Interim Results

SouthernEra Diamonds 2006 Second Quarter Results

    (All amounts are in United States dollars unless otherwise noted)

    Shares Issued and Outstanding: 159,514,229
    TSX: SDM
    AIM: SRE

    TORONTO, and LONDON, Aug. 14 /CNW/ - The Board of Directors of
SouthernEra Diamonds Inc. ("SouthernEra") (the "Company") (TSX: SDM, AIM: SRE)
today reported on the Company's 2006 second quarter results.
    In the second quarter of 2006 costs of $0.1 million were incurred at
Klipspringer Mine consisting of dewatering, security and site maintenance
compared to $0.2 million in the comparable quarter of 2005. Amortization
charges of $0.1 million (2005 - $0.1 million) in the second quarter of 2006
relate to the Klipspringer diamond recovery plants and the corporate group
fixed assets.
    Corporate, general and administration expenses of $0.9 million (2005 -
$1.2 million) relate to the ongoing corporate, office, payroll and
administrative costs incurred by the Company. The current quarter includes a
$0.2 million charge to earnings for the fair value of granted and vested
common share purchase options and common shares granted to directors, officers
and employees of the Company.
    The foreign exchange gain in the current quarter of $1.9 million
comprises net unrealized gains on Canadian and South African currency
denominated monetary assets and liabilities and reflects the relative movement
against the Company's reporting currency (the US dollar). The South African
Rand, in which currency the Company's main monetary liabilities are stated,
weakened against the US dollar in the quarter, and the comparable quarter of
2005 resulting in the gains in the two periods.
    In summary, in the second quarter of 2006, the Company incurred an after
tax net income of $0.6 million versus an after tax net loss of $0.2 million in
the second quarter of 2005.
    Cash used in operating activities in the second quarter of 2006 amounted
to $2.0 million versus $1.7 million in the second quarter of 2005. In the
current quarter, the Company expended cash to fund care and maintenance costs
at the KJV and general and administration charges. Cash used in the
advancement of its exploration and development projects, in the second quarter
of 2006 amounted to $2.8 million versus $2.1 million in the second quarter of
2005. Heightened exploration and evaluation activities in the Democratic
Republic of Congo in 2006 compared to 2005 resulted in the increase year over
year.
    At June 30, 2005, the Company held approximately $41 million of
(December 31, 2005 - $35 million) exploration and development project value on
its balance sheet. Projects are situated in Canada, Gabon, the DRC, South
Africa, Zimbabwe and Angola.
    Please refer to the Company's website (www.southernera.com) or SEDAR
(www.sedar.com) to view the full financial results for the second quarter of
2006.


    SouthernEra Diamonds Inc.
    Consolidated Balance Sheets
    (in thousands of United States dollars)
    (unaudited)

                                                   June 30,      December 31,
                                                      2006              2005
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash and equivalents                     $     10,735      $     4,337
      Accounts receivable                             1,211            1,508
    -------------------------------------------------------------------------
                                                     11,946            5,845
    Restricted cash                                       -            4,000
    Property, plant and equipment                     1,403            1,644
    Development projects                             14,864           14,596
    Exploration projects                             26,313           20,482
    Other assets                                        967            1,111
    -------------------------------------------------------------------------
                                               $     55,493      $    47,678
    -------------------------------------------------------------------------
    Liabilities and shareholders' equity
    Current liabilities:
      Accounts payable and accrued liabilities $      1,134      $     1,447
      Income taxes payable                           14,302           15,897
    -------------------------------------------------------------------------
                                                     15,436           17,344

    Long-term liabilities:
      Future income taxes                               515              524
      Environmental rehabilitation provision            901            1,032
    -------------------------------------------------------------------------
                                                     16,852           18,900
    -------------------------------------------------------------------------

    Shareholders' equity:
      Common shares                                 119,581          108,882
      Share purchase warrants                         1,724            1,578
      Contributed surplus                             3,810            3,558
      Deficit                                       (84,500)         (83,266)
      Cumulative translation adjustments             (1,974)          (1,974)
    -------------------------------------------------------------------------
                                                     38,641           28,778
    -------------------------------------------------------------------------
                                               $     55,493      $    47,678
    -------------------------------------------------------------------------



