UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 20-F



(Mark One)



| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------



OR



| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR
(15d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------

For the fiscal year ended
December 31, 2013



OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



OR



| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------

Date of event requiring
this shell company report......................................



For the transition period
from __________________ to __________________



Commission file number 001-32468



MOUNTAIN PROVINCE DIAMONDS INC.

(Exact name of Registrant as specified in
its charter)



Not Applicable

(Translation of Registrant’s name
into English)



Ontario

(Jurisdiction of incorporation or organization)



161 Bay Street, Suite 2315, PO Box 216,
Toronto, Ontario Canada M5J 2S1

(Address of principal executive offices)



Bruce Ramsden – 416-361-3562

Fax: 416-603-8565; Email: b.ramsden@mountainprovince.com

161 Bay Street, Suite 2315, PO Box 216,
Toronto, Ontario Canada M5J 2S1

(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)



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 no par value | NYSE MKT                                 











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



Not Applicable

(Title of Class)



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



None

(Title of Class)



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

100,501,351



Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 ̈YesxNo



If this report is an
annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.

 ̈YesxNo



Note – Checking the box above will
not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.



Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 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.

xYes ̈No



Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 file such reports)

 ̈Yes ̈No



Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):



|Large accelerated filer ̈ | Accelerated filerx | Non-accelerated filer ̈
|------------------------ | ------------------ | ----------------------



Indicate by check
mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



|U.S. GAAP ̈ |  | International Financial Reporting Standards | x | Other ̈
|---------- |  | ------------------------------------------- | - | ------
|           |  | as issued by the International Accounting   |   |       
|           |  | Standards Board                             |   |       













If “Other”
has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow.

 ̈Item 17 ̈Item
18



If this is an annual report, indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 ̈YesxNo



(APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check
mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 ̈Yes ̈No



Not Applicable











TABLE OF CONTENTS



|GLOSSARY                                  | vii 
|----------------------------------------- | ----
|                                          |     
|GLOSSARY OF TECHNICAL TERMS               | xi  
|                                          |     
|NOTE REGARDING FORWARD LOOKING STATEMENTS | xvii
|                                          |     
|PART I                                    |     
|                                          |     
|Item 1                                    |     
|                                          |     
|Item 2                                    |     
|                                          |     
|Item 3                                    |     
|                                          |     
|A.                                        |     
|                                          |     
|B.                                        |     
|                                          |     
|C.                                        |     
|                                          |     
|D.                                        |     
|                                          |     
|Item 4                                    |     
|                                          |     
|A.                                        |     
|                                          |     
|B.                                        |     
|                                          |     
|C.                                        |     
|                                          |     
|D.                                        |     
|                                          |     
|Item 4A                                   |     
|                                          |     
|Item 5                                    |     
|                                          |     
|Item 6                                    |     
|                                          |     
|A.                                        |     
|                                          |     
|B.                                        |     
|                                          |     
|C.                                        |     
|                                          |     
|D.                                        |     
|                                          |     
|E.                                        |     
|                                          |     
|Item 7                                    |     
|                                          |     
|A.                                        |     
|                                          |     
|B.                                        |     



iv







|C.      | Interests of experts and counsel                           | 83 
|------- | ---------------------------------------------------------- | ---
|        |                                                            |    
|Item 8  | Financial Information                                      | 83 
|        |                                                            |    
|A.      | Consolidated Statements and Other Financial Information    | 83 
|        |                                                            |    
|B.      | Significant Changes                                        | 83 
|        |                                                            |    
|Item 9  | The Offer and Listing                                      | 84 
|        |                                                            |    
|A.      | Offer and Listing Details                                  | 84 
|        |                                                            |    
|B.      | Plan of Distribution                                       | 85 
|        |                                                            |    
|C.      | Markets                                                    | 85 
|        |                                                            |    
|D.      | Selling Shareholders                                       | 85 
|        |                                                            |    
|E.      | Dilution                                                   | 85 
|        |                                                            |    
|F.      | Expenses of the Issuer                                     | 85 
|        |                                                            |    
|Item 10 | Additional Information                                     | 85 
|        |                                                            |    
|A.      | Share capital                                              | 85 
|        |                                                            |    
|B.      | Memorandum and articles of association                     | 85 
|        |                                                            |    
|C.      | Material contracts                                         | 89 
|        |                                                            |    
|D.      | Exchange controls                                          | 89 
|        |                                                            |    
|E.      | Taxation                                                   | 92 
|        |                                                            |    
|F.      | Dividends and paying agents                                | 101
|        |                                                            |    
|G.      | Statement by experts                                       | 101
|        |                                                            |    
|H.      | Documents on display                                       | 101
|        |                                                            |    
|I.      | Subsidiary Information                                     | 102
|        |                                                            |    
|Item 11 | Quantitative and Qualitative Disclosures About Market Risk | 102
|        |                                                            |    
|Item 12 | Description of Securities Other than Equity Securities     | 102



v







|PART II       |                                                                              |    
|------------- | ---------------------------------------------------------------------------- | ---
|              |                                                                              |    
|Item 13       | Defaults, Dividend Arrearages and Delinquencies                              | 103
|              |                                                                              |    
|Item 14       | Material Modifications to the Rights of Security Holders and Use of Proceeds | 103
|              |                                                                              |    
|Item 15       | Controls and Procedures                                                      | 103
|              |                                                                              |    
|Item 16A      | Audit Committee Financial Expert                                             | 104
|              |                                                                              |    
|Item 16B      | Code of Ethics                                                               | 104
|              |                                                                              |    
|Item 16C      | Principal Accountant Fees and Services                                       | 105
|              |                                                                              |    
|Item 16D      | Exemptions from the Listing Standards for Audit Committees                   | 106
|              |                                                                              |    
|Item 16E      | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 106
|              |                                                                              |    
|Item 16F      | Change in Registrant’s Certifying Accountant                                 | 106
|              |                                                                              |    
|Item 16G      | Corporate Governance                                                         | 106
|              |                                                                              |    
|Item 16H      | Mine Safety Disclosure                                                       | 106
|              |                                                                              |    
|PART III      |                                                                              |    
|              |                                                                              |    
|Item 17       | Financial Statements                                                         | 107
|              |                                                                              |    
|Item 18       | Financial Statements                                                         | 107
|              |                                                                              |    
|Item 19       | Exhibits                                                                     | 107
|              |                                                                              |    
|SIGNATURES    | 108                                                                         
|              |                                                                              |    
|EXHIBIT INDEX | 109                                                                         
|              |                                                                              |    
|APPENDIX      | Item 18. Financial Statements                                                | 111



vi







GLOSSARY



2002 Agreementor Gahcho
Kué Joint Venture Agreementormeans the joint venture agreement entered into by Mountain Province
Diamonds Inc., Camphor Ventures Inc., and De Beers Canada Exploration Inc. on October 24, 2002, but which took effect from January
1, 2002, and which was amended and restated on July 3, 2009;



2009 AgreementorGahcho
Kué Amended and Restated Joint Arrangement-Agreementmeans the Gahcho Kué Joint Venture Agreement as amended
and restated, and entered into by Mountain Province Diamonds Inc., Camphor Ventures Inc., and De Beers Canada Inc. on July 3, 2009;



2009 Technical Report means
the Technical Report dated as of April 20, 2009 entitled "Gahcho Kué Kimberlite Project NI 43-101 Technical Report,
Northwest Territories, Canada" prepared for the Company by AMEC Americas Limited;



2010 Technical Report, Definitive
Feasibility Study,orFeasibility Studymeans the “Gahcho Kué Project, Definitive Feasibility
Study, National Instrument (“NI”) 43-101 Technical Report” dated December 1, 2010 (with Information effective
as of October 15, 2010) as prepared and completed by JDS Energy and Mining Inc., and filed by the Company on SEDAR on December
3, 2010;



2013 Technical Report, Update of
the Mineral Resource Estimate for the Tuzo Kimberlite,means the “Gahcho Kué Project, Update of the Mineral
Resource Estimate for the Tuzo Kimberlite, National Instrument (“NI”) 43-101 Technical Report” dated July 2,
2013 as prepared and completed by Mineral Services Canada Inc., and filed by the Company on SEDAR on August 14, 2013;



Affiliate has the meaning
given to affiliated bodies corporate under theBusiness Corporations Act (Ontario);



AK Property means the claims
known as the "AK claims" held by the Gahcho Kué Arrangement;



AK-CJ Propertiesmeans, collectively,
the AK Property and CJ Property;



AMECmeans AMEC Americas
Limited;



AMEX or NYSE AMEXmeans the
American Stock Exchange prior to the take-over of the American Stock Exchange LLC by the New York Stock Exchange, and subsequently
renamed NYSE Amex, then renamed NYSE MKT;



CJ Property means the claims
known as the "CJ claims", which have now lapsed, previously held by MPV;



Arrangement means the arrangement
between the Company and Glenmore which was effected as of June 30, 2000;



Arrangement Agreementmeans the Arrangement Agreement dated as of May 10, 2000, and made between MPV and Glenmore, including the Schedules to that
Agreement;



Business Corporations Act (Ontario)
means the R.S.O. 1990, CHAPTER B.16, as amended from time to time;



vii







CDNX means the Canadian Venture
Exchange Inc, formerly the Vancouver Stock Exchange, and now known as the TSX Venture Exchange;



Camphor or Camphor Venturesmeans Camphor Ventures Inc.;



Canadian National Instrument 43-101means the National Instrument 43-101 (Standards of Disclosure for Mineral Projects)adopted by the Canadian Securities
Administrators;



Code means the United States
Internal Revenue Code of 1986, as amended;



Company, MPVor
Registrant means Mountain Province Diamonds Inc.;



De Beers means De Beers Consolidated
Mines Ltd.;



De Beers Canada or Monopros
means De Beers Canada Inc., formerly known as De Beers Canada Exploration Inc., and before that as Monopros Limited, a wholly-owned
subsidiary of De Beers;



Desktop Study means the preliminary
technical assessment of the Gahcho Kué resource conducted by De Beers Consolidated Mines Ltd. in 2000 (and updated in 2003,
2005, 2006, and 2008) and the Independent Qualified Persons’ review of the Desktop Study provided by AMEC;



Definitive Feasibility Study, Feasibility
Study,or2010 Technical Reportmeans the “Gahcho Kué Project, Definitive Feasibility Study,
National Instrument (“NI”) 43-101 Technical Report” dated December 1, 2010 (with Information effective as of
October 15, 2010) as prepared and completed by JDS Energy and Mining Inc., and filed by the Company on SEDAR on December 3, 2010;



Exchange Act means the U.S.
Securities Exchange Act of 1934, as amended;



Feasibility Study, Definitive Feasibility
Study,or2010 Technical Reportmeans the “Gahcho Kué Project, Definitive Feasibility Study,
National Instrument (“NI”) 43-101 Technical Report” dated December 1, 2010 (with Information effective as of
October 15, 2010) as prepared and completed by JDS Energy and Mining Inc., and filed by the Company on SEDAR on December 3, 2010;



GAAP means Canadian generally
accepted accounting principles;



Gahcho Kué Amended and Restated
Joint Arrangement-Agreementor2009. Agreementmeans the Gahcho Kué Joint Venture Agreement as amended
and restated, and entered into by Mountain Province Diamonds Inc., Camphor Ventures Inc., and De Beers Canada Inc. on July 3, 2009;



Gahcho Kué Joint ArrangementorJoint Arrangementmeans the joint Arrangement between Mountain Province Diamonds Inc., Camphor Ventures
Inc., and De Beers Canada, for the Gahcho Kué Project, and as currently governed by the 2009 Agreement;



Gahcho Kué Joint Arrangement-Agreementor2002 Agreementmeans the joint arrangement agreement entered into by Mountain Province Diamonds Inc.,
Camphor Ventures Inc., and De Beers Canada Exploration Inc. on October 24, 2002, but which took effect from January 1, 2002, and
which was amended and restated on July 3, 2009;



Gahcho KuéProject,located on Kennady Lake, also referred to as the “Kennady Lake Project”, and comprising four mineral leases that
are 100% owned by De Beers Canada Inc. (“De Beers Canada”), which holds them on behalf of the Gahcho Kué Joint
Arrangement. The participating interest of each of the joint venture parties is governed by the 2009 Agreement;



viii







Glenmore means Glenmore Highlands
Inc., a company incorporated under the Business Corporations Act (Alberta) and which, pursuant to the Arrangement,
amalgamated with the Company's wholly-owned subsidiary, Mountain Glen Mining Inc., to form an amalgamated company, also known as
Mountain Glen Mining Inc.;



Glenmore Shares means the
common shares of Glenmore, as the same existed before the Arrangement took effect and "Glenmore Share" means any of them;



Glenmore Shareholder means
a holder of Glenmore Shares;



IFRSmeans International
Financial Reporting Standards, as issued by the International Accounting Standards Board - a system of generally accepted accounting
principles, as applied to Mountain Province’s financial statements beginning with its transition effective January 1, 2010;



JDSmeans JDS Energy and
Mining Inc.;



Joint Information Circular
means the joint information circular of the Company and Glenmore dated May 10, 2000 for the Extraordinary General Meeting and Special
Meeting of the Company and Glenmore respectively to approve the Arrangement;



Joint ArrangementorGahcho Kué Joint Arrangementmeans the joint arrangement between Mountain Province Diamonds Inc., Camphor Ventures
Inc., and De Beers Canada, for the Gahcho Kué Project, and as currently governed by the 2009 Agreement;



Kennady Arrangementmeans
the arrangement between the Company and Kennady Diamonds Inc. which was effected as of July 6, 2012;



Kennady Arrangement Agreementmeans
the Kennady Arrangement Agreement dated as of March 12, 2012, and made between the Company and Kennady Diamonds Inc., including
the schedules to that agreement;



Kennady North Projectmeans
the mining leases (4330, 4466, 4467, and 4468) and eight mineral claims staked in 2010 (Kwezi 01 to Kwezi 08) which were 100% owned
by Mountain Province in the area around the Gahcho Kué Project and Kennady Lake, and which were transferred to Kennady Diamonds
Inc. under the plan of arrangement between Kennady Diamonds Inc. and Mountain Province effective July 6, 2012;



Letter Agreement means the
letter agreement dated March 6, 1997 among Mountain Province Mining Inc., Camphor Ventures Inc., Glenmore Highlands Inc., 444965
B.C. Ltd. and Monopros as amended or supplemented by: an agreement dated April 10, 1997 among Mountain Province Mining Inc., Camphor
Ventures Inc., Glenmore Highlands Inc., 444965 B.C. Ltd. and Monopros; an assurance given to De Beers by the other parties., dated
July, 1997; an agreement given to De Beers by the other parties dated November 1, 1997 and two agreements each dated December 17,
1999 among the parties;



Monopros or De Beers
Canada means De Beers Canada Inc., formerly known as Monopros Limited, a wholly-owned subsidiary of De Beers and also formally
known as De Beers Canada Exploration Inc.;



Mountain Glen means Mountain
Glen Mining Inc., a wholly-owned subsidiary (now dissolved) of the Company;



ix







MPV, Mountain Province, Company
or Registrantmeans Mountain Province Diamonds Inc.;



MPV Sharesmeans the
common shares of MPV, and MPV Share means any of them;



Nasdaqmeansthe
National Association of Securities Dealers Automatic Quotation System, now the Nasdaq Stock Exchange;



NYSE MKTmeans the New York
Stock Exchange MKT, renamed from NYSE Amex;



Old MPVmeans MPV prior to
its amalgamation with 444965 B.C. Ltd.;



OTCBB means the OTC bulletin
board;



PFIC means Passive Foreign
Investment Company under the Code;



Qualified Personas defined
by Canadian National Instrument 43-101 (Standards of Disclosure for Mineral Projects), means an individual who:



