exercise price		$ 3.48
Expected volatility		31.03%
Risk-free interest rate		1.11%
Top of range [member]
Disclosure of Shareholder's Equity [Line Items]
Exercise price		$ 5.86
Expected volatility		31.14%
Risk-free interest rate		1.82%

XML

SHAREHOLDERS' EQUITY (Details 2)	Dec. 31, 2018 CAD ($) Decimalitem	Dec. 31, 2017 CAD ($) Decimalitem	Dec. 31, 2016 CAD ($) Decimalitem
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	3,130,000	3,640,000	3,020,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	2,183,334	2,530,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 4.17	$ 4.40	$ 4.68
February 13, 2019
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	150,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	150,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 5.29
April 13, 2020
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	785,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	785,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 4.66
October 14, 2020
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	100,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	100,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 4.21
December 10, 2020
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	545,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	545,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 3.57
June 30, 2021
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	100,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	100,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 6.35
November 3, 2021
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	100,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	100,000
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 6.96
February 5, 2022
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	100,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	66,667
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 5.86
December 21, 2022
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	1,010,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	336,667
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 3.48
June 30, 2023
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	200,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	0
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 3.30
June 30, 2023
Disclosure of Shareholder's Equity [Line Items]
Number of share options outstanding in share-based payment arrangement | Decimalitem	40,000
Number of share options exercisable in share-based payment arrangement | Decimalitem	0
Weighted average exercise price of share options outstanding in share-based payment arrangement | $	$ 3.30
Black scholes [Member]
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	4,019,000
Black scholes [Member] | February 13, 2019
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	206,000
Black scholes [Member] | April 13, 2020
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	1,242,000
Black scholes [Member] | October 14, 2020
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	133,000
Black scholes [Member] | December 10, 2020
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	614,000
Black scholes [Member] | June 30, 2021
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	120,000
Black scholes [Member] | November 3, 2021
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	214,000
Black scholes [Member] | February 5, 2022
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	171,000
Black scholes [Member] | December 21, 2022
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	1,075,000
Black scholes [Member] | June 30, 2023
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	203,000
Black scholes [Member] | June 30, 2023
Disclosure of Shareholder's Equity [Line Items]
Weighted average fair value at measurement date, share options granted | $	$ 41,000

XML

SHAREHOLDERS' EQUITY (Details 3) - Restricted Stock Units (RSUs) [Member]		12 Months Ended
		Dec. 31, 2018 CAD ($) Decimalitem	Dec. 31, 2017 CAD ($) Decimalitem
Disclosure of Shareholder's Equity [Line Items]
Number of units Balance at beginning of year | Decimalitem		488,665	320,000
Number of units RSUs awarded | Decimalitem		0	265,000
Number of units RSUs settled and common shares issued | Decimalitem	[1]	(111,668)	(79,668)
Number of units RSUs forfeited | Decimalitem		(8,000)	(16,667)
Number of units Balance at Ending of year | Decimalitem		368,997	488,665
Weighted average value Balance at beginning of year | $		$ 4.88	$ 6.48
Weighted average value RSUs awarded | $		0	3.52
Weighted average RSUs settled and common shares issued | $	[1]	4.33	6.45
Weighted average value RSUs forfeited | $		6.49	6.49
Weighted average value Balance at Ending of year | $		$ 5.01	$ 4.88

[1] As at December 31, 2018, 106,668 RSUs at a weighted average value of $$6.49 have vested and have not yet been settled.

XML

SHAREHOLDERS' EQUITY (Details 4) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of Shareholder's Equity [Abstract]
Expense recognized in the year for share-based payments	$ 1,685	$ 1,582

XML

SHAREHOLDERS' EQUITY (Details 5) - CAD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Numerator
Net (loss) income for the year	$ (18,934)	$ 17,152
Denominator
For basic - weighted average number of shares outstanding	195,968,588	160,189,858
Effect of dilutive securities	0	834,496
For diluted - adjusted weighted average number of shares outstanding	195,968,588	161,024,354
(Loss) Earnings Per Share
Basic	$ (0.10)	$ 0.11
Diluted	$ (0.10)	$ 0.11