    SouthernEra Diamonds Inc.
    Consolidated Statements of Operations
    (in thousands of United States dollars, except income (loss) per share
    amounts)
    (unaudited)
                               For Three Months ended       Six Months ended
                                               June 30,              June 30,
                                       2006       2005       2006       2005
    -------------------------------------------------------------------------
    Diamond sales revenue          $      -   $      -   $      -   $      -
    Direct costs:
      Mining operations                (138)      (202)      (266)      (202)
      Amortization                     (144)      (138)      (262)      (288)
    -------------------------------------------------------------------------
                                       (282)      (340)      (528)      (490)
    -------------------------------------------------------------------------
    Loss from mining operations        (282)      (340)      (528)      (490)
    Interest expense                   (241)      (239)      (491)      (565)
    General and administration
     expenses                          (924)    (1,275)    (1,845)    (2,039)
    -------------------------------------------------------------------------
    Loss before the undernoted       (1,447)    (1,854)    (2,864)    (3,094)
    Foreign exchange gain (loss)      1,945        558      1,647      2,066
    Other income                          -      1,000          -      1,000
    -------------------------------------------------------------------------
    Income (loss) before taxes          498       (296)    (1,217)       (28)
    Income tax:
      Current                           (11)        (6)       (28)      (160)
      Future recovery                   138         37         11         78
    -------------------------------------------------------------------------
    Net income (loss) after
     income taxes                       625       (265)    (1,234)      (110)
    Basic and diluted income
     (loss) per share             $    0.00   $  (0.00)  $  (0.01)  $  (0.00)
    -------------------------------------------------------------------------



    Consolidated Statements of Deficit, Contributed Surplus and Cumulative
    Translation Adjustments
    (in thousands of United States dollars)
    (unaudited)

    For the Six Months Ended                2006                         2005
    -------------------------------------------------------------------------
                                      CUMULATIVE                   CUMULATIVE
                             CONTRIB-   TRANSLA-           CONTRIB-  TRANSLA-
                                 UTED       TION              UTED       TION
                      DEFICIT SURPLUS    ADJUST-    DEFICIT SURPLUS   ADJUST-
                                          MENTS                         MENTS
    -------------------------------------------------------------------------
    Beginning of
     period        $ (83,266) $ 3,558  $ (1,974) $ (77,460) $ 2,501 $ (1,974)
    Fair value of
     share options
     granted and
     vested                -      252         -          -      137        -
    Net income
     (loss) for
     the period       (1,234)       -         -       (110)       -        -
    -------------------------------------------------------------------------
    End of period  $ (84,500) $ 3,810  $ (1,974) $ (77,570) $ 2,638 $ (1,974)
    -------------------------------------------------------------------------



    SouthernEra Diamonds Inc.
    Consolidated Statements of Cash Flows
    (in thousands of United States dollars)
    (unaudited)
                                   Three Months ended       Six Months ended
                                               June 30,              June 30,
                                       2006       2005       2006       2005
    -------------------------------------------------------------------------
    Net income (loss) for the
     period                        $    625   $   (265)  $ (1,234)  $   (110)
    Adjustments for non-cash items:
      Amortization                      144        138        262        288
      Accrued interest                  241        239        491        565
      Fair value of granted and
       vested share options             127         50        252        125
      Future income taxes              (138)         -        (11)         -
      Foreign currency translation
       loss (gain)                   (1,945)      (558)    (1,647)    (2,066)
    -------------------------------------------------------------------------
                                       (946)      (396)    (1,887)    (1,198)
    Change in non-cash working
     capital balance                 (1,042)    (1,327)    (1,147)       384
    -------------------------------------------------------------------------
    Cash used in operations          (1,988)    (1,723)    (3,034)      (814)
    -------------------------------------------------------------------------
    Financing activities:
      Issue of common shares
       for cash                      11,692        503     11,692      4,773
    -------------------------------------------------------------------------
    Cash provided by financing
     activities                      11,692        503     11,692      4,773
    -------------------------------------------------------------------------
    Investing activities:
      Exploration and development
       projects                      (2,755)    (2,113)    (6,193)    (3,431)
      Property, plant and equipment     (16)         -        (32)        (4)
      Restricted Cash                 2,000          -      4,000          -
    -------------------------------------------------------------------------
    Cash used in investing
     activities                        (771)    (2,113)    (2,225)    (3,435)
    -------------------------------------------------------------------------
    Increase (decrease) in cash       8,933     (3,333)     6,433        524
    Foreign exchange loss on cash
     held in foreign currency           (37)        17        (35)       (38)
    Cash and equivalents -
     beginning of period              1,839      4,534      4,337        732
    -------------------------------------------------------------------------
    Cash and equivalents -
     end of period                 $ 10,735   $  1,218   $ 10,735   $  1,218
    -------------------------------------------------------------------------
    Cash and cash equivalents
     comprise:
      Cash                         $  2,735   $  1,218   $  2,735   $  1,218
      Short-term investments          8,000          -      8,000          -
    -------------------------------------------------------------------------
                                   $ 10,735   $  1,218   $ 10,735   $  1,218
    -------------------------------------------------------------------------


For further information: SouthernEra Diamonds Inc., Mr. Chris Reynolds,
Senior Vice President and CFO, Telephone: [phone], Fax: [phone],
E-mail: inbox(at)southernera.com, www.southernera.com
(SRE)