(1)	is an engineer or geoscientist
with a university degree, or equivalent accreditation, in an area of geosciences, or engineering, relating to mineral exploration
or mining;



(2)	has at least five years
of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these,
that is relevant to his or her professional degree or area of practice;



(3)	has experience relevant
to the subject matter of the mineral project and the technical report; and



(4)	is in good standing
with a professional association; and



(5)	in the case of a professional
association in a foreign jurisdiction, has a membership designation that:

(i) requires attainment of a position of responsibility
in their profession that requires the exercise of independent judgment; and

(ii) requires:

A. a favourable confidential peer evaluation of
the individual’s character, professional judgment, experience, and ethical fitness; or

B. a recommendation for membership
by at least two peers, and demonstrated prominence or expertise in the field of mineral exploration or mining;



Except where
specifically indicated otherwise, scientific and technical information included in this report on Form 20F regarding the Company’s
mineral projects has been reviewed by Carl Verley, a Director of the Company and a Qualified Person as defined by National
Instrument 43-101. Independent Qualified Persons responsible for the 2013 Technical Report prepared for the Gahcho Kué Joint
Arrangement and discussed in Item 4 D “Property, Plants and Equipment” from the headings “Permits” to “–Mineral
Resource Summary – Tuzo Deep” are: Mike Makarenko, P.Eng., and Tom E. Nowicki, P.Geo.;



TSX means the Toronto Stock
Exchange; and,



VSE means the Vancouver Stock
Exchange, subsequently renamed the Canadian Venture Exchange, and now known as the TSX Venture Exchange.



x







GLOSSARY
OF TECHNICAL TERMS



|Adit              | A horizontal or nearly horizontal passage driven from the surface for the working of a mine.                                                                                                                                                                                                                                                                                                                                                                             
|----------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Archean           | The earliest eon of geological history or the corresponding system of rocks.                                                                                                                                                                                                                                                                                                                                                                                             
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Area of Interest  | A geographic area surrounding a specific mineral property in which more than one party has an interest and within which new acquisitions must be offered to the other party or which become subject automatically to the terms and conditions of the existing agreement between the parties. Typically, the area of interest is expressed in terms of a radius of a finite number of kilometers from each point on the outside boundary of the original mineral property.
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Bulk Sample       | Evaluation program of a diamondiferous kimberlite pipe in which a large amount of kimberlite (at least 100 tonnes) is recovered from a pipe.                                                                                                                                                                                                                                                                                                                             
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Carat             | A unit of weight for diamonds, pearls, and other gems. The metric carat, equal to 0.2 gram or 200 milligram, is standard in the principal diamond-producing countries of the world.                                                                                                                                                                                                                                                                                      
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Caustic Fusion    | An analytical process for diamonds by which rocks are dissolved at temperatures between 450-600°C. Diamonds remain undissolved by this process and are recovered from the residue that remains.                                                                                                                                                                                                                                                                          
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Craton            | A stable relatively immobile area of the earth's crust that forms the nuclear mass of a continent or the central basin in an ocean.                                                                                                                                                                                                                                                                                                                                      
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Diabase           | A fine-grained rock of the composition of gabbro but with an ophitic texture.                                                                                                                                                                                                                                                                                                                                                                                            
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Dyke              | A body of igneous rock, tabular in form, formed through the injection of magma.                                                                                                                                                                                                                                                                                                                                                                                          
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Feasibility Study | As defined by Canadian National Instrument 43-101, means a comprehensive study of a deposit in which all geological, engineering, operating, economic and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.                                                                                       
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Gneiss            | A banded rock formed during high grade regional metamorphism. It includes a number of different rock types having different origins. It commonly has alternating bands of schistose and granulose material.                                                                                                                                                                                                                                                              
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Indicator mineral | Minerals such as garnet, ilmenite, chromite and chrome diopside, which are used in exploration to indicate the presence of kimberlites.                                                                                                                                                                                                                                                                                                                                  





xi







|Jurassic        | The period of the Mesozoic era between the Triassic and the Cretaceous or the corresponding system of rocks marked by the presence of dinosaurs and the first appearance of birds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Kimberlite      | A dark-colored intrusive biotite-peridotite igneous rock that can contain diamonds. It contains the diamonds known to occur in the rock matrix where they originally formed (more than 100 km deep in the earth).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Macrodiamond    | A diamond, two dimensions of which exceed 0.5 millimeters (mm).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Microdiamond    | Generally refers to diamonds smaller than approximately 0.5 mm, which are recovered from acid dissolution of kimberlite rock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Mineral Reserve | Means the economically mineable part of a Measured Mineral Resource 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.                                                                                                                                                                                                                                              
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                | THE TERMS "MINERAL RESERVE," "PROVEN MINERAL RESERVE" AND "PROBABLE MINERAL RESERVE" USED IN THIS REPORT ARE CANADIAN MINING TERMS AS DEFINED IN ACCORDANCE WITH NATIONAL INSTRUMENT 43-101 - STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS WHICH INCORPORATES THE DEFINITIONS AND GUIDELINES SET OUT IN THE CANADIAN INSTITUTE OF MINING, METALLURGY AND PETROLEUM (THE "CIM") DEFINITION STANDARDS FOR MINERAL RESOURCES AND MINERAL RESERVES (THE “CIM DEFINITION STANDARDS”) AS ADOPTED BY THE CIM COUNCIL ON DECEMBER 11, 2005. IN THE UNITED STATES, A MINERAL RESERVE IS DEFINED AS A PART OF A MINERAL DEPOSIT WHICH COULD BE ECONOMICALLY AND LEGALLY EXTRACTED OR PRODUCED AT THE TIME THE MINERAL RESERVE DETERMINATION IS MADE.
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                | Under United States standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                | "Reserve" means that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                | "Economically," as used in the definition of reserve, implies that profitable extraction or production has been established or analytically demonstrated to be viable and justifiable under reasonable investment and market assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                | "Legally," as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, there should be a reasonable certainty based on applicable laws and regulations that issuance of permits or resolution of legal issues can be accomplished in a timely manner.                                                                                                                                                                                                                                                                                                                            



xii







|                 | Mineral Reserves are categorized as follows on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                 | "Proven Mineral Reserve" means, in accordance with CIM Definition Standards, the economically viable part of a Measured 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 is justified.                                                                                                                                                                             
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                 | The definition for "proven mineral reserves" under CIM Definition Standards differs from the standards in the United States, where proven or measured reserves are defined as reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geographic character is so well defined that size, shape, depth and mineral content of reserves are well established.
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                 | "Probable Mineral Reserve" means, in accordance with CIM Definition Standards, the economically mineable part of an Indicated, and in some circumstances a Measured 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 is justified.                                                                                                                                 
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                 | The definition for "probable mineral reserves" under CIM Definition Standards differs from the standards in the United States, where probable reserves are defined as reserves for which quantity and grade and/or quality are computed from information similar to that of proven reserves (under United States standards), but the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mineral Resource | Under CIM Definition Standards, a Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals 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 extractions.  The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.    



xiii







| | THE TERMS "MINERAL RESOURCE", "MEASURED MINERAL RESOURCE", "INDICATED MINERAL RESOURCE", "INFERRED MINERAL RESOURCE" USED IN THIS REPORT ARE CANADIAN MINING TERMS AS DEFINED IN ACCORDANCE WITH NATIONAL INSTRUMENT 43-101 - STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS UNDER THE GUIDELINES SET OUT IN THE CIM DEFINITION STANDARDS. THE COMPANY ADVISES U.S. INVESTORS THAT WHILE SUCH TERMS ARE RECOGNIZED AND PERMITTED UNDER CANADIAN REGULATIONS, THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT RECOGNIZE THEM. THESE ARE NOT DEFINED TERMS UNDER THE UNITED STATES STANDARDS AND MAY NOT GENERALLY BE USED IN DOCUMENTS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION BY U.S. COMPANIES. AS SUCH, INFORMATION CONTAINED IN THIS REPORT CONCERNING DESCRIPTIONS OF MINERALIZATION AND RESOURCES MAY NOT BE COMPARABLE TO INFORMATION MADE PUBLIC BY U.S. COMPANIES SUBJECT TO THE REPORTING AND DISCLOSURE REQUIREMENTS OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "Inferred Mineral Resource" means, under CIM Definition Standards, that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ANY PART OR ALL OF AN INFERRED RESOURCE EXISTS, OR IS ECONOMICALLY OR LEGALLY MINEABLE.                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "Indicated Mineral Resource" means, under CIM Definition Standards, 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 testing 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. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ANY PART OR ALL OF THE MINERAL DEPOSITS IN THIS CATEGORY WILL EVER BE CONVERTED INTO RESERVES.                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "Measured Mineral Resource" means, under CIM Definition standards 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 drillholes that are spaced closely enough to confirm both geological and grade continuity. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ANY PART OR ALL OF THE MINERAL DEPOSITS IN THIS CATEGORY WILL EVER BE CONVERTED INTO RESERVES.                                                                                                                               



xiv







|Operator                      | The party in a joint venture which carries out the operations of the joint venture subject at all times to the direction and control of the management committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Ordovician                    | The period between the Cambrian and the Silurian or the corresponding system of rocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Overburden                    | A general term for any material covering or obscuring rocks from view.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Paleozoic                     | An era of geological history that extends from the beginning of the Cambrian to the close of the Permian and is marked by the culmination of nearly all classes of invertebrates except the insects and in the later epochs by the appearance of terrestrial plants, amphibians, and reptiles.                                                                                                                                                                                                                                                                                                                                                                                      
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Pipe                          | A kimberlite deposit that is usually, but not necessarily, carrot-shaped.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Preliminary Feasibility Study | Under the CIM Definition Standards, means a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined, includes a financial analysis based on reasonable assumptions of technical, engineering, operating, economic factors and the evaluation of other relevant factors which are sufficient for a Qualified Person acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Proterozoic                   | The eon of geologic time or the corresponding system of rocks that includes the interval between the Archean and Phanerozoic eons, perhaps exceeds in length all of subsequent geological time, and is marked by rocks that contain fossils indicating the first appearance of eukaryotic organisms (as algae).                                                                                                                                                                                                                                                                                                                                                                     
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Reverse Circulation Drill     | A rotary percussion drill in which the drilling mud and cuttings return to the surface through the drill pipe.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Sill                          | Tabular igneous rock that parallels the bedding or foliation of the country rock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Stringers                     | The narrow veins or veinlets, often parallel to each other, and often found in a shear zone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Tertiary                      | The Tertiary period or system of rocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



xv







|Till Sample | A sample of soil taken as part of a regional exploration program and examined for indicator minerals.
|----------- | -----------------------------------------------------------------------------------------------------
|            |                                                                                                      
|Xenolith    | A foreign inclusion in an igneous rock.                                                              



xvi







NOTE REGARDING FORWARD-LOOKING STATEMENTS



This report contains forward-looking statements
within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning the Company's exploration,
operations, planned acquisitions and other matters. These statements relate to analyses and other information that are based on
forecasts of future results, estimates of amounts not yet determinable and assumptions of management.



Statements concerning mineral resource
estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization
that will be encountered if the property is developed, and based on certain assumptions that the mineral deposit can be economically
exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects"
or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans",
"estimates" or "intends", or stating that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact
and may be "forward-looking statements." Forward-looking statements are subject to a variety of risks and uncertainties
which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without
limitation:



| | § | 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 feasibility 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
and prices of diamonds;
| | - | ----------------------------------------------------------------------



| | § | risks related to commodity price fluctuations;
| | - | ----------------------------------------------



| | § | the uncertainty of profitability based
upon the Company's history of losses;
| | - | ----------------------------------------------------------------------------



| | § | risks related to failure of the Company
and/or its joint venture partner to obtain adequate financing on a timely basis and on acceptable terms, particularly given recent
volatility in the global financial markets;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | 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;
| | - | --------------------------------------------------------------------



| | § | political and regulatory risks associated
with mining and exploration;
| | - | ----------------------------------------------------------------------



| | § | geological and technical conditions at
the Company’s Gahcho Kué Project being adequate to permit development;
| | - | -------------------------------------------------------------------------------------------------------------



xvii







| | § | the ability to develop and operate the
Company’s Gahcho Kué Project on an economic basis and in accordance with applicable timelines;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | § | 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.
| | - | ---------------------------------------------------------------------------------------------------



Some of the important risks and uncertainties
that could affect forward-looking statements are described further in this Annual Report under the headings "Risk Factors",
"History and Development of Company," "Business Overview," "Property, plants and equipment," and
"Operating and Financial Review and Prospects". Should one or more of these risks and uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements.
Forward -looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made,
and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other
circumstances should change. Investors are cautioned against attributing undue certainty to forward-looking statements.



Forward-looking information is based on
certain factors and assumptions regarding, among other things, exploration, permitting, construction, mining, and production at
the Gahcho Kué Project and any other property as well as world and U.S. economic conditions and the future worldwide demand
for diamonds. Specifically, in making statements regarding expected mineral recovery, diamond prices and expectations concerning
the diamond industry, the Company has made assumptions regarding, among other things, foreign exchange rates, continuing recovery
of world and U.S. economic conditions, our ability to successfully implement our exploration, construction and mining plans, the
success of permitting the Gahcho Kué Project, and overall demand for diamonds. While the Company considers these assumptions
to be reasonable based on the information currently available to it, they may prove to be incorrect. See “Risk Factors”.



CAUTIONARY NOTE TO U.S. INVESTORS REGARDING
RESOURCE AND RESERVE ESTIMATES – MINING PROPERTIES



This Annual Report on Form 20-F 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 Definition Standards”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM
Council, as amended. These definitions differ from the definitions in United States Securities and Exchange Commission (“SEC”)
Industry Guide 7 (the “SEC Guidelines”) under the United States Securities Act of 1993, as amended (the “Securities
Act”). Under SEC 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.



xviii







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
are normally not permitted to be used in reports and registration statements filed with the SEC. 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. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations;
however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.



Accordingly, information contained in this
Annual Report on Form 20-F and the documents incorporated by reference herein contain descriptions of our mineral deposits that
may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and regulations thereunder.



NOTE REGARDING FINANCIAL STATEMENTS
AND EXHIBITS



The financial statements and exhibits referred
to herein are filed with this report on Form 20-F in the United States. This report is also filed in Canada as an Annual Information
Form. Canadian investors should also refer to the annual consolidated financial statements of the Company as at December 31,
2013, as filed with the applicable Canadian Securities regulators on SEDAR (the Canadian Securities Administrators' System for
Electronic Document Analysis and Retrieval) under "Audited Annual Financial Statements - English".



METRIC EQUIVALENTS



For ease of reference, the following factors
for converting metric measurements into imperial equivalents are provided:



|To Convert From Metric |  | To Imperial        |  | Multiply by
|---------------------- |  | ------------------ |  | -----------
|Hectares               |  | Acres              |  | 2.471      
|Metres                 |  | Feet (ft.)         |  | 3.281      
|Kilometres (km.)       |  | Miles              |  | 0.621      
|Tonnes                 |  | Tons (2000 pounds) |  | 1.102      
|Grams/tonne            |  | Ounces (troy/ton)  |  | 0.029      



xix







PART I



| | Item 1. | Identity of Directors, Senior Management and Advisors
| | ------- | -----------------------------------------------------



Not Applicable



| | Item 2. | Offer Statistics and Expected Timetable
| | ------- | ---------------------------------------



Not Applicable



| | Item 3. | Key Information
| | ------- | ---------------



| | A. | Selected financial data.
| | -- | ------------------------



You should read the following
selected financial data together with Item 5, "Operating and Financial Review and Prospects", the Consolidated Financial
Statements in Item 18 and the other information in this Annual Report. The selected financial data presented below is derived from
our Consolidated Financial Statements.