XML

SHAREHOLDERS' EQUITY (Details Textual)		1 Months Ended				12 Months Ended
	Feb. 06, 2017 shares	Jan. 31, 2019 USD ($) Decimalitem	Jun. 30, 2018 shares	Apr. 13, 2018 shares	Dec. 22, 2017 shares	Dec. 31, 2018 CAD ($) shares Decimalitem $ / shares	Dec. 31, 2017 CAD ($) Decimalitem shares	Dec. 31, 2017 shares Decimalitem	Dec. 31, 2017 Decimalitem shares	Dec. 31, 2016 shares	Jun. 21, 2016
Disclosure of Shareholder's Equity [Line Items]
Number of share options exercised in share-based payment arrangement						0		355,000	(355,000)
Increase (decrease) through exercise of options, equity | $							$ 1,577,000
Weighted average share price for share options in share-based payment arrangement exercised during period at date of exercise | $							$ 2,316,000
Weighted average remaining contractual life of outstanding share options (in years) | Decimalitem						2.63	2.85	2.85	2.85
Number of share options granted in share-based payment arrangement	100,000		200,000		1,010,000	240,000			1,110,000
Description of vesting requirements for share-based payment arrangement	vested 1/3 immediately and 1/3 vested on February 6, 2018 and the remaining 1/3 vest on February 6, 2019		vest 1/3 on June 30, 2019, 1/3 on June 30, 2020 and 1/3 on June 30, 2021		vest 1/3 on December 22, 2018, 1/3 on December 22, 2019, and 1/3 on December 22, 2020
Options With Potential Future Dilutive Effect Not Included In Calculation Of Diluted Earnings Per Share | shares						3,130,000		2,805,504
No Of Shares Issued Through Business Acquisition | shares				49,737,307
Dividend Per Share | $ / shares						$ 0.04
Dividends declared and paid | $						$ (8,400,000)	$ 0
Restricted Stock Units With Potential Future Dilutive Effect Not Included In Calculation Of Diluted Earnings Per Share | shares						368,997
Number of share options expired in share-based payment arrangement | Decimalitem						(750,000)			(135,000)
Weighted average exercise price of share options expired in share-based payment arrangement | $						$ 5.00	$ 4.84
Restricted Stock Units [Member]
Disclosure of Shareholder's Equity [Line Items]
Number of other equity instruments exercised or vested in share-based payment arrangement | Decimalitem						106,668
Weighted average exercise price of other equity instruments exercised or vested in share-based payment arrangement | $						$ 6.49
Option Contract one [Member]
Disclosure of Shareholder's Equity [Line Items]
Number of share options granted in share-based payment arrangement | shares			40,000
Description of vesting requirements for share-based payment arrangement			vest 1/2 on June 30, 2019 and 1/2 on June 30, 2020
Share capital
Disclosure of Shareholder's Equity [Line Items]
Number of shares outstanding | shares						210,102,476	160,253,501	160,253,501	160,253,501	159,818,833
Increase (decrease) through exercise of options, equity | $							$ 1,577,000
No Of Shares Issued Through Business Acquisition | shares						49,737,307
Dividends declared and paid | $						$ 0
Subsequent Events [Member]
Disclosure of Shareholder's Equity [Line Items]
Number of share options expired in share-based payment arrangement | Decimalitem		150,000
Weighted average exercise price of share options expired in share-based payment arrangement | $		$ 5,290
Long-Term Equity Incentive Plan [Member]
Disclosure of Shareholder's Equity [Line Items]
Percentage of shares reserved for issue under options and contracts for sale of shares											10.00%
Number of instruments granted in share-based payment arrangement | shares						21,010,248
Number of shares reserved for issue under options and contracts for sale of shares | shares						17,511,251

XML

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of Selling, General And Administrative Expense [Abstract]
Selling and marketing	$ 6,607	$ 6,493
General and administrative:
Consulting fees and payroll	2,297	3,238
Share-based payment expense	1,685	1,582
Depreciation	21	19
Office and administration	879	870
Professional fees	1,579	2,161
Promotion and investor relations	264	162
Director fees	328	325
Transfer agent and regulatory fees	536	390
Travel	243	353
Selling, General and Administrative Expense	$ 14,439	$ 15,593