The Company's consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”), effective with the Company’s transition to IFRS on January
1, 2010. Previously, the Company’s consolidated financial statements were prepared in accordance with Canadian generally
accepted accounting principles (“GAAP”). Material measurement differences between GAAP and accounting principles in
the United States, applicable to the Company, were described in the Company’s previous consolidated financial statements.
With the Company’s transition to IFRS in the year ended December 31, 2011 with a transition date of January 1, 2010, there
is no requirement to report the material measurement differences between IFRS and accounting principles in the United States.



The Company's financial statements
are set forth in Canadian dollars.



The consolidated financial information in the below
tables for 2011, 2012 and 2013 was prepared in accordance with IFRS as issued by the IASB.



|For the year ending (except as noted)                                           
|--------------------------------------------------------------------------------
|All in CDN$1,000's except Earnings (loss) per Share 
and Number of Common Shares
|Operating Revenue                                                               
|Working Capital                                                                 
|Net Loss                                                                        
|Basic and diluted loss per share                                                
|Total Assets                                                                    
|Share Capital                                                                   
|Net Assets -                                                                    
|Number of Common Shares issued                                                  



1







No dividends have been declared
in any of the years presented above.



Exchange Rate Information



All dollar amounts set forth
in this report are in Canadian dollars, except where otherwise indicated. The following tables set forth, (i) for the five most
recent financial years, the average rate (the "Average Rate") of exchange for the Canadian dollar, expressed in U.S.
dollars, calculated by using the average of the U.S. noon exchange rates per the Bank of Canada for each trading day of the fiscal
year; and (ii) the high and low exchange rates for each of the previous six calendar months for the Canadian dollar, expressed
per the Bank of Canada.



The Average Rate is set out for
each of the periods indicated in the table below.



|Dec-13 |        |  | Dec-12 |     |        | Dec-11 |  |     | Dec-10 |  |  | Dec-09 (nine months) |       
|------ | ------ |  | ------ | --- | ------ | ------ |  | --- | ------ |  |  | -------------------- | ------
|US$    | 0.9402 |  |        | US$ | 0.9949 |        |  | US$ | 0.9891 |  |  | US$                  | 0.9704



The
high and low exchange rates for each month during the previous six months are as follows:



|Month          |  | High (US$) |        |  | Low (US$) | 
|-------------- |  | ---------- | ------ |  | --------- | 
|February 2014  |  |            | 0.9132 |  |           | 
|January 2014   |  |            | 0.9444 |  |           | 
|December 2013  |  |            | 0.9458 |  |           | 
|November 2013  |  |            | 0.9617 |  |           | 
|October 2013   |  |            | 0.9736 |  |           | 
|September 2013 |  |            | 0.9803 |  |           | 



On March 25, 2014, the noon buying rate in Canadian
dollars as per the Bank of Canada (the "Exchange Rate") was $1 Canadian = US$0.8948.



2







| | B. | Capitalization and indebtedness.
| | -- | --------------------------------



Not Applicable



| | C. | Reasons for the offer and use of proceeds.
| | -- | ------------------------------------------



Not Applicable



| | D. | Risk factors.
| | -- | -------------



The Company, and thus the securities
of the Company, should be considered a highly speculative investment and investors should carefully consider all of the information
disclosed in this Annual Report prior to making an investment in the Company. In addition to the other information presented in
this Annual Report, the following risk factors should be given special consideration when evaluating an investment in any of the
Company's securities. Any or all of these risks could have a material adverse effect on the Company’s business, financial
condition, results of operations, cash flows and on the market price of its common stock.



a)	    The
Company's limited operating history makes it difficult to evaluate the Company's current business and forecast future results.



The Company has only a limited
operating history on which to base an evaluation of the Company's current business and prospects, each of which should be considered
in light of the risks, expenses and problems frequently encountered in the early stages of growth of all companies, and in mining
companies in particular. The Company has not commenced mining operations and is still in the development and permitting stage of
the Gahcho Kué Project. The Company may not be able to obtain all of the permits which are necessary for it to commence
operations. The Company’s mining operations may not be successful. As a result of this limited operating history, period-to-period
comparisons of the Company’s operating results may not be meaningful and the results for any particular period should not
be relied upon as an indication of future performance.



(b)      The diamond mining business is speculative and the Company may not be successful in implementing its plans to establish
a successful and profitable diamond mining business



Resource exploration and possible
development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable
efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present,
are insufficient in quantity and quality to return a profit from production. Diamonds acquired or discovered by the Company may
be required to be sold at a price which is reflective of the market at that time.



(c)     
The Company has no significant source of operating cash flow and failure to generate revenues in the future could cause the Company
to go out business.



The
Company currently has no significant source of operating cash flow. The Company has limited financial resources. The Company's
ability to achieve and maintain profitability and positive cash flow is dependent upon the Company's ability to generate revenues.
The Company’s current operations do not generate any cash flow. The Company’s annual operating costs, excluding its
share of costs of the Gahcho Kué Project, are approximately $2.5 million.



3







| |  | (d) The Company is in the development and permitting stage for the Gahcho Kué Project and
may never become profitable.
| |  | ----------------------------------------------------------------------------------------------------------------------



The Company's Gahcho Kué
Project is in the permitting and engineering design stage. The Company’s proposed mining operations may never become profitable.
Drilling of the 5034, Hearne, and Tuzo kimberlite pipes has been extensive and is completed for purposes for the development of
the mine. Reserves have been established through the Feasibility Study but the permitting of the mine is still underway. Estimates
of mineral deposits, development plans and production costs, when made, can be affected by such factors as environmental permit
regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological
formations and work interruptions. In addition, the grade of diamonds ultimately discovered may differ from that indicated by bulk
sampling results. Mine plans and processing concepts that have been developed are not necessarily final.



(e) The
preliminary process testing may not be accurate in predicting the actual presence and recoverability of diamonds on Company properties.



Process testing is limited to
small scale testing based on a number of laboratory test programs, trade-off studies and design evaluations. There can be no assurance
that diamonds recovered in small scale tests will be duplicated in large scale tests under on-site conditions or in production
scale. Difficulties may be experienced in obtaining the expected diamond recoveries when scaling up to a production scale process
plant.



(f) The
Company may not have adequate funds to explore properties other than the Gahcho Kué Project.



The Company may not have the
ability to pay for exploration or development costs on any other properties it may acquire. If such funds were available, there
is no assurance that expending such funds would result in discovery of any diamondiferous kimberlite.



(g)
The Company has a history of losses and is likely to continue to incur losses for the foreseeable future.



The Company has a history of
losses and is likely to continue to incur losses for the foreseeable future. During the fiscal years ended December 31, 2013, 2012,
and 2011, the Company incurred net losses.



| | · | $26.604 million loss for the year ended
December 31, 2013;
| | - | ----------------------------------------------------------



| | · | $3.338 million loss for the year ended
December 31, 2012; and
| | - | -------------------------------------------------------------



| | · | $11.539 million loss for the year ended
December 31, 2011.
| | - | ----------------------------------------------------------



As of December 31, 2013, the
Company had an accumulated deficit of $120.8 million. There can be no assurance that the Company will ever be profitable.



None of the Company's properties
have advanced to the commercial production stage, and the Company has no history of earnings or cash flow from operations and,
as an exploration and development company, has only a history of losses.



(h) The Company
may never recover the amounts it has capitalized for mineral property costs.



The recoverability of the amounts
capitalized for mineral properties in the Company's consolidated financial statements is dependent upon the ability of the Company
to complete exploration and development, the discovery of economically recoverable reserves, and, if warranted, upon future profitable
production or proceeds from disposition of some or all of the Company's mineral properties.



4







| |  | (i) The Company’s failure to raise required financing in the future could cause the Company
to go out of business.
| |  | ------------------------------------------------------------------------------------------------------------------



As of December 31, 2013, the Company
had cash and short-term investments of approximately $35.7 million and working capital of approximately $35.1 million. During the
past two fiscal years ended December 31, 2013 and December 31, 2012, the Company used approximately $46.4 million in cash flows
in operating activities including approximately $32.6 million during the year ended December 31, 2013, and $13.8 million during
the year ended December 31, 2012.



The Company's administrative
and other expenses are expected to be approximately $2.5 million for the next year, in addition to an estimated $92.0 million for
the Company’s proportional share of expenses for the Gahcho Kué joint Arrangement for 2014. The Company expects that
a payment of $10 million for historic sunk costs will be required during the second quarter of 2014 when permits are expected for
the Gahcho Kué Project.



In order to advance the development
of the Gahcho Kué Project, the Company will be required to raise additional capital through equity and/or debt financings
on terms that may be dilutive to its shareholders’ interests in the Company and the value of their common shares. The Company
may consider share offerings, private placements, rights offerings, credit and debt facilities, as well as the exercise of outstanding
options or other arrangements to meet its capital requirements in the future. Such arrangements may have a material adverse effect
on the Company’s business or results of operations. As well, there is no guarantee that the Company will be able to raise
additional capital, or to raise additional capital on terms and conditions which it finds acceptable. If the Company is not able
to raise sufficient capital, it may not be able to grow the Company, or it may be forced to cease doing business.



(j) Gahcho
Kué Project probable reserves.



The Gahcho Kué Project
is the Company’s only property and is in the permitting and development stage. The Gahcho Kué Project has probable
reserves in three of the four kimberlite bodies at Kennady Lake. See “Item 4D - Property, plants and equipment - Principal
Properties”.



| |  | (k) If the Company does not hold good title to properties, its ability to explore and eventually
mine them could be prevented or restricted.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------



The Company’s business
depends upon having clear title to its properties and its ability to explore, develop and mine its properties without undue restriction.
If any of its properties are subject to prior unregistered agreements that restrict the use of the properties, or if it does not
hold title to the properties as it believes it does, its ability to explore, develop and mine on those properties could be limited
or prevented completely. This would have a material adverse effect on the Company and its results of operation.



| |  | (l) Diamond prices can fluctuate significantly, and as a result, the Company’s results
                                                                                of operation may fluctuate significantly.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The market for rough diamonds
is subject to strong influence from demand in the United States, Japan, China and India, which are the largest markets for polished
diamonds, and supply from major producers such as Alrosa of Russia and Debswana of Botswana. The price of diamonds has historically
fluctuated.  The price of diamonds dropped sharply after September 11, 2001. Between 2003 and 2006 diamond prices increased
on average by approximately 15%.  In 2007, rough diamond prices increased by an average of 25%, and in the first five months
of 2008, by a further 11%.  From about mid-2008 to mid-April 2009, rough diamond prices fell sharply with concerns of the
global economic environment of the time.  By mid-April 2009, rough diamond prices rebounded to pre-global recession levels. 
During 2010, rough diamond prices increased by approximately 30%.  This strengthening continued through the first half of
2011 when diamond prices reached historic highs.  During the second half of 2011, diamond prices dropped sharply resulting
in an overall approximate 17% increase during the year. Accordingly to industry leaders, in 2012 rough diamond prices dropped by
approximately 12 percent and remained largely unchanged through 2013. While the supply/demand fundamentals for diamonds would indicate
good price support and steadily rising prices in the future, such fluctuations make it difficult to predict future diamond prices
with a high degree of certainty. To mitigate against this, the Company uses conservative modeled diamond prices in its economic
studies and mine planning. Nonetheless, the Company’s future results of operation may fluctuate significantly if rough diamond
price volatility continues into the future.



5







(m)
The Company may incur significant costs to comply with Environmental and Government Regulation



The current and anticipated future
operations of the Company, including development activities and commencement of production on its properties, require permits from
various federal, territorial and local governmental authorities and such operations are and will be governed by laws and regulations
governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal,
toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation
of mines and related facilities generally experience increased costs, and delays in development, production and other schedules
as a result of the need to comply with applicable laws, regulations and permits. The Company's development activities and its potential
mining and processing operations in Canada are subject to various Canadian Federal and Territorial laws governing land use, the
protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste
disposal, toxic substances, mine safety and other matters.



Such exploration, development
and operation activities are also subject to substantial regulation under these laws by governmental agencies and may require that
the Company obtain permits from various governmental agencies. The Company believes it is in substantial compliance with all material
laws and regulations which currently apply to its activities. There can be no assurance, however, that all permits which the Company
may require for construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms or that
such laws and regulations, or that new legislation or modifications to existing legislation, would not have an adverse effect on
any exploration, development or mining activities which the Company might undertake.



Further detail on governmental
regulation may be found in “Item 4 - Business Review - Government Regulation”, below.



Failure to comply with applicable
laws, regulations and permit requirements may result in enforcement actions thereunder, including orders issued by regulatory or
judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those
suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation
of applicable laws or regulations. The amount of funds required to comply with all environmental regulations and to pay for compensation
in the event of a breach of such laws may exceed the Company's ability to pay such amounts.



Amendments to current laws, regulations
and permits governing operations and activities of mining companies, or more stringent implementation of existing or new laws,
could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction
in levels of production at producing properties or require abandonment or delays in development of new mining facilities.



6







| |  | (n) Climate and transportation costs may increase and have a negative effect on the Company’s
results of operation.
| |  | -------------------------------------------------------------------------------------------------------------------



The Gahcho Kué Project
is subject to climate and transportation risks because of its remote northern location. Such factors can add to the costs of development
and operation, thereby increasing costs and negatively affecting profitability. The availability of weather conducive to building
and operating the Tibbitt to Contwoyto Winter Road is particularly critical to the development of the mine, and production.



(o)
The Company is dependent upon its joint arrangement partner for the success of the Gahcho Kué Project.



The Company, and the success of
the Gahcho Kué Project, are dependent on the efforts, expertise and capital resources of our joint arrangement partner,
De Beers Canada, and its parent De Beers. De Beers Canada is the project operator and is responsible for exploring, permitting,
developing and operating the Gahcho Kué Project. In addition, De Beers Canada is providing its share of financing for the
Gahcho Kué Project. The Company is dependent on De Beers Canada for accurate information about the Gahcho Kué Project,
and the proper and timely progress of permitting and development.



(p) Operating
Hazards and Risks



Diamond exploration and mining
involves many risks. Operations in which the Company has a direct or indirect interest will be subject to all the hazards and risks
(such as accidents, injuries, and hazardous waste) normally incidental to exploration, development and production of resources,
any of which could result in work stoppages, damage to property and possible environmental damage.



(q) There are numerous
factors beyond the control of the Company that may affect the marketability of any diamonds discovered.



Factors beyond the control of
the Company may affect the marketability of any diamonds produced. Significant price movements over short periods of time may be
affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations
of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to the Canadian dollar and other currencies),
interest rates and global and/or regional consumption patterns. The effect of these factors on the prices of diamonds and therefore
the economic viability of any of the Company's projects cannot accurately be predicted.



(r)
The Company's expectations reflected in forward-looking statements may prove to be incorrect.



This Form 20-F includes "forward-looking
statements". A shareholder or prospective shareholder should bear this in mind when assessing the Company's business. All
statements, other than statements of historical facts, included in this annual report, including, without limitation, the statements
under and located elsewhere herein regarding industry prospects and the Company's financial position are forward-looking statements.
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such expectations
may prove to be incorrect.



7







(s) The Mineral Resources
Industry is intensely competitive and the Company competes with many companies with greater financial means and technical facilities.



The resource industry is intensely
competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical
facilities. Competition could adversely affect the Company's ability to acquire suitable producing properties or prospects for
exploration in the future.



(t)
Aboriginal Rights and Title



Governments
in Canada must consult with aboriginal peoples with respect to grants of mineral rights and the issuance of or amendment to project
authorizations. Consultation regarding rights or claimed rights of aboriginal people may require accommodations, including undertakings
with respect to employment and other matters. This may affect the Company’s timetable and costs of development of mineral
properties. Aboriginal rights or title claims could affect the Company’s existing operations, in addition to its future acquisitions.
These legal requirements, among other things, may affect the Company’s ability to develop the Gahcho Kué Project and
other mineral properties or may materially delay the development of such properties.



(u)
Future equity financings which the Company may undertake would cause shareholders’ interests in the Company to be diluted.



The Company's current operations
do not generate any cash flow. As the Company seeks additional equity financing, the issuance of additional shares will dilute
the interests of the Company's current shareholders. The amount of the dilution would depend on the number of new shares issued
and the price at which they are issued. The Company has raised funds in recent years through share, option and warrant issuances.
As of December 31, 2013, the Company had cash and short-term investments of approximately $35.7 million and working capital of
approximately $35.1 million. To develop the Gahcho Kué mine, and perform exploration on any other properties acquired, the
Company will need to investigate sources of additional liquidity to increase the cash balances required in the future. These additional
sources include, but are not limited to, share offerings, private placements, rights offerings, credit and debt facilities, as
well as the exercise of outstanding options. There can be no assurance that the Company will be able to raise additional funds
as needed, or that funds raised, if any, would be on terms and conditions acceptable to the Company. The Company’s annual
cash administrative operating costs, excluding the costs directly associated with the Gahcho Kué Project, are approximately
$2.5 million.



(v)
If outstanding options to buy Company stock are exercised, existing shareholders’ interests in the Company will be diluted.



As at March 25, 2014, there were
1,400,000 options (including options not fully vested) outstanding with exercise prices ranging from $4.06 to $6.13 (expiring at
various dates). The stock options, if fully exercised, would increase the number of shares outstanding by 1,400,000. Such options,
if fully exercised, would constitute about 1.4% (out of 101,901,351 shares (100,501,351 issued and outstanding, plus total outstanding
options)) of the Company's resulting share capital as at March 25, 2014. It is unlikely that outstanding options and warrants would
be exercised unless the market price of the Company's common shares exceeds the exercise price at the date of exercise. The exercise
of such options and the subsequent resale of such Common shares in the public market could adversely affect the prevailing market
price and the Company's ability to raise equity capital in the future at a time and price which it deems appropriate. The Company
may also enter into commitments in the future which would require the issuance of additional common shares and the Company may
grant new share purchase warrants and stock options. Any share issuances from the Company's treasury will result in dilution to
existing shareholders.



8







(w)  Members
of our Management and Board of Directors may have outside interests which conflict with the Company or its shareholders.



The President and CEO and Director,
Patrick Evans, and the Vice President Finance, CFO and Corporate Secretary, Bruce Ramsden, have Consulting Agreements with the
Company (see “Item 6C - Board Practices”). In addition, certain officers and directors of the Company are associated
with other natural resource companies that acquire interests in mineral properties. Such associations may give rise to conflicts
of interest from time to time.



(x)
If the Company is not able to attract and maintain qualified key management personnel, it may not be able to successfully implement
its planned business activities and growth.



The nature of the Company's business,
its ability to continue its exploration, development and permitting activities and to thereby develop a competitive edge in its
marketplace depends, in large part, on its ability to attract and maintain qualified key management personnel. Competition for
such personnel is intense, and there can be no assurance that the Company will be able to attract and retain such personnel. The
Company's development to date has depended, and in the future will continue to depend, on the efforts of Patrick Evans. See “Item
7B -Related party transactions” and “Item 6C - Board Practices”. Loss of the key person could have a material
adverse effect on the Company. The Company does not maintain key-man life insurance on Patrick Evans.



(y)   The
Company’s stock price is subject to significant fluctuations.



Prices for the Company's shares
on the TSX and on the NYSE MKT (formerly NYSE Amex), have been extremely volatile. The price for the Company's common shares on
the TSX ranged from $3.88 (low) and $5.87 (high) during the fiscal year ended December 31, 2013, and from $3.25 (low) to $5.6 (high)
during the fiscal year ended December 31, 2012. The price on the NYSE MKT ranged from $3.83 US (low) and $5.59 US (high) during
the fiscal year ended December 31, 2013, and from $3.13 US (low) to $5.66 US (high) during the fiscal year ended December 31, 2012.
Any investment in the Company's securities is therefore subject to considerable fluctuations in value.



(z) The Company has not
paid dividends in the past and does not anticipate paying them in the foreseeable future.



Since
its inception, the Company has not paid any cash dividends on its common stock and does not anticipate paying any cash dividends
on its common stock until significant cash flow is generated. Without dividends on its common stock, shareholders will be able
to profit from an investment only if the price of the stock appreciates before the shareholder sells it.



(aa) Currency rate fluctuations
may have a material effect on our financial position, results of operations, and timing of the development of the Company’s
properties.



Feasibility and other studies
conducted to evaluate the Company's properties are typically denominated in U.S. dollars, and the Company conducts a significant
portion of its operations and incurs a significant portion of its administrative and operating costs in Canadian dollars. The exchange
rate for converting U.S. dollars into Canadian dollars has fluctuated in recent years. Accordingly, the Company is subject to fluctuations
in the rates of currency exchange between the U.S. dollar and the Canadian dollar, and these fluctuations in the rates of currency
exchange may materially affect the Company's financial position, results of operations and timing of the development of its properties. In
particular, a strong Canadian dollar relative to the US dollar would negatively impact the Gahcho Kué Project.



9







(bb)
Historically, the Company has been dependent on the support of De Beers and there is no assurance that their support will continue
in the future.



The exploration of the Gahcho
Kué Project has historically been funded by De Beers Canada. As well, De Beers Canada is the Operator of the Project, and
has an equity investment in the Company. With the execution of the 2009 Agreement, De Beers and the Company share funding responsibility
for the Gahcho Kué Project. Under the 2009 Agreement, the Company and De Beers are required to fund their share of costs
for future operations. As well, the Company is required to make certain repayments of agreed historic costs of the Gahcho Kué
Project, funded by De Beers, if and when certain events occur. If either party is unable to fund their share of historic costs,
or, if the Company defaults on its required payments of historic costs if and when they are due, in addition to interest on late
or defaulted payments, marketing rights can be diluted for the defaulting party. As well, there is no assurance that the Company
will have the required funds on hand when the payments are required to be made. Finally, there is no assurance that the level of
support provided by De Beers will continue in the future.



(cc) It will be difficult
for any shareholder of the Company to commence legal action against the Company’s executives. Enforcing judgments against
them or the Company will be difficult.



As the Company is a Canadian
company, it may be difficult for U.S. shareholders of the Company to effect service of process on the Company or to realize on
judgments obtained against the Company in the United States.  Some of the Company’s directors and officers are residents
of Canada and a significant part of the Company’s assets are, or will be, located outside of the United States. As a result,
it may be difficult for shareholders resident in the United States to effect service of process within the United States upon the
Company, directors, officers or experts who are not residents of the United States, or to realize in the United States judgments
of courts of the United States predicated upon civil liability of any of the Company directors or officers under the United States
federal securities laws. If a judgment is obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities
laws against the Company or its directors or officers, it will be difficult to enforce the judgment in the Canadian courts against
the Company and any of the Company's non-U.S. resident executive officers or directors. Accordingly, United States shareholders
may be forced to bring actions against the Company and its respective directors and officers under Canadian law and in Canadian
courts in order to enforce any claims that they may have against the Company or the Company’s directors and officers. Subject
to necessary registration, as an extra provincial company, under applicable provincial corporate statutes in the case of a corporate
shareholder, Canadian courts do not restrict the ability of non-resident persons to sue in their courts. Nevertheless it may be
difficult for United States shareholders to bring an original action in the Canadian courts to enforce liabilities based on the
U.S. federal securities laws against the Company and any of the Company's Canadian executive officers or directors.



(dd) The MPV Shares may be
delisted from NYSE MKT, and if this occurs, shareholders may have difficulty converting their investment into cash efficiently.



NYSE MKT has established certain
standards for the continued listing of a security on this exchange. If the MPV Shares were to be excluded from NYSE MKT, the prices
of the MPV Shares and the ability of shareholders to sell such stock would be adversely affected. If the Company were to be delisted,
the Company would be required to comply with the initial listing requirements to be relisted on NYSE MKT.



10







(ee)
The Company is likely a "passive foreign investment company" which may have adverse U.S. federal income tax consequences
for U.S. shareholders.



U.S. investors in the Common
Shares should be aware that the Company believes it was classified as a PFIC during the tax year ended December 31, 2013, and based
on current business plans and financial expectations, the Company believes that it will be a PFIC for the tax year ending December
31, 2014, and may be a PFIC in subsequent tax years. If the Company is a PFIC for any year during a U.S. shareholder’s holding
period, then such U.S. shareholder generally will be required to treat any gain realized upon a disposition of Common Shares, or
any so-called “excess distribution” received on its Common Shares, as ordinary income, and to pay an interest charge
on a portion of such gain or distributions, unless the shareholder makes a timely and effective "qualified electing fund"
election (“QEF Election”) or a "mark-to-market" election with respect to the Common Shares. A U.S. shareholder
who makes a QEF Election generally must report on a current basis its share of the Company's net capital gain and ordinary earnings
for any year in which the Company is a PFIC, whether or not the Company distributes any amounts to its shareholders. However, U.S.
shareholders should be aware that there can be no assurance that the Company will satisfy record keeping requirements that apply
to a qualified electing fund, or that the Company will supply U.S. shareholders with information that such U.S. shareholders require
to report under the QEF Election rules, in the event that the Company is a PFIC and a U.S. shareholder wishes to make a QEF Election.
Thus, U.S. shareholders may not be able to make a QEF Election with respect to their Common Shares. A U.S. shareholder who makes
the mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the Common
Shares over the taxpayer’s basis therein. This paragraph is qualified in its entirety by the discussion below under the heading
“United States Federal Income Tax Consequences.” Each U.S. shareholder should consult its own tax advisor regarding
the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.



| | Item 4. | Information on the Company
| | ------- | --------------------------



| | A. | History and development of the company.
| | -- | ---------------------------------------



The Corporate Organization



Mountain Province Diamonds Inc.,
formerly Mountain Province Mining Inc., was formed on November 1, 1997 by the amalgamation (the "MPV Amalgamation") of
Mountain Province Mining Inc. ("Old MPV") and 444965 B.C. Ltd. ("444965") pursuant to an amalgamation agreement
(the "MPV Amalgamation Agreement") dated as of August 21, 1997.



Under the terms of the MPV Amalgamation
Agreement, as at November 1, 1997, each Old MPV share was exchanged for one MPV Share and each 444965 share was exchanged for approximately
0.80 of one MPV Share. The conversion ratios reflected the respective interests of Old MPV and 444965 in the AK-CJ Properties prior
to the date of the MPV Amalgamation.



Old MPV was incorporated under
the laws of British Columbia on December 2, 1986 under the British Columbia Company Actand was engaged in the exploration
of precious and base mineral resource properties until the date of the MPV Amalgamation. Prior to the date of the MPV Amalgamation,
Old MPV held an undivided 50% interest in the AK-CJ Properties and an interest in each of the other properties which are currently
held by MPV, as described below.



444965, a wholly-owned subsidiary
of Glenmore Highlands Inc., (Glenmore being a former controlling shareholder of the Company as defined under the Securities
Act, British Columbia) prior to the MPV Amalgamation, was incorporated under the laws of British Columbia on August 20, 1993.
Prior to the MPV Amalgamation, 444965's only material asset consisted of a 40% undivided interest in the AK-CJ Properties.



As of March 31, 2000, the Company
had one wholly-owned subsidiary, Mountain Province Mining Corp. (USA), which has since been voluntarily dissolved.



11







On April 4, 2000, the Company
incorporated a wholly-owned subsidiary, Mountain Glen Mining Inc. in Alberta. Pursuant to an arrangement agreement (the "Arrangement
Agreement") with Glenmore dated May 10, 2000, Glenmore was amalgamated with Mountain Glen effective as of June 30, 2000 to
form a wholly-owned subsidiary (also known as "Mountain Glen Mining Inc.") of the Company. All Glenmore Shares were exchanged
for common shares in the Company on the basis of 0.5734401 MPV Shares to one Glenmore Share, and Glenmore Shares were concurrently
cancelled. All of the assets of Glenmore became assets of Mountain Glen, including 16,015,696 MPV Shares previously held by Glenmore.



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.



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 TSX on October 25, 2000.



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 with the object of winding up the affairs of Mountain Glen. The property transferred included Mountain
Glen's shares in Baltic Minerals BV and the 16,015,696 MPV Shares. On March 30, 2004, the 16,015,696 MPV Shares were cancelled
and returned to treasury.



Mountain Glen was voluntarily
dissolved on August 4, 2004.



Baltic Minerals BV and its subsidiary
Baltic Minerals Finland OY were voluntarily dissolved in 2006.



Pursuant to the repeal of the
British Columbia Company Act and its replacement by the British Columbia Business Corporations Act(the "New
Act"), the Company transitioned to the New Act and adopted new Articles of Incorporation. On September 20, 2005, the Company’s
shareholders approved a special resolution for the continuance of the Company into Ontario, and the Company amended its articles
and continued incorporation under the Business Corporations Act (Ontario), transferring from the Company Act (British Columbia).



The Company is domiciled in Canada.



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 Annual Report,
are as follows:



|Name of Subsidiary    |  | Date of Incorporation                        |  | Juridiction of Incorporation
|--------------------- |  | -------------------------------------------- |  | ----------------------------
|Camphor Ventures Inc. |  | May 9, 1986 (as Sierra Madre Resources Inc.) |  | British Columbia, Canada    



On February 27, 2012, the Company
incorporated a wholly-owned subsidiary named Kennady Diamonds Inc. under the Ontario Business Corporations Act. This subsidiary
was formed for the purpose of effecting the transfer of Mountain Province’s interest in the Kennady North Project in Northwest
Territories, Canada and operations to a new company as contemplated under a Mountain Province plan of arrangement which closed
July 6, 2012 (see “Kennady North” discussion under “Other Properties”). Until the completion of the plan
of arrangement, Kennady Diamonds Inc. was a wholly-owned subsidiary of Mountain Province. Upon completion of the plan of arrangement,
Mountain Province distributed the shares of Kennady Diamonds to Mountain Province shareholders on the basis of one Kennady Diamonds’
share for every five shares of Mountain Province held by shareholders.



12







The sole subsidiary of the Company,
represented diagrammatically, is as follows:







The Company's registered, records,
administrative, and executive office is at 161 Bay Street, Suite 2315, 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's initial public
offering on the VSE was pursuant to a prospectus dated July 28, 1988 and was only offered to investors in British Columbia. The
Company listed its shares on the TSX (Trading Symbol "MPV") on January 22, 1999 and on the Nasdaq Smallcap Market (Trading
Symbol "MPVIF") on May 1, 1996. Its shares were delisted from the Vancouver Stock Exchange (now known as the TSX Venture
Exchange and prior to that, as the CDNX) on January 31, 2000 and from the Nasdaq Smallcap Market on September 29, 2000. Presently,
the Company's shares trade on the TSX under the symbol "MPV" and also on the NYSE MKT (formerly NYSE Amex) under the
symbol “MDM”. Prior to April 4, 2005, the Company's shares traded on the OTCBB under the symbol "MPVI". The
Company is also registered extra-provincially in the Northwest Territories, and is a reporting issuer in British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland.The Company files reports
in the United States pursuant to Section 13 of the Securities Exchange Act.



The Company’s transfer
agent is Computershare Investor Services Inc. located at 100 University Avenue, 8th Floor, Toronto, Ontario, Canada, M5J 2Y1.



Principal Capital Expenditures
and Divestitures



There are no principal capital
expenditures and divestitures currently in progress.



Takeover offers



There were no public takeover
offers by third parties in respect of the MPV Shares or by the Company in respect of other companies' shares during the last and
current financial year.