XML

DERIVATIVE ASSETS AND LIABILITIES (Details) - 12 months ended Dec. 31, 2018 $ in Thousands, $ in Thousands	CAD ($) Decimalitem	USD ($)
Disclosure of Derivative Liabilities [Line Items]
Notional amount	$ 33,500	$ 25,000
Average foreign exchange rate	1.34
January To July Contract [Member]
Disclosure of Derivative Liabilities [Line Items]
Notional amount	$ 33,500	$ 25,000
Average foreign exchange rate	1.34

XML

DERIVATIVE ASSETS AND LIABILITIES (Details 1) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of Derivative Liabilities [Line Items]
Gains on change in fair value of derivatives	$ (247)	$ 3,178
Currency Contracts [Member]
Disclosure of Derivative Liabilities [Line Items]
Gains on change in fair value of derivatives	(653)	0
Interest Rate Swap Contracts [Member]
Disclosure of Derivative Liabilities [Line Items]
Gains on change in fair value of derivatives	0	2,207
Embedded Derivative [Member]
Disclosure of Derivative Liabilities [Line Items]
Gains on change in fair value of derivatives	$ 406	$ 971

XML

DERIVATIVE ASSETS AND LIABILITIES (Details Textual) $ in Thousands, $ in Thousands		1 Months Ended	12 Months Ended
	Dec. 19, 2018 CAD ($)	Jan. 31, 2019 CAD ($)	Dec. 31, 2018 CAD ($) Decimalitem	Dec. 31, 2017 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 19, 2018 USD ($)	Dec. 31, 2017 USD ($)
Disclosure of Derivative Liabilities [Line Items]
Notional amount			$ 33,500		$ 25,000
Average foreign exchange rate | Decimalitem			1.34
Non-current derivative financial assets			$ 1,670	$ 963	1,226		$ 766
Gains (losses) on change in fair value of derivatives			(247)	3,178
Foreign Currency Forward Strip Contracts [Member]
Disclosure of Derivative Liabilities [Line Items]
Notional amount	$ 25,000					$ 33,500
Average foreign exchange rate | Pure	1.34
Embedded Derivative [Member]
Disclosure of Derivative Liabilities [Line Items]
Gains (losses) on change in fair value of derivatives			$ 406	$ 971
Forward contract [member]
Disclosure of Derivative Liabilities [Line Items]
Notional amount					$ 20,093
April to October [Member] | Subsequent Events [Member]
Disclosure of Derivative Liabilities [Line Items]
Notional amount		$ 15,000
Average foreign exchange rate | Pure		1.3395

XML

FINANCIAL INSTRUMENTS (Details) $ in Thousands, $ in Thousands	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CAD ($)
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	$ 1,670	$ 1,226	$ 963	$ 766
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	1,670		963
Financial assets designated as not measured at fair value [Abstract]
Cash	30,708		43,129		$ 6,844
Amounts receivable	2,478		2,679
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	33,186		45,808
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	653
Financial liabilities, at fair value	653
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	48,295		34,615
Secured notes payable	408,144		396,509
Financial liabilities classified as derivative liabilities, accounts payable and accrued liabilities, carrying amount	456,439		431,124
Maximum exposure to credit risk		$ 2,478		$ 2,679
Financial liabilities at fair value through profit or loss, category [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	1,670		963
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	1,670		963
Financial assets designated as not measured at fair value [Abstract]
Cash	0		0
Amounts receivable	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	653
Financial liabilities, at fair value	653
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	0		0
Secured notes payable	0		0
Financial liabilities classified as derivative liabilities, accounts payable and accrued liabilities, carrying amount	0		0
Financial assets at fair value through other comprehensive income, category [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Financial assets designated as not measured at fair value [Abstract]
Cash	0		0
Amounts receivable	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	0
Financial liabilities, at fair value	0
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	0		0
Secured notes payable	0		0
Financial liabilities classified as derivative liabilities, accounts payable and accrued liabilities, carrying amount	0		0
Financial liabilities at amortised cost, category [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Financial assets designated as not measured at fair value [Abstract]
Cash	0		0
Amounts receivable	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	0
Financial liabilities, at fair value	0
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	48,295		34,615
Secured notes payable	408,144		396,509
Financial liabilities classified as derivative liabilities, accounts payable and accrued liabilities, carrying amount	456,439		431,124
Cash at fair falue [Member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	1,670		963
Financial assets designated as not measured at fair value [Abstract]
Cash	30,708		43,129
Amounts receivable	2,478		2,679
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	653
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	48,295		34,615
Secured notes payable	425,860		412,976
Financial assets at amortised cost, category [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	0		0
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	0		0
Financial assets designated as not measured at fair value [Abstract]
Cash	30,708		43,129
Amounts receivable	2,478		2,679
Financial assets classified as cash, amounts receivable and restricted cash, carrying amount	33,186		45,808
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	0
Financial liabilities, at fair value	0
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	0		0
Secured notes payable	0		0
Financial liabilities classified as derivative liabilities, accounts payable and accrued liabilities, carrying amount	0		0
Level 1 of fair value hierarchy [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	0		0
Financial assets designated as not measured at fair value [Abstract]
Cash	30,708		43,129
Amounts receivable	2,478		2,679
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	0
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	48,295		34,615
Secured notes payable	425,860		412,976
Level 2 of fair value hierarchy [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	1,670		963
Financial assets designated as not measured at fair value [Abstract]
Cash	0		0
Amounts receivable	0		0
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	653
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	0		0
Secured notes payable	0
Level 3 of fair value hierarchy [member]
Financial assets designated as measured at fair value through profit or loss [Abstract]
Derivative assets, at fair value	0		0
Financial assets designated as not measured at fair value [Abstract]
Cash	0		0
Amounts receivable	0		0
Designated financial liabilities at fair value through profit or loss [Abstract]
Derivative liabilities	0
Designated financial liabilities at not fair value through profit or loss [Abstract]
Accounts payable and accrued liabilities	0		0
Secured notes payable	$ 0		$ 0