Acquisitions and Dispositions



On October 10, 2002, the Company
granted an option for the acquisition by Vision Gate Ventures Limited (now known as Northern Lion Gold Corp.) of a 70% interest
in its Haveri Gold Property, which was not considered to be a property that was material to the Company. On October 4, 2004, the
Company agreed to exchange the Company's 30% interest in the Haveri Gold Property for 4,000,000 common shares of Northern Lion
Gold Corp. The shares were subject to a two-year hold period and there were volume restrictions on re-sale thereafter. The 4,000,000
common shares of Northern Lion Gold Corp. were sold in July 2007.



13







Acquisition of Camphor Ventures
Inc.



On July 5, 2006, the Company
announced that it had entered into an agreement with certain Camphor Ventures Inc. (“Camphor” or “Camphor Ventures”)
shareholders to acquire approximately 33.5 percent of the issued and outstanding shares of Camphor through a private agreement
exempt share exchange on the basis of 0.3975 MPV Shares for each Camphor share. The acquisition was completed on July 24, 2006.



On January 19, 2007, the Company
announced that Camphor had accepted an offer letter from the Company in terms of which the Company offered, subject to certain
conditions, to acquire all of the outstanding securities of Camphor Ventures on the basis of 0.41 MPV Shares, options or warrants
(as the case may be) per Camphor common share, option, or warrant. Offering documents and the Camphor Directors’ Circular
were mailed to Camphor shareholders on February 23, 2007, and the offer remained open until March 30, 2007, following which Mountain
Province took up the Camphor shares tendered into the offer increasing the Company’s interest in Camphor to over 90 percent.
The offer was subsequently extended until April 16, 2007, following which the Company’s interest in Camphor increased to
96% percent on a fully diluted basis. On April 19, 2007, the Company issued a Notice of Compulsory Acquisition to acquire the balance
of the outstanding shares of Camphor. The Notice expired June 19, 2007 and the Company took up the balance of the Camphor shares.
Camphor Ventures was de-listed in July 2007, and is now a wholly owned subsidiary of Mountain Province.



Disposition of Kennady North
Project



On March 12, 2012, Kennady
Diamonds Inc. and Mountain Province entered into an arrangement agreement (the “Kennady Arrangement Agreement”) pursuant
to which Mountain Province agreed to would transfer its interest in the Kennady North Project, in the Northwest Territories in
Canada, including permits, mining claims, rights and title, to Kennady Diamonds Inc. in exchange for common shares of Kennady Diamonds
Inc.



Upon completion of the Kennady
Arrangement on July 6, 2012, Kennady Diamonds Inc. issued 16,143,111 shares to Mountain Province which was distributed along with
the one share held by Mountain Province to the Mountain Province shareholders in exchange for the assets and cash transferred,
as contemplated by the Kennady Arrangement. The transactions contemplated by the Kennady Arrangement was completed on July 6, 2012.
Kennady Diamonds Inc. began trading on the TSX Venture Exchange on July 10, 2012 under the ticker symbol “KDI”.



| | B. | Business overview.
| | -- | ------------------



| | 1.1 | Introduction
| | --- | ------------



The Company is a natural resource
property exploration and development company. At this time, the Company has interest in one natural resource property – its
49% interest (including the 4.9% interest in the property held by Camphor) in the Gahcho Kué Property located in the Northwest
Territories of Canada. See "Item 4D - Property, plants and equipment".



Bulk sampling and drilling on
the Gahcho Kué Project is complete, as is the Definitive Feasibility Study which demonstrates an economically viable project.
The Project is currently in the permitting and development stage. There are no revenues from the Company’s natural resource
property.



14







In July and November 2010, the
Company acquired eight (8) mineral claims just north and west of the Gahcho Kué Project mineral leases. The Company referred
to these eight claims and its five 100%-owned mineral leases as the Kennady North Project. During 2011, the Kennady North Project
underwent a desktop study to compile the historic exploration information in order to assess what exploration, if any, could be
done on these 13 claims and leases. In 2012, through a plan of arrangement, Mountain Province’s interest in the Kennady North
Project and cash were transferred to Kennady Diamonds Inc. See “Other Properties” for further information on the Kennady
North Project and Kennady Diamonds Inc.



1.2    
Historical Corporate Development



AK-CJ Properties, and the
Gahcho Kué Project



In August 1992, the Company acquired
a 100% interest in the AK-CJ Properties that encompassed approximately 520,000 acres. Pursuant to an agreement dated November 18,
1993 (as amended), the Company optioned 40% of its interest in the AK-CJ Properties to 444965, a subsidiary of Glenmore.



Pursuant to an agreement dated
August 16, 1994 (as amended), the Company also optioned 10% of its interest in the AK-CJ Claims to Camphor. Following the merger
of the Company with 444965, the Company held a 90% interest in the AK-CJ Claims, and Camphor, the remaining 10%. Exploration work
in the form of soil sampling, aerial geophysical surveys and geochemical and geophysical analysis were undertaken on these properties
during the period from 1992 to 1995.



During fiscal 1995, the Company
focused the majority of its attention on the AK Property. In February 1995, a diamondiferous kimberlite was discovered (the
"5034" kimberlite pipe) and a program of delineation drilling was undertaken. Activity during this period on the Company's
other properties was minimal because of the focus on the AK Property.



During 1996, the Company completed
a 104-tonne mini-bulk sample from the 5034 kimberlite pipe. The results indicated an average grade of 2.48 carats per tonne. During
1997, the Company concluded a joint venture agreement (the "Letter Agreement") with Monopros, a wholly-owned subsidiary
of De Beers now known as De Beers Canada Inc., Camphor Ventures Inc., and other parties, and further amended it (as the Gahcho
Kué Joint Venture Agreement) in 2002, to develop the AK-CJ Properties. The Letter Agreement granted De Beers the sole and
exclusive right and option to acquire a 51% ownership interest in the AK Property in consideration of incurring certain expenditures.



During the 1997 exploration season,
De Beers Canada discovered three new kimberlite pipes on the AK Property: Tesla, Tuzo and Hearne. All are diamondiferous.



During the spring of 1998, De
Beers Canada conducted mini-bulk sampling on the three new pipes as well as the 5034 kimberlite pipe, the original pipe discovery
on the AK Property. The results were positive enough for De Beers to commit to a major bulk sample in 1999.



During 1999, De Beers Canada
completed a major bulk sample of the four major pipes. For the 5034 kimberlite pipe, a total of 1,044 carats were recovered from
609 tonnes of kimberlite. For the Hearne pipe, a total of 856 carats were recovered from 469 tonnes of kimberlite. For the Tuzo
pipe, a total of 533 carats were recovered from 523 tonnes of kimberlite. For the Tesla pipe, 64 carats were recovered from 184
tonnes of kimberlite. The Tesla pipe was too low grade to be considered as part of a mine plan.



On March 8, 2000, the Company
agreed to extend the feasibility study decision date, and De Beers Canada agreed to carry all exploration, development and other
project costs.



On August 4, 2000, De Beers Canada
presented the Desktop Study to the Company. Upon presentation, De Beers Canada was deemed to earn a 51% interest in the AK-CJ Properties.
Consequently, the Company was left with a 44.1% interest and Camphor with a 4.9% interest in the AK-CJ Properties. The main conclusion
of the Desktop Study was that only a 15 percent increase in diamond revenues was needed for De Beers Canada to proceed to the feasibility
stage.



15







On May 4, 2001, De Beers Canada
completed the bulk sample program of the Hearne and 5034 pipes. A total of approximately 307 tonnes and 550 tonnes of kimberlite
were recovered from the Hearne and 5034 pipes respectively. The modeled values of the diamonds recovered from the Hearne and 5034
pipes were reported on December 18, 2001 and the results were encouraging enough for De Beers to commit to another bulk sample
during the winter of 2002. The main purpose was to recover more high quality, top color diamonds, like the 9.9-carat diamond recovered
in the 2001 program.



The CJ Property claims substantially
lapsed in November 2001 and the remaining CJ Property claims lapsed on August 17, 2002.



During 2002, the Company entered
into the Gahcho Kué Joint Venture Agreement. This agreement provided that De Beers Canada 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 Canada 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 (see “Description of Property
– Amended and Restated Joint Venture Agreement”).



The winter 2002 bulk sample program
of the 5034 and Hearne pipes was completed on April 20, 2002. The modeled grades and values per carat for both pipes were used
to update the Desktop Study. De Beers Canada's 2003 updated Desktop Study showed that, due to the decrease in diamond prices since
September 11, 2001 and a lower U.S. dollar against the Canadian dollar, the projected return on the project would be slightly less
than that obtained previously. As a result of the indicated internal rate of return, well below the agreed hurdle rate of 15%,
De Beers decided to postpone a pre-feasibility decision until the next year when the Desktop Study would be updated again.



At the end of July 2003, De Beers
notified the Company that they had started work on a detailed internal cost estimate study on the Gahcho Kué Project that
incorporated the Kennady Lake diamond deposits. They based their decision on their belief that the improving geo-political and
economic conditions supported confidence in longer-term diamond price projections. In November 2003, the Joint Venture’s
management committee approved a budget of approximately $25 million for the study which started in January 2004, and was completed
mid-2005.



The projected profitability levels
were sufficiently encouraging to the Joint Venture to support the Joint Venture’s decision to proceed to the next phase of
permitting and advanced exploration to improve the resource confidence and input data for mine design to support further study.
On July 11, 2005, De Beers reported an increase in the modeled value of the diamonds for the Gahcho Kué Project with the
modeled values increasing by approximately 6, 7 and 8 percent for the Tuzo, Hearne and 5034 pipes respectively.



During 2006, 2007 and the winter
of 2008, advanced exploration and permitting work continued on the AK Property. For further particulars, reference should be made
to “Item 4D - Property, plants and equipment - Principal Properties - Resource Properties”.



In July 2009 the Company entered
into an Amended and Restated Joint Arrangement Agreement with De Beers Canada of which details are provided below.



In October 2010 the Company announced
the results of the Definitive Feasibility Study. The full Technical report was filed on EDGAR on December 3, 2010 under Form 6K
and on the relevant Securities Commissions in Canada on the System for Electronic Document Analysis and Retrieval (“SEDAR”)
on December 3, 2010.



16







Based on the positive results
of the Definitive Feasibility Study, the Company and De Beers approved the development of the Gahcho Kué diamond mine in
June, 2011, subject to the successful permitting of the project.



On July 22, 2013 Mountain Province
and De Beers Canada announced that the Mackenzie Valley Environmental Impact Review Board (MVEIRB) had completed the Gahcho Kué
Environmental Impact Assessment and recommended approval of the proposed Gahcho Kué diamond mine subject to certain measures
and follow-up programs.



In October 2013 the Canadian Federal
Minister of Aboriginal Affairs and Northern Development approved the development of the Gahcho Kué diamond mine subject
to the measures and follow-up programs recommended by the MVEIRB.



On December 2, 2013 Mackenzie
Valley Land and Water Board approved a pioneer Land Use Permit for the Gahcho Kué diamond mine, which allowed for the commencement
of land-based site works in preparation for the start of full construction in 2014.



Other Properties



The Company regards only the
AK Property (the “Gahcho Kué Project”) as material at this time. The Company’s former Kennady North Project
is discussed only briefly in this document. For further particulars, reference should be made to “Item 4D - Property, plants
and equipment - Other Properties”.



Kennady North

The Company (outside of the Joint
Arrangement with De Beers Canada) had the following five mining leases at Kennady Lake, adjacent or close to the Gahcho Kué
Project, with their respective lease numbers –4340, 4342, 4466, 4467, and 4468. These five mining leases represent about
12,755 acres. In late 2010, the Company also staked eight claims around Gahcho Kué – Kwezi 01 to Kwezi 08. These claims
represent approximately 17,619 acres, and together with the five mining leases, comprise 30,374 acres. This was known as the Company’s
Kennady North Project. These mining leases and claims were not part of the 2009 Gahcho Kué Joint Arrangement Agreement with
De Beers Canada and were not considered part of the Gahcho Kué Project. Historical exploration on the Kennady North Project
was done starting in 1992 and continued until about 12 years ago when the Company and De Beers Canada focussed exploration efforts
on the Gahcho Kué Project. In 2011, the Company undertook a desktop study of the exploration work done in the past on the
Kennady North Project, and in late 2011, undertook an airborne gravity gradiometer survey over the Kennady North Project leases
and claims.



On March 12, 2012, Kennady
Diamonds Inc. and Mountain Province entered into the Kennady Arrangement Agreement pursuant to which Mountain Province agreed to
would transfer its interest in the Kennady North Project, in the Northwest Territories in Canada, including permits, mining claims,
rights and title, to Kennady Diamonds Inc. in exchange for common shares of Kennady Diamonds Inc.



Upon completion of the Kennady
Arrangement on July 6, 2012, Kennady Diamonds Inc. issued 16,143,111 shares to Mountain Province which were distributed along with
the one share held by Mountain Province to the Mountain Province shareholders in exchange for the assets and cash transferred,
as contemplated by the Kennady Arrangement. The transactions contemplated by the Kennady Arrangement were completed on July 6,
2012. Kennady Diamonds Inc. began trading on the TSX Venture Exchange on July 10, 2012 under the ticker symbol “KDI”.



17







Foreign Assets



Until the Arrangement with Glenmore,
all of the Company's assets are and have been located in Canada (see Item 4D - Property, plants and equipment - Principal Properties).
Since the Arrangement, the Company has not generated any revenue from operations. Pursuant to the Arrangement, the assets of Glenmore,
were acquired by Mountain Glen, and are now held by the Company, having been distributed to the Company on the winding up of Mountain
Glen.



Government Regulation



The current and anticipated future
operations of the Company, including development activities and commencement of production on its properties, require permits from
various federal, territorial and local governmental authorities and such operations are and will be governed by laws and regulations
governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal,
toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation
of mine-related facilities generally experience increased costs, and delays in production and other schedules as a result of the
need to comply with applicable laws, regulations and permits. The Company's exploration and development activities, as well as
future mining and processing operations in Canada, are subject to various laws governing land use, the protection of the environment,
prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances,
mine safety and other matters.



In most jurisdictions, mining
is regulated by conservation laws and regulations. In the Northwest Territories, the mining industry operates primarily under Canadian
federal law because the ownership of water, fisheries, and surface and sub-surface rights to land are vested in the federal government.
Accordingly, federal legislation governs prospecting, development, production, environmental protection, exports, and collective
bargaining. Matters of a purely local or territorial nature, such as mine safety standards, the establishment of a minimum wage,
education and local health services are matters for the Territorial government. With respect to environmental matters, the Company's
properties are subject to federal regulation under, inter alia,the Canadian Environmental Protection Act, the Fisheries
Act, the Canadian Environmental Protection Act,the Migratory Bird Act,the Northwest Territories Waters Act,
the Northwest Territories Wildlife Act,the Arctic Waters Pollution Prevention Act, the Navigable Waters Protection
Act, the Mackenzie Valley Resource Management Actand the Mackenzie Valley Land Use Regulations. Territorial
environmental legislation may also apply for some purposes. The Mackenzie Valley Land and Water Board established under the federal
Mackenzie Valley Resource Management Act has the responsibility to receive and to process applications for water licenses
under the Northwest Territories Waters Act in most areas of the Northwest Territories. Generally, these licenses outline
the volume of water the mine may use, how tailings will be treated, the quality and types of waste that may be deposited into the
receiving environment and how the quality and types of waste may be monitored and contain requirements regarding the restoration
of the tailings disposal and other affected areas. The water licence also has requirements for monitoring and reporting of water
and waste as well as determines reclamation and closure requirements. The Mackenzie Valley Land and Water Board also issues land
use permits applicable to most areas of the Northwest Territories under the Mackenzie Valley Land Use Regulations. Such
permits govern the manner in which various development activities on federal Crown and other lands may be undertaken. Applicable
territorial legislation and regulations include the Apprentice and Trade Certification Regulations, Archaeological Resources
Act, Boilers and Pressure Vessels Regulations, Business Licence Fire Regulations, Civil Emergency Measures Act, Environmental
Protection Act, Environmental Rights Act, Explosives Use Act, Explosives Regulations, Fire Prevention Act, Fire Prevention Regulations,
Labour Standards Act, Mine Health and Safety Act, Mine Health and Safety Regulations, Public Health Act, Research Act, Wildlife
Act,and Workers Compensation Act.



18







The Fisheries Act, Northwest
Territories Waters Act, Territorial Lands Act and Regulations, Territorial Quarrying Regulations, Mackenzie Valley Land Use Regulations,
Real Property Act, Transportation of Dangerous Goods Act,and the Canada Mining Regulations are federal legislation
or regulations. Failure to comply with territorial and/or federal legislation or regulations may result in cease work orders and/or
fines.



The Company's operations and
exploration activities are also subject to substantial regulation under these laws by governmental agencies. The Company believes
it is in substantial compliance with all material laws and regulations which currently apply to its activities. There can be no
assurance, however, that all permits which the Company may require for construction of mining facilities and conduct of mining
operations will be obtainable on reasonable terms or that such laws and regulations, or that new legislation or modifications to
existing legislation, would not have an adverse effect on any exploration, development or mining project which the Company might
undertake.



Portions of the Northwest Territories
will also be subject to the jurisdiction of the Tlicho Government, a First Nations government which will have certain powers of
regulation in respect of "Tlicho Lands" under the "Tlicho Agreement", a land claim agreement entered into between
the Tlicho First Nation and the federal and territorial governments.



Failure to comply with applicable
laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those
suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation
of applicable laws or regulations.



Amendments to current laws, regulations
and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material
adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production
at producing properties or require abandonment or delays in development of new mining properties.



On October 17, 2007, the Company
entered into an agreement with the Government of the Northwest Territories pursuant to which it agreed to make available 10% of
its share of the diamonds from the Gahcho Kué Project to the Northwest Territories diamond cutting and polishing facilities.



| | C. | Organizational structure.
| | -- | -------------------------



See “Item 4 A - History
and development of the Company - The Corporate Organization”.



19







| | D. | Property, plants and equipment.
| | -- | -------------------------------



Principal Properties



In this section on "Principal
Properties", the reader should note that where disclosures pertaining to mineral resources are made, these are not mineral
reserves and do not have demonstrated economic viability. The Company has only one principal property, the AK Property also known
as the Gahcho Kué Project, which is located in the Canada’s Northwest Territories. The Gahcho Kué Project is
in the development and permitting stage.



A "mineral resource"
as defined under the CIM Definition Standards, differs from the SEC Guidelines and means 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. See "Glossary of
Technical Terms" in this Report.



A "mineral reserve"
as defined under the CIM Definition Standards, which are different from the SEC Guidelines, means the economically mineable part
of a Measured Mineral Resource 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. See "Glossary of Technical Terms" in this Report.



In this Annual Report, because
the Company is a Canadian company with mining properties in Canada, the definitions and disclosures are made in accordance with
the CIM Definition Standards as required by Canadian law for disclosure of material facts. The CIM Definition Standards differ
from those adopted by the SEC in its SEC Guidelines. See “Glossary of Technical Terms” in this Report.



It should be noted that
the SEC Guidelines define "reserve" to mean "that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination". See the Mineral Reserves Section, below.



Description of Property



Administrative Offices



The Company's administrative
office is located at 161 Bay Street, Suite 2315, PO Box 216, Toronto, Ontario, Canada M5J 2S1. The Company considers these premises
suitable for its current needs.



Mineral Properties



The Company’s main property
is the Gahcho Kué Project.



Amended and Restated Joint
Venture Agreement



Under the 2002 Agreement with
De Beers Canada previously in effect, the Company was not responsible for funding the Gahcho Kué Project, and De Beers Canada
had no recourse to the Company for repayment of funds until, and unless, the Gahcho Kué Project was built, in production,
and generating net cash flows.



20







On July 3, 2009, the Company
entered the “2009 Agreement” with De Beers Canada (jointly, the “Participants”) with respect to the Gahcho
Kué Project that replaces the 2002 Agreement entered into by the Participants. Under the 2009 Agreement:



| | 1. | The Participants’ continuing interests in the Gahcho Kué Project will be Mountain
Province 49% and De Beers Canada 51%, with Mountain Province’s interest no longer subject to the dilution provisions in the
2002 Agreement except for normal dilution provisions which are applicable to both Participants;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Each Participant will market their own proportionate share of diamond production in accordance
with their participating interest;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------

| | 3. | Each Participant will contribute their proportionate share to the future project development costs;
| | -- | ---------------------------------------------------------------------------------------------------

| | 4. | Material strategic and operating decisions will be made by consensus of the Participants as long
as each Participant has a participating interest of 40% or more;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The Participants agreed that the sunk historic costs to the period ending on December 31, 2008
will be reduced and limited to $120 million;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | Mountain Province would repay De Beers Canada $59 million (representing 49% of an agreed sum of
$120 million) in settlement of the Company’s share of the agreed historic sunk costs on the following schedule:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

·$200,000
on execution of the 2009 Agreement (Mountain Province’s contribution to the 2009 Gahcho Kué Joint Arrangement expenses
to date of execution of the 2009 Agreement) (paid);

·Up
to $5.1 million in respect of De Beers Canada’s share of the costs of the feasibility study (paid $4,417,421 to December
31, 2013, capitalized as “Mineral Properties” in the Company’s financial statements – no further costs
expected);

·$10
million upon the completion of a feasibility study with at least a 15% IRR and approval of the necessary development work for a
mine (as defined in the 2009 Gahcho Kué Joint Arrangement Agreement – paid March 15, 2011);

·$10
million following the issuance of the construction and operating permits;

·$10
million following the commencement of commercial production; and

·The
balance of approximately $24.4 million plus accrued interest within 18 months following commencement of commercial production.



Mountain Province has agreed
that the marketing rights provided to the Company in the 2009 Agreement will be diluted if the Company defaults on certain of the
repayments described above.



Extracts from Technical Reports



Unless otherwise stated, the
technical information in this section from the sub-headings “Property Setting” to “Economic Analysis - Summary”
is based upon Independent Qualified Person's Technical Report dated as of December 1, 2010 (with information effective as of October
15, 2010) (the "2010 Technical Report") entitled "Gahcho Kué Project, Definitive Feasibility Study, NI 43-101
Technical Report, Northwest Territories, Canada" prepared for the Gahcho Kué Project by JDS Energy and Mining Inc.
by:



| | · | Daniel D. Johnson, P.Eng. (JDS)
| | - | -------------------------------

| | · | Mike Makarenko, P.Eng. (JDS)
| | - | ----------------------------

| | · | Ken Meikle, P.Eng. (JDS)
| | - | ------------------------

| | · | Bob Prince-Wright, P.Eng. (JDS)
| | - | -------------------------------



21







| | · | Jarek Jakubec, C.Eng. (SRK (Canada) Consulting
Inc.)
| | - | ----------------------------------------------------

| | · | Kevin Jones, P.Eng. (EBA Engineering Consultants
Inc.)
| | - | ------------------------------------------------------



The details about the 2010
Technical Report were filed on EDGAR on December 3, 2010 under Form 6K. The full Technical Report was also filed on SEDAR on December
3, 2010.



An updated mineral resource
estimate for the deep portion of the Tuzo kimberlite was provided in an Independent Qualified Person’s Technical Report
with an effective date of July 2, 2013 (the “2013 Technical Report”) entitled “Update of the Mineral Resource
Estimate for the Tuzo Kimberlite, Gahcho Kué Project, Northwest Territories, Canada: NI 43-101 Technical Report”
prepared for Mountain Province by Mineral Services Canada Inc. by:



| | · | Tom E. Nowicki, P.Geo. (Mineral Services
Canada Inc.)
| | - | -----------------------------------------------------



| | · | Michael Makarenko, P.Eng. (JDS Energy
& Mining Inc.)
| | - | ----------------------------------------------------



The details about the 2013
Technical Report were filed on EDGAR on August 14, 2013 under Form 6K. The full Technical Report was also filed with the relevant
Securities Commissions in Canada on SEDAR on August 13, 2013.



Portions of the following information
are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full
text of the 2010 Technical Report and the 2013 Technical Report.



Property Setting



The Gahcho Kué Project
is located at the informally-named Kennady Lake, approximately 300 km east-northeast of Yellowknife in the Northwest Territories
(NWT), Canada at the approximate latitude 63.26.16N and longitude 109.12.05W (NAD83 Zone 12 coordinates 7035620N, 589735E.



The Gahcho Kué Project
is located 150 km south–southeast of the Diavik and Ekati diamond mines operated by Diavik Diamond Mines Inc. (Rio Tinto)
and BHP Diamonds Inc. (BHP Billiton) respectively at Lac de Gras, and 80 km east–southeast of the De Beers Canada Snap Lake
mine.



The Gahcho Kué Project
consists Hearne North and South; 5034 West, Central and North-East; 5034 South Pipe; 5034 North Pipe; Tuzo; Wallace; Dunn Sheet
and Tesla diamondiferous kimberlite pipes, sheets and dykes. Except for the northernmost part of 5034, the main kimberlite pipes
all lie beneath Kennady Lake.



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, nutrient-poor
water, and relatively low potential for aquatic life.



Physiography



The Gahcho Kué Project
lies on the edge of the continuous permafrost zone in an area known as the “barren lands”, which are characterized
by heath and tundra, with occasional knolls, bedrock outcrops, and localized surface depressions interspersed with lakes. Thin,
discontinuous covers of organic and mineral soil and glacial till deposits overlie bedrock, which occurs typically within a few
metres of surface. Some small stands of stunted spruce occur in the area.



22









Fauna
includes red fox, arctic fox, sic sic, grizzly bear, wolf and caribou (during annual migration), ptarmigan, abundant migratory
bird life in summer, and clouds of mosquitoes and black flies during the height of the summer months (mid-June to mid-August).



Vegetation in the area is characteristic
of low arctic tundra. Shrubs of willow and birch occur in drainages, and in some areas may reach over 2 m in height. Heath
tundra covers most upland areas. Conifer stands occur in patchy distribution north of the tree line in lowland, sheltered areas,
and riparian habitats, and are found as far north as Kirk Lake.



Topographic elevations within
the property range between 400 meters above sea level (“masl”) to 450 masl.



Accessibility



The Gahcho Kué Project
occurs at the informally-named Kennady Lake, 20 km north of tree line with no permanent road access. Access to the Gahcho Kué
Project is by float-equipped planes during summer months and ski- or wheel-equipped planes in winter. During winter, larger aircraft
such as the Dash-7 and Super Hercules L100 Transport can operate from an artificially-thickened ice landing strip on Kennady Lake.



Helicopter pads are located
within the base camp to support drilling and logistical operations. During the short ‘shoulder seasons’, access to
the property is via a 1,000 ft long runway established on an esker at Kirk Lake Camp located approximately 26 km north
of the Gahcho Kué Project; passengers and supplies are transferred to the site by helicopter.



During winter, a permitted
120 km winter ice road connecting the Gahcho Kué Project with the main Tibbitt Lake to Contwoyto Lake winter road is
built, if required. The winter ice road supports shipment of fuel, heavy equipment, construction materials and bulk samples. The
main winter ice road connects Yellowknife to the Snap Lake, Ekati, and Diavik mines from February to April each year to the extent
that weather allows. The road is operated under a Licence of Occupation by the Joint Venture Partners who operate the Ekati (Dominion
Diamonds), Snap Lake (De Beers Canada) and Diavik (Rio Tinto) mines. The Gahcho Kué Joint Venture is also a full partner
in the Licence of Occupation, which provides equal access to and use of the ice road.



Climate



As the Gahcho Kué Project
is located 230 km south of the Arctic Circle, the climate is extreme and semi-arid. Temperatures range from -45°C to +25°C
over a twelve-month period. Winter normally lasts from November to May and has average temperatures of about -20°C. Summer
temperatures prevail from early July to mid-September, and average about 18°C. Freeze-up and ice break-up occur in November
and June, respectively. Activities are possible on-site year-round.



Daylight hours range from near
zero in mid winter (Winter Solstice) to effectively 24 hours (Summer Solstice). The spring and fall equinox occur in March and
September respectively, marking the period when length of daylight and darkness are equal.



23







Infrastructure



Camp – The exploration
camp erected on the shore of Kennady Lake (near the southeast edge of the postulated future limits of the 5034 pit) has seen an
increase to accommodations in order to lodge the preliminary construction work crew. Living quarters are a mixture of three-person
stick-built cabins and skid-mounted dorm units; providing a maximum capacity of 180 beds.  Support buildings include the kitchen
and dining room; recreation building; office building; core storage; men’s and women’s dry; toilet facilities; fuel
storage; shops; and warehouses.



Transport – Regular
shipments of consumables and materials can occur over an annual winter road and, for year-round access and deliveries, by aircraft.



Power– There
is currently no local electrical grid or power plant for power supply to site. Power generation for any planned mining operation
is likely to be produced by an on-site diesel generation plant.



Communications –
Current site communications depends entirely on satellite connections for internet and phones.



Water– Process
water for any planned mining operation may be obtained from open-pit water collection, recycling of process water, water management
ponds and from re-treatment of water from waste piles. Hydrogeological studies are required to confirm whether there is adequate
process water from these sources. Kennady Lake is the current source of potable water.



Tenure History



The Gahcho Kué Project
was part of a larger group of mining claims, known as the AK Property, which currently consists of four remaining mining leases.
The AK Property was initially staked in 1992 by Inukshuk Capital Corp., and optioned to Mountain Province Mining, Inc. (now Mountain
Province Diamonds Inc.) later the same year.



On staking, the AK Property
covered about 520,000 ha, and included the AK and CJ claims. The CJ claims substantially lapsed in November 2001, and the remaining
CJ claims lapsed on August 17, 2002, leaving only the AK claims as current.



Additional partners in the AK
Property included Camphor Ventures Inc. (“Camphor Ventures”), and 444965 B.C. Ltd, a subsidiary company of Glenmore
Highlands Inc. (“Glenmore Highlands”). At the time, Glenmore Highlands was a controlling shareholder of Mountain Province
Mining Inc. as defined under the Securities Act of British Columbia. The Glenmore Highlands subsidiary amalgamated with MPV in
1997, and Camphor Venture’s interest in the AK Property was acquired by MPV during 2007.



In 1997, Monopros (now De Beers
Canada) joint ventured the property.



24







Mineral Tenure



The Gahcho Kué Project
comprises four mining leases, 4199, 4341, 4200, and 4201, covering a total area of 10,353 hectares. The mining leases are 100%
owned by De Beers Canada which holds them on behalf of the Gahcho Kué Joint Arrangement. The participating interest of each
participant of the Gahcho Kué Joint Arrangement is governed by the 2009 Agreement, which supersedes the (2002) Agreement.
The (2002) Agreement is registered against the mineral leases. The 2009 Agreement provides for De Beers Canada’s participating
interest to be 51% and MPV’s interest (including Camphor’s) to be 49% of the Gahcho Kué Project.



Annual lease payments, payable
to the Receiver General Canada (Northwest Territories, c/o Mining Recorders Office), comprise $1.00 per acre for the duration of
the 21-year lease period (note that fees are payable on acres, not hectares, in the Northwest Territories and Nunavut). Payments
increase to $2.00 per acre if a second 21-year term is granted after application to the Northwest Territories Mining Recorder for
the extension. Payments for the leases for 2007 totalled $10,353, and a similar amount is expected for each succeeding year. All
mining leases were legally surveyed by licensed surveyors.