XML

FINANCIAL INSTRUMENTS (Details 1) $ in Thousands	Dec. 31, 2018 CAD ($)
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	$ 1,254
Revolving credit facility stand by charges	1,651
Notes payable - Principal	422,262
Notes payable - Interest	137,094
Forward Exchange Contracts:
Forward Exchange Contracts Inflows	(33,500)
Forward Exchange Contracts Outflows	34,060
Total of financial liabilities, capital commitments including obligations	566,193
Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	1,794
Mine commitments	1,578
Less than 1 Year
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	231
Revolving credit facility stand by charges	843
Notes payable - Principal	0
Notes payable - Interest	34,250
Forward Exchange Contracts:
Forward Exchange Contracts Inflows	(33,500)
Forward Exchange Contracts Outflows	34,060
Total of financial liabilities, capital commitments including obligations	38,260
Less than 1 Year | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	798
Mine commitments	1,578
1 to 3 Years
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	471
Revolving credit facility stand by charges	808
Notes payable - Principal	0
Notes payable - Interest	68,594
Forward Exchange Contracts:
Forward Exchange Contracts Inflows	0
Forward Exchange Contracts Outflows	0
Total of financial liabilities, capital commitments including obligations	70,679
1 to 3 Years | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	806
Mine commitments	0
4 to 5 Years
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	473
Revolving credit facility stand by charges	0
Notes payable - Principal	422,262
Notes payable - Interest	34,250
Forward Exchange Contracts:
Forward Exchange Contracts Inflows	0
Forward Exchange Contracts Outflows	0
Total of financial liabilities, capital commitments including obligations	457,175
4 to 5 Years | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	190
Mine commitments	0
After 5 Years
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	79
Revolving credit facility stand by charges	0
Notes payable - Principal	0
Notes payable - Interest	0
Forward Exchange Contracts:
Forward Exchange Contracts Inflows	0
Forward Exchange Contracts Outflows	0
Total of financial liabilities, capital commitments including obligations	79
After 5 Years | Gahcho Kue Diamond Mine [Member]
Disclosure of detailed information about financial instruments [line items]
Operating lease obligations	0
Mine commitments	$ 0

XML

FINANCIAL INSTRUMENTS (Details 2) $ in Thousands, $ in Thousands	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CAD ($)
Disclosure of detailed information about financial instruments [line items]
Cash	$ 30,708		$ 43,129		$ 6,844
Derivative assets	1,670	$ 1,226	963	$ 766
Accounts payable and accrued liabilities	(48,295)		(34,615)
Secured notes payable	$ (408,144)		$ (396,509)
Currency denominated by Canadian dollar [Member]
Disclosure of detailed information about financial instruments [line items]
Cash		16,837		25,509
Derivative assets		1,670		963
Accounts payable and accrued liabilities		(2,248)		(3,783)
Derivative liabilities		(653)		0
Secured notes payable		(422,262)		(414,843)
Total		$ (406,656)		$ (392,154)

XML

FINANCIAL INSTRUMENTS (Details Textual) $ in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CAD ($)
Disclosure Of Financial Instruments [Line Items]
Trade and other current receivables	$ 2,478	$ 2,679
Undrawn borrowing facilities			$ 50.0
Secured bank loans received	$ 408,144	396,509
Percentage of entity's revenue	49.00%
10% Change [Member]
Disclosure Of Financial Instruments [Line Items]
Increase (decrease) in net income	$ 40,700	39,200
First lien revolving credit facility [Member]
Disclosure Of Financial Instruments [Line Items]
Secured bank loans received	422,300	$ 414,800	$ 309.9	$ 330.0
Harmonized sales tax refunds [Member]
Disclosure Of Financial Instruments [Line Items]
Trade and other current receivables	$ 1,247				$ 2,068

XML

RELATED PARTIES (Details) - CAD ($) $ in Thousands		Dec. 31, 2018	Dec. 31, 2017
Gk mine [Member]
Related party [Line Items]
Amounts payable, related party transactions	[1]	$ 1,430	$ 523
International investment and underwriting [Member]
Related party [Line Items]
Amounts payable, related party transactions		0	32
Key management personnel of entity or parent [member]
Related party [Line Items]
Amounts payable, related party transactions		57	178
De Beers Canada [Member]
Related party [Line Items]
Amounts payable, related party transactions		352	339
Amounts receivable, related party transactions		$ 0	$ 21

[1] included in accounts payable and accrued liabilities

XML

RELATED PARTIES (Details 1) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
The total of the transactions:
Key management personnel compensation	$ 2,917	$ 3,828
Finance costs incurred from De Beers Canada Inc.	1,645	1,529
Kennady diamonds [Member]
The total of the transactions:
Settlement of liabilities by entity on behalf of related party, related party transactions	30	90
International investment and underwriting [Member]
The total of the transactions:
Settlement of liabilities by entity on behalf of related party, related party transactions	99	82
De beers canada inc [Member]
The total of the transactions:
Diamonds sold to De Beers Canada Inc.	2,028	8,791
Assets purchased from De Beers Canada Inc.	0	324
Gk mine [Member]
The total of the transactions:
Key management personnel compensation	4,153	4,153
De Beers Canada [Member]
The total of the transactions:
Sunk cost repayment to De Beers Canada Inc.	0	49,063
Diamonds purchased from De Beers Canada Inc.	29,774	19,470
Finance costs incurred from De Beers Canada Inc.	$ 705	$ 339

XML

RELATED PARTIES (Details 2) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Related Party [Abstract]
Consulting fees, payroll, director fees, bonus and other short-term benefits	$ 1,643	$ 2,707
Share-based payments	1,324	1,171
Key management personnel compensation	$ 2,917	$ 3,828

XML

RELATED PARTIES (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Related party [Line Items]
Percentage of security deposit fee	3.00%
Long-term deposits	$ 23.4	$ 23.4
Gahcho Kue Diamond Mine [Member]
Related party [Line Items]
Proportion of ownership interests held by non-controlling interests	49.00%

XML

INCOME TAXES (Details) - CAD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Income Tax [Abstract]
(Loss) income before income taxes		$ (14,816)	$ 17,152
Applicable tax rate		26.50%	26.50%
Tax expense calculated using statutory rates		$ (3,926)	$ 4,545
Expenses not deductible (earnings not taxable)		4,656	(3,491)
Change in tax benefits not recognized		(934)	(1,054)
Current And Deferred Mining Taxes		4,322	0
Income tax expenses		4,118	0
Current income tax expense	[1]	1,148	0
Deferred tax expense		$ 2,970	$ 0

[1] In the current income tax expense, $574 has been paid in the year ended December 31, 2018, with the remaining $574 still outstanding, and presented as income taxes payable.