Agreements



The Letter Agreement, dated
March 6, 1997, was entered into between Monopros Ltd. (a wholly-owned Canadian subsidiary of De Beers Consolidated Mines and
now known as De Beers Canada), MPV, and Camphor Ventures. The parties amended the Monopros Ltd. Joint Venture Agreement in 2000,
as a result of agreements reached at a meeting on March 8, 2000.



The Gahcho Kué Joint
Venture Agreement became effective on January 1, 2002, was signed October 24, 2002. The 2002 Agreement provided that De Beers Canada
could earn up to a 55% interest in the Gahcho Kué Project by funding and completing a positive definitive feasibility study.
The 2002 Agreement also provided that De Beers Canada could earn up to a 60% interest in the Gahcho Kué Project by funding
development and construction of a commercial-scale mine.



MPV acquired Camphor Ventures’
interest in the joint venture in 2007.



An updated and amended joint
Arrangement agreement between De Beers Canada and MPV was executed effective July 3, 2009. The 2009 Agreement superseded the previous
joint venture agreements. The 2009 Agreement maintains the Gahcho Kué Project ownership at 51% De Beers Canada and
49% MPV. Each party is responsible for funding their respective share of the Gahcho Kué Project development costs from January
1, 2009 onward, and each party shall receive a proportional share of the diamond production.



The 2009 Agreement also sets
forth the amount of “allowable” expenses of exploration work between March 8, 2000 and December 31, 2008 previously
funded by De Beers Canada, and sets forth a repayment schedule by MPV to De Beers Canada for their 49% share of the allowable
expenses. The repayment schedule is triggered by milestone events with the final payment plus accrued interest required to be made
18 months after the start of commercial production.



25







Permits



Exploration
Programs



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



| | · | Indian and Northern Affairs Canada –
Class A Land Use Permit
| | - | ------------------------------------------------------------

| | · | Indian and Northern Affairs Canada –
Type B Water Licence
| | - | ---------------------------------------------------------

| | · | Workers’ Compensation Board (WCB),
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.
| | - | -------------------------------------------------------



Development



The Gahcho Kué Project
is being permitted under the Mackenzie Valley Resource Management Act. A list of the permits that may be required for Gahcho Kué
Project development is presented in the 2010 Technical Report and the 2013 Technical Report.



On July 22, 2013 Mountain Province
and De Beers Canada announced that the Mackenzie Valley Environmental Impact Review Board (MVEIRB) completed the Gahcho Kué
Environmental Impact Assessment and recommended approval of the proposed Gahcho Kué diamond mine subject to measures and
follow-up programs.



On December 2, 2013 Mountain
Province and De Beers Canada announced that Mackenzie Valley Land and Water Board approved a pioneer Land Use Permit for the Gahcho
Kué diamond mine. The pioneer Land Use Permit allows land-based site works to commence in preparation for deliveries planned
for the 2014 winter road season. Major permits required for the completion of construction and operation of the Gahcho Kué
mine include a Class A Land Use Permit and Class A Water Licence, which are expected to be issued during the course of 2014.



Previous Work



There is no recorded exploration
prior to 1992 for diamonds, base, or precious metals in the area covered by the Gahcho Kué Project. Exploration conducted
on behalf of MPV by Canamera Geological Ltd. during 1995 resulted in the discovery of the 5034 kimberlite.



De Beers Canada became
the operator of the property via a joint-venture agreement in 1997. Additional kimberlites, including Tesla, Hearne, and Tuzo were
discovered the same year. Tesla, Tuzo, Hearne and 5034 form the main Gahcho Kué kimberlite cluster.



In July 2012, Mountain Province
completed a plan of arrangement whereby the Kennady North project, bounding the Gahcho Kué Project to the north and east,
and containing the Kelvin and Faraday kimberlites, was transferred in full to the newly-created Kennady Diamonds Inc. There is
no overlap between the Gahcho Kué Project and the Kennady Diamonds Project.



26







Summary of Exploration and
Development Work Undertaken



Exploration and development
work undertaken during 1997–2008 included:



| | · | sediment sampling, including glacial till,
sediment and outcrop sampling
| | - | ------------------------------------------------------------------------

| | · | geological mapping
| | - | ------------------

| | · | airborne electromagnetic and ground geophysical
surveys
| | - | -------------------------------------------------------

| | · | core drilling, including large diameter core
mini-bulk sampling
| | - | ---------------------------------------------------------------

| | · | reverse circulation drilling, including mini-bulk
and bulk sampling programs utilizing reverse-flood air-lift assist large diameter drill rigs
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | · | geotechnical, hydrogeology, and civil engineering
drilling
| | - | ----------------------------------------------------------

| | · | micro- and macro-diamond sample processing
and analysis
| | - | -------------------------------------------------------

| | · | diamond valuation and diamond breakage analysis
| | - | -----------------------------------------------

| | · | bulk density determinations
| | - | ---------------------------

| | · | ore dressing studies
| | - | --------------------

| | · | construction of geological and micro-diamond
grade models and Mineral Resource block models
| | - | -------------------------------------------------------------------------------------------

| | · | construction of density, geotechnical, and
volume models
| | - | --------------------------------------------------------

| | · | conceptual mine plans
| | - | ---------------------

| | · | conceptual process plant design.
| | - | --------------------------------



A first-time Mineral Resource
estimate was completed in 2003 to support a conceptual desktop study of the potential of these pipes. The study included Inferred
Mineral Resources, considered too speculative geologically to have economic considerations applied to them.



From 2003 to 2008, a number
of additional desktop studies were completed that considered aspects of conceptual mining studies. These comprised conceptual mining
and processing considerations, evaluation of different potential input factors and assumptions.



None of the above desktop studies
completed provided for a sufficiently economic robust project.



Between August 2009 and December
2010, JDS was engaged to provide a feasibility study that outlined a sufficiently robust mine development plan. On October 15,
2010, JDS delivered the definitive Feasibility Study report to the Gahcho Kué Joint Arrangement of which a detailed summary
is provided in the December 1, 2010 Technical Report. The 2010 Technical Report outlined a plan that exceeded the minimum hurdle
rate required by the 2009 Agreement to proceed with mine development.



Additional work completed since 2010 includes:



| | · | Airborne gravity survey over the entire
project area completed in October 2011, comprising 1198 line-kilometers;
| | - | ----------------------------------------------------------------------------------------------------------------

| | · | Drilling and sampling of the deeper portions
of Tuzo.
| | - | -----------------------------------------------------



This work provided the basis
for the updated mineral resource estimate for the deep portion of the Tuzo kimberlite.



27







Geology



This excerpt from the 2010
Technical Report was taken from the 2009 Technical Report. JDS reviewed the 2009 Technical Report and believes the information
contained in this section to be accurate.



The Gahcho Kué kimberlite
cluster occurs in the southeast Slave Craton.



Several kimberlite bodies were
discovered and delineated by drilling. The 5034, Hearne North, Hearne South, and Tuzo pipes have the most attractive grades and
tonnages delineated to date. Of the larger kimberlites on the property, the 5034 kimberlite is interpreted as forming an irregular
hypabyssal root zone, Hearne and Tesla as transitional diatreme to root zones and Tuzo as the deeper part of a diatreme zone (Tesla
is not included in the Gahcho Kué Mineral Resource because of its small size (0.4 ha) and relatively low-grade).



The 5034, Hearne, and Tuzo
kimberlites have contrasting pipe shapes. The West Lobe, Centre Lobe, and eastern portion of the North-East Lobe of the 5034 kimberlite
sub-crop below lake-bottom sediments; the northern portion of the 5034 North-East Lobe (referred to as the North Lobe) is a blind
lobe overlain by approximately 80 m of in-situ country rock. The 5034 pipe is dominantly infilled with hypabyssal kimberlite
(“HK”). Hearne South is a roughly circular pipe and smaller than Hearne North, which is a narrow elongated pipe. Hearne
South is infilled predominantly with tuffisitic kimberlite breccia (“TK”); Hearne North is infilled with approximately
equal amounts of HK and TK. Tuzo is characterized by smooth, steep-sided pipe walls and is predominantly infilled with TK with
HK at depth.



In most cases, the top of the
kimberlites occur between 380 and 390 masl. Except for the 5034 North Lobe, which intrudes 70 to 80 m below a peninsula,
the kimberlites subcrop at the bottom of Kennady Lake, covered by 10 to 15 m of water and between 5 to 15 m of glacial
lake sediments. The kimberlites are surrounded laterally by granite and granite-gneiss country rock.



In the 2009 Technical Report,
AMEC Americas Limited determined that the geological understanding of the deposit setting, lithologies, and kimberlite type distributions
was adequate to support Mineral Resource estimation. Understanding of diamond distributions within each kimberlite type, as well
as the style of mineralization were sufficient to support Mineral Resource estimation.



The following paragraph
is not an excerpt from the 2010 Technical Report.



The 2013 Technical Report provided
a more detailed analysis of the geological and geotechnical characteristics of the Tuzo kimberlite, including 3D modelling. A Mineral
Resource estimate for the upper portion of the Tuzo kimberlite extending to a depth of 354 mbs was undertaken by De Beers Canada
in 2009, subsequently incorporated into the 2010 Technical Report. Following completion of the Tuzo Deep drilling and sampling
program in 2012, De Beers Canada undertook a Mineral Resource estimate for the section of the Tuzo kimberlite extending between
354 and 564 mbs. A Mineral Resource statement, summarizing the new and updated estimates for Tuzo Deep (300 to 564 mbs) was provided
in a letter from De Beers Canada Inc. to Mountain Province on April 4, 2013. The purpose of the 2013 Technical Report was to verify
and document this Mineral Resource estimation.



Drilling and Sampling



Drilling completed to date
on and surrounding the Gahcho Kué kimberlite cluster totals 510 drill holes (100,618 meters). An additional 50 drill holes
were completed on exploration targets located away from the Gahcho Kué cluster. Core holes included PQ (85.0 mm), HQ (63.5
mm) and NQ (47.6 mm) core sizes, and 76 mm tricone drilling for overburden. RC drill diameters included 140 mm, 149 mm, 324 mm,
334 mm and 610 mm sizes.



28







Exploration drilling programs
were performed during 1995-2003 around the Gahcho Kué kimberlite cluster to test geophysical anomalies, discover kimberlites,
define pipe boundaries and morphology, delineate internal geology and provide large diameter reverse circulation (“RC”)
drill (“LDD”) mini-bulk samples for value and grade evaluation purposes.



Drilling between 2004 and 2008
comprised LDD and large diameter core (“LDC”) mini-bulk sample, programs, core drilling to provide information to support
advanced evaluation geology, Mineral Resource estimation and ore dressing studies, civil engineering, geotechnical, hydrological,
and geothermal core drilling programs. These drill programs also provided core that was used to inform and support environmental
baseline studies.



The following paragraph
is not an excerpt from the 2010 Technical Report.



An additional 6 HQ diameter
core drill holes (4,126.62 m) were drilled in 2011/2012 with the purpose of further delineating the deep (354 – 564 mbs)
portion of the Tuzo kimberlite and obtaining material for microdiamond sampling.



5034



Canamera Geological Ltd. (“Canamera”)
conducted the earliest drilling that resulted in the discovery of the 5034 kimberlite. Drilling in 1995 included 39 delineation
NQ core holes (6,522 m). Since then, small-diameter NQ core drilling was used extensively to test kimberlite indicator mineral
trains and geophysical anomalies in addition to delineation of the 5034 kimberlite.



Large diameter core drilling
was used to collect small mini-bulk samples from 5034. In 1996, Canamera obtained PQ-sized core samples (85 mm diameter),
and in 2007, the Gahcho Kué Project obtained 149 mm diameter LDC samples. The LDC samples provide additional information
(macro-diamonds) regarding the diamond content of the pipes.



Large diameter reverse circulation
drilling was used to collect kimberlite mini-bulk samples. LDD programs have included smaller scale 140 mm (5.5-inch) diameter
drillholes in 1998, 311 mm (12.25-inch) drill holes in 1999, to the largest employed, the 610 mm (24-inch) diameter drill
holes in the 2001, 2002, and 2008 mini-bulk sampling programs. The LDD mini-bulk sample programs obtained macro-diamonds for grade
and revenue estimation.



The 1998 and 1999 drilling
focused on the 5034 West, Centre and East lobes; in 2001 the East Lobe and the west neck of the Centre Lobe were drilled; in 2002
work focused on the narrow corridor drilled previously in 1999 through the West and Centre lobes. There was one delineation NQ
core hole drilled by Gahcho Kué Joint Venture at 5034 in 2003.



In 2004, 13 core holes drilled
into the 5034 kimberlite as part of pit geotechnical, hydrogeology, and ore dressing studies (“ODS”). In 2005, a single
core hole for hydrogeology studies drilled through the East Lobe of 5034, and two core holes were drilled at the North Lobe of
5034 to provide additional geological data. A substantial core program followed this in 2006 that comprised 13 HQ core holes
for pit geotechnical, pipe volume delineation, and geological investigations. The last campaign of core drilling was conducted
in 2007 with five HQ core holes being drilled to provide geological data from the 5034 East Lobe and 5 LDC holes (149 mm,
5.875-inch) drilled into the 5034 North Lobe to obtain a small parcel of macro-diamonds for comparative purposes.



29







Hearne



A total of 24 core holes were
drilled in and around the Hearne kimberlite during 1997-2003 for delination. In 1998, 19 LDD holes (140 mm diameter) were
drilled into the Hearne kimberlite to test the diamond grade.



In 1999, 10 LDD (311 mm
diameter) holes were drilled into Hearne to obtain macro-diamonds for initial revenue estimation. In 2001, 5 LDD (610 mm
diameter) holes were drilled into Hearne North, and 6 more LDD (610 mm diameter) holes tested in 2002, to increase the parcel
of macro-diamonds available for revenue estimation.



In 2004, 14 NQ core holes
were drilled into the Hearne kimberlite as part of pit geotechnical and ODS programs. In 2005 a single core hole was drilled for
hydrogeological studies, and in 2006 a single core hole was drilled to support pit geotechnical studies.



Tuzo



Between 1997 and 1999, 7 NQ
and 3 NQ3 core holes were drilled into Tuzo. All of these were angle holes collared outside the kimberlite body and drilled into,
and sometimes through, the kimberlite. In 2002, 7 vertical HQ core holes were drilled into the pipe. LDD mini-bulk sample drilling
took place in 1998 and 1999. Drilling to a maximum depth of 166 m, 18 LDD holes (140 mm diameter) were completed
in 1998, and an additional 11 LDD holes (311 mm diameter) were completed in 1999 to a maximum depth of 300 m.



In 2004, 2 HQ core holes
were drilled at Tuzo as part of a pit geotechnical study. This was followed by a 16-hole HQ core program in 2006 to provide pipe
delineation and geological data and pilot holes. Two 610 mm holes were drilled in 2006 to provide samples. In 2007, a grid of 27 HQ
core holes was completed to provide additional geological and pipe volume delineation data. The final resource drilling at Tuzo
was an LDD mini-bulk sample program conducted in 2008 with 9 holes (610 mm) completed to provide additional macro-diamonds
for diamond revenue estimation.



The following paragraph
is not an excerpt from the 2010 Technical Report.



In 2011/2012 an additional
6 HQ diameter core drill holes (4,126.62 m) were drilled with the purpose of further delineating the deep (354 – 564 mbs)
portion of the Tuzo kimberlite and obtaining material for microdiamond sampling. Previous evaluation work had not adequately represented
this zone. Samples of approximately 8 kg each were collected for microdiamonds at 12 m spacing down hole throughout the entire
length of the kimberlite intersection in each drill hole.



AMEC’s Assessment



This excerpt from the 2010
Technical Report was taken from the 2009 Technical Report. JDS reviewed the 2009 Technical Report and believes the information
contained in this section to be accurate.



AMEC assessed the exploration
results to be appropriate to the style of mineralization and adequate to support Mineral Resource estimation. Drill hole types
and orientations were appropriate for the type of mineralization. Small-diameter core holes defined the limits of the kimberlite
bodies. Large-diameter core and reverse circulation drilling provided mini-bulk samples of kimberlite material for macro-diamond
extraction. Micro-diamonds were extracted from the small-diameter cores drilled to define the limits of the deposit. Three diamond
breakage studies indicated that breakage was about 10–15% that is typical for this type of drilling program. The diamond
parcels obtained in 2007–2008 were not evaluated for diamond breakage.



30







AMEC also assessed that the
sampling and sample lengths were appropriate for the type of mineralization. Core sample lengths were somewhat variable during
the early years of the Gahcho Kué Project. Later in the Gahcho Kué Project, core sample lengths were standardized
at 12 m. These standardized samples provided most of the data used for the Mineral Resource estimates reported in the 2009 Technical
Report.



Core and cuttings logging met
and typically significantly exceeded industry practices. Core was quick-logged on site, and the kimberlite intersections were transported
to De Beers’ core logging facility in Sudbury, Ontario where experienced geologists log kimberlite type, mineral and inclusion
types and concentrations, and structures. AMEC assessed that geotechnical work to date was appropriate for the stage of the Gahcho
Kué Project and type of mining planned. Geotechnical logging of exploration core is a routine procedure performed by geologists
trained in the logging methods required. A number of core holes were drilled specifically to obtain geotechnical data. Collar and
downhole surveys were performed using industry-standard methods and instruments.



AMEC determined that the analytical
and diamond recovery procedures were adequate to support Mineral Resource estimation. Macro-diamond and micro-diamond extractions
were performed using procedures standard to the industry. Micro-diamonds were recovered from core using either caustic fusion or
acid dissolution procedures. Both are standard to the industry, although caustic fusion is the most common procedure. Macro-diamonds
are extracted using small-scale diamond recovery plants. Geochemical samples were analyzed using standard procedures and instrumentation.
Density determinations were performed using standard procedures, and the number of density data is adequate to support Mineral
Resource estimation. Most of the density data were obtained using a water immersion procedure standard to the industry. Some of
the data were obtained using geophysical methods, and some were obtained by water displacement methods. Quality control during
drilling, sampling, and sample analysis is adequate and reflects industry best practices. Quality control of diamond extractions
consists of spikes using marked diamonds and tailings audits of a portion of the samples.



Sample and diamond security
throughout the exploration process was determined by AMEC to be excellent and consisted of rigorous chain-of-custody procedures,
multiple locks requiring at least two persons to open critical areas or containers, cameras in all plants and processing areas,
and dedicated security personnel at all plants and processing areas. Shipping of diamonds and diamond concentrates conforms to
requirements of Kimberley Process chain-of-custody procedures.



Geological Setting



This excerpt from the 2010
Technical Report was taken from the 2009 Technical Report. JDS reviewed the 2009 Technical Report and believes the information
contained in this section to be accurate.



Gahcho
Kué Kimberlites



The main Gahcho Kué
kimberlite cluster comprises four pipes; the Hearne, 5034, Tuzo, and Tesla bodies. The Hearne Pipe, most of the 5034 Pipe, and
the Tuzo and Tesla pipes occur under Kennady Lake, which has an average depth of 8 m.



31







Gahcho Kué kimberlites
are overlain by varying thickness of glacial boulder outwash and lake sediments (averaging 10 m thick), and have a combined
water and sediment cover as much as 25 m thick.



Hearne
Kimberlite



Two bodies comprise the Hearne
kimberlite, Hearne South and Hearne North. The bodies have smooth, steep-sided walls, and cover an area of about 1.5 ha. Hearne
South is a roughly circular pipe, whereas Hearne North is a narrow, elongate pipe trending north–south. The pipes may join
at depth. The width of country rock between the two bodies varies from a minimum of approximately 20 m at the sub-crop to
approximately 70 m at depth. Hearne North measures a maximum of 250 m x 50 m north–south. Hearne South
has a dimension of about 80 m x 90 m at surface.



The present pipe geological
model for Hearne South extends to 225 masl; there is no drill information below this level. At Hearne North, the pipe narrows
to less than 10 m wide in the centre of the body at approximately 130 m below lake-surface. There is also evidence at
the north and south ends of the body that the pipe extends below 115 masl.



The distance from the south
end of Hearne to Tuzo is about 2 km.



5034
Kimberlite



The 5034 kimberlite is a highly
irregularly-shaped pipe and dyke complex, which is comparable to kimberlite root zones elsewhere and has a surface area of approximately
2.1 ha (West, Centre and East Lobe).



The 5034 kimberlite is modelled
as a semi-continuous occurrence composed of five discrete kimberlite bodies, three of which are modelled as joined at the subcrop
to form one main continuous body, with two small outlying satellite pipes.



The five modelled kimberlite
bodies are referred to as follows:

| | · | 5034 South Pipe (that occurs along an interpreted
dyke, the “Southwest Corridor”, that is also modelled incorporating the Wallace and Tuffisitic Kimberlite BBBdrill core intersections)
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | 5034 “Main” West Lobe
| | - | ---------------------

| | · | 5034 “Main” Centre Lobe
| | - | -----------------------

| | · | 5034 “Main” North-East Lobe (i.e.,
East Lobe and North Lobe)
| | - | ------------------------------------------------------------

| | · | 5034 North Pipe.
| | - | ----------------



The main part of the 5034 occurrence
that reaches the surface occurs under Kennady Lake and can be divided into three lobes: West, Centre, and East. These three lobes
are joined at the surface, but separate at depth. The Centre and East lobes are modelled separately at shallow depth, but rejoin
at greater depth producing what appears to be a window of granite within the kimberlite. The East and North lobes are joined at
depth, geologically continuous, and are collectively referred to as the North-East Lobe. The surface measurements of the three
lobes of the 5034 Main Pipe are approximately as follows:

| | · | West Lobe – 125 m x 45 m
| | - | ------------------------

| | · | Centre Lobe – 125 m x 80 m
| | - | --------------------------

| | · | East Lobe – 85 m x 65 m.
| | - | ------------------------



32







The northern portion of the
5034 North-East lobe, the North Lobe, is blind, and occurs under 60 m to 90 m of country rock cap. Approximately half
of this northern lobe lies below the lake bed and half beneath the main peninsula. The blind northern portion of the 5034 North-East
Lobe measures 240 m long and varies from approximately 20 to 50 m wide, averaging 30 m wide. A combined internal
geology model is developed for the 5034 North-East Lobes. There are four major kimberlite types, three of which occur across both
lobes.



The
following excerpt about the Tuzo kimberlite is from the 2013 Technical Report.



Tuzo
Kimberlite



The Tuzo kimberlite pipe has
a circular outline in plan view, with steep-sided walls in the south and rounding towards the North, East and West. The surface
dimensions are ~108 m by 88 m, and the overall surface area of the pipe is ~0.76 hectares. The top of the pipe is covered by variable
thicknesses of water (average of ~8.4 m for drill cores collared on lake ice), and overburden (e.g. lake-bottom sediment and glacial
till; average of ~8 m). The pipe shape bulges with depth towards the North and West into an ellipsoidal outline oriented northeast
to southwest, reaching a maximum surface area at a depth of ~330 mbs that is approximately four times that at surface (~233 m by
165 m; ~3 ha).



Information obtained from the
2011/2012 Tuzo Deep program enabled extension of the Tuzo pipe model from 354 mbs to 564 mbs, establishing that below 330 mbs,
the pipe maintains an ellipsoidal outline oriented northeast to southwest, but that the pipe dimensions gradually narrow with depth.
The surface area of the pipe at the base of the model is approximately 1.3 ha.



All bodies remain open at depth.



Data Verification



Independent data verifications
were undertaken on a number of occasions between 1999 and 2008:

| | · | 1999, 2004, 2007 – independent consultants
made site visits to review quality assurance/quality control (“QA/QC”)
| | - | -----------------------------------------------------------------------------------------------------------------

| | · | 1999 – external consultant audit
of the 1999 evaluation program
| | - | ---------------------------------------------------------------

| | · | 2000 – geology (petrological) peer
review
| | - | -----------------------------------------

| | · | 2004 – geotechnical and hydrogeology
consultants QA/QC site visit, internal and external Mineral Resource evaluation data base audits, geology (petrological) peer review,
Gemcom® three-dimensional (“3D”) model peer review
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | 2007 – internal and external petrological
peer reviews; external verification of macro-diamond resource evaluation data set
| | - | ---------------------------------------------------------------------------------------------------------------------------

| | · | 2008 – external review of 2003 Technical
Report resource estimation and density (rock density) models.
| | - | ------------------------------------------------------------------------------------------------------



Resource evaluation data base
verification included:

| | · | audits of drill collar locations and lengths
| | - | --------------------------------------------

| | · | down-hole survey data
| | - | ---------------------

| | · | geological logs
| | - | ---------------

| | · | bulk density data
| | - | -----------------

| | · | macro-diamond data.
| | - | -------------------



33







The following paragraph
is not an excerpt from the 2010 Technical Report.



The Mineral Resource estimate
and classification for Tuzo Deep (300 to 564 metres below surface) has been subject to an extensive internal peer-review process
within the De Beers Group. All geological work is reviewed internally by senior DeBeers Canada KPU staff, and geological models
and Mineral Resource estimates were reviewed by senior De Beers MRM Group resource specialists in Johannesburg.



Independent reviews of critical aspects
of the estimate have been undertaken as follows:



| | · | Review of geological solids models undertaken
by D. Farrow of GeoStrat Consulting Inc.; and
| | - | -------------------------------------------------------------------------------------------



| | · | External review of the zonal estimate for
Tuzo Deep Lower by D. Bush of ZStar Mineral Resource Consultants.
| | - | -----------------------------------------------------------------------------------------------------------



Diamond Valuations



The Qualified Persons are not
able to apply quality control measures to the valuation process performed by either De Beers or WWW.



The reason for this is that
diamond valuation is, at best, only partially analytical (in the way that a gold assay process can be termed analytical), as the
diamonds are sieved and subjectively classified by colour, clarity, and other factors. The dollar per carat determinations for
various stones, however, is ultimately governed by the valuator’s price-book. This part of the process is proprietary, governed
by a given valuator’s view of the marketplace and can vary from valuator to valuator, particularly for larger stones. Even
in larger parcels, valuators must then ‘model’ or extrapolate values in the larger stone size classes where there may
be few representatives. The methodology for modelling is also proprietary.



These diamond valuation procedures
do not lend themselves to quality control measures that a qualified person could apply as with a commercial assay laboratory. At
every step, the QPs are relying on the valuator’s opinions of the diamond market and their subjective view of diamond values.



The Qualified Persons also
rely on the valuators models which are heavily dependent on their view of the diamond market, their proprietary estimates of the
likelihood of finding larger stones in the deposit because of sample-size support, and the perceived value of those larger stones.



The culmination of the process
is the average prices for given zones, lobes or pipes. The heavy dependence of the process on economic market assessments, and
the proprietary nature of the valuators’ assumptions and methods, materially affects the quality of, and confidence in, the
Mineral Resource estimate. In this way, the valuations used in the Mineral Resource assessments are markedly different than the
concept of analytical mineral assays in, for instance, a precious metal project. The proprietary nature of the processes employed
for valuations limit any quantitative assessment of the added risk to the Gahcho Kué Project. Other than reviewing the De
Beers Canada data and the WWW report for transcription errors in the transfer of the valuation figures into the database, no other
data verification procedures can be applied.



34







Diamond valuators are experts,
but not Qualified Persons, and the Qualified Persons preparing the Mineral Resource estimates and assessing the reasonable prospects
for economic extraction have had to completely rely on the De Beers Canada and WWW diamond values provided.



Mineral Resource and Mineral Reserve Estimates



Mineral Resource Summary
(not including Tuzo Deep (300 to 564 metres below surface))



This Mineral Resource Summary
excerpt and summary from the 2010 Technical Report was taken from the 2009 Technical Report. JDS reviewed the 2009 Technical Report
and believes the information contained in this section to be accurate.



Cautionary Note to U.S. Investors
concerning estimates of Indicated and Inferred Resources.This section uses the terms "indicated" and "inferred
resources." We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the SEC does
not recognize them. "Inferred 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.



U.S. investors are cautioned
not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.



U.S. investors are cautioned
not to assume that part or all of an inferred resource exists, or is economically or legally minable.



The estimation and classification
of the mineral resources was completed by AMEC and are summarized in Table 1.



Table
1



|Resource |  | Classification |  | Volume(Mm3) |      |  | Tonnes (Mt) |  |      | Carats  (Mct) |  |  | Grade (cpht) | 
|-------- |  | -------------- |  | ----------- | ---- |  | ----------- |  | ---- | ------------- |  |  | ------------ | 
|5034     |  | Indicated      |  |             | 5.1  |  |             |  | 12.7 |               |  |  | 23.9         | 
|         |  | Inferred       |  |             | 0.3  |  |             |  | 0.8  |               |  |  | 1.2          | 
|Hearne   |  | Indicated      |  |             | 2.3  |  |             |  | 5.3  |               |  |  | 11.9         | 
|         |  | Inferred       |  |             | 0.7  |  |             |  | 1.6  |               |  |  | 2.9          | 
|Tuzo     |  | Indicated      |  |             | 5.1  |  |             |  | 12.2 |               |  |  | 14.8         | 
|         |  | Inferred       |  |             | 1.5  |  |             |  | 3.5  |               |  |  | 6.2          | 
|Summary  |  | Indicated      |  |             | 12.4 |  |             |  | 30.2 |               |  |  | 50.5         | 
|         |  | Inferred       |  |             | 2.5  |  |             |  | 6.0  |               |  |  | 10.3         | 

Notes:

1) Mineral Resources are reported
at a bottom cut-off of 1.0 mm; cpht = carats per hundred tonnes.

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

3) Volume, tonnes, and carats
are rounded to the nearest 100,000

4) Tuzo volumes and tonnes exclude
0.6 Mt of a granite raft



35







5) Diamond price assumptions used
to assess reasonable prospects of economic extraction reflect mid-2008 pricebooks with a 20% increase factor. The prices assumed,
on a per pipe basis (in US$), equate to $113/ct for 5034, $76/ct for Hearne and $70/ct for Tuzo.



Mineral Resource Summary
- Tuzo Deep (300 to 564 metres below surface)



This Mineral Resource Summary
was taken from the 2013 Technical Report.



The estimation and classification
of the mineral resources for Tuzo Deep was completed by Mineral Services Canada Inc. and are summarized in Table 2.



Table
2



|Resource         |  | Classification |  | Volume(Mm3) |     |  | Tonnes (Mt) |  |     | Carats  (Mct) |  |  | Grade (cpht) | 
|---------------- |  | -------------- |  | ----------- | --- |  | ----------- |  | --- | ------------- |  |  | ------------ | 
|TZDu             |  | Indicated      |  |             | 1.5 |  |             |  | 3.6 |               |  |  | 6.0          | 
|(300 to 360 mbs) |  |                |  |             |     |  |             |  |     |               |  |  |              | 
|TDZI             |  | Inferred       |  |             | 3.7 |  |             |  | 8.9 |               |  |  | 14.4         | 
|(360 to 564 mbs) |  |                |  |             |     |  |             |  |     |               |  |  |              | 

Notes:

1) Mineral Resources are reported
at a bottom cut-off of 1.0 mm; cpht = carats per hundred tonnes.

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

3) Volume, tonnes, and carats
are rounded to the nearest 100,000

4) Tuzo volumes and tonnes exclude
0.4 Mt of a granite raft and 0.3 Mt of highly diluted country-rock breccia in TZDu



Mineral