XML

INCOME TAXES (Details 1) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Deferred tax liability
Inventory	$ (4,993)	$ (4,724)
Property, plant & equipment	(25,275)	(31,606)
Non-capital loss carryforwards	(443)	(255)
Deferred tax asset
Deferred tax (liability) asset	(3,174)	0
Non-capital loss carryforwards [Member]
Deferred tax asset
Non-capital loss carryforwards	$ 27,537	$ 36,585

XML

INCOME TAXES (Details 2) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	$ 138,314	$ 133,939
Property, plant and equipment [member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	4,693	0
Decommissioning and restoration liability [member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	57,929	29,200
Capital losses [Member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	3,200	3,420
Non-capital losses, expiring 2034 to 2037 [member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	34,247	95,730
Share issuance cost [member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	1,250	3,150
Loan facility and secured notes payable [member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	$ 36,995	$ 2,439

XML

INCOME TAXES (Details Textual) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Tax [Line Items]
Applicable tax rate	26.50%	26.50%
Deductible temporary differences for which no deferred tax asset is recognised	$ 138,314	$ 133,939
Income taxes paid (refund), classified as operating activities	574	0
Current tax liabilities	574	0
Northwest Territories Mining Royalty [Member]
Income Tax [Line Items]
Deductible temporary differences for which no deferred tax asset is recognised	$ 6,669	$ 34,580

XML

CAPITAL MANAGEMENT (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure of objectives, policies and processes for managing capital [abstract]
Secured notes payable	$ 408,144	$ 396,509
Share capital	629,796	475,624
Share-based payments reserve	6,750	5,549
Deficit	(173,765)	(146,431)
Shareholder equity and other equity interest	$ 870,925	$ 731,251

XML

CAPITAL MANAGEMENT (Details Textual)	12 Months Ended
	Dec. 31, 2018
Disclosure of objectives, policies and processes for managing capital [abstract]
Information about restrictions or covenants imposed debt agreement	The restrictive covenant on the Company's ability to pay potential future dividends relates to a fixed charge coverage ratio of no less than 2:1. The fixed charge coverage ratio is calculated as EBITDA over interest expense. Subject to certain limitations and exceptions, the amount of the restricted payments, which include dividends and share buybacks, is limited to a maximum dollar threshold, which is calculated at an opening basket of US$10 million plus 50% of the historical consolidated net income, subject to certain adjustments, reported from the quarter of issuance and up to the most recently available financial statements at the time of such restricted payment, plus an amount not to exceed the greater of US$15 million and 2% of total assets as defined in the indenture.

XML

SEGMENTED REPORTING (Details) - CAD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017
Sales		$ 310,969	$ 170,108
Cost of sales:
Production costs		117,908	64,420
Cost of acquired diamonds		32,611	8,940
Depreciation and depletion		79,419	44,615
Earnings From Mine Operations		81,031	52,133
Exploration and evaluation expenses		8,204	472
Selling, general and administrative expenses		14,439	15,593
Operating income (loss)		58,388	36,068
Net finance (expenses) income		40,564	52,219
Derivative losses		247	(3,178)
Foreign exchange losses		32,474	(30,035)
Other income		(81)	(90)
Net loss before taxes		(14,816)	17,152
Total assets		979,877	$ 795,066
Total liabilities		515,762
Gk mine [Member]
Sales		310,969
Cost of sales:
Production costs		117,908
Cost of acquired diamonds		32,611
Depreciation and depletion		79,419
Earnings From Mine Operations		81,031
Exploration and evaluation expenses		3,511
Selling, general and administrative expenses		14,391
Operating income (loss)		63,129
Net finance (expenses) income		(40,567)
Derivative losses		(247)
Foreign exchange losses		(32,473)
Other income		81
Net loss before taxes		(10,077)
Total assets		810,901
Total liabilities		515,246
KNP [Member]
Sales	[1]	0
Cost of sales:
Production costs	[1]	0
Cost of acquired diamonds	[1]	0
Depreciation and depletion	[1]	0
Earnings From Mine Operations	[1]	0
Exploration and evaluation expenses	[1]	4,693
Selling, general and administrative expenses	[1]	48
Operating income (loss)	[1]	(4,741)
Net finance (expenses) income	[1]	3
Derivative losses	[1]	0
Foreign exchange losses	[1]	(1)
Other income	[1]	0
Net loss before taxes	[1]	(4,739)
Total assets	[1]	168,976
Total liabilities	[1]	$ 516

[1] From the date of acquisition April 13, 2018 (Note 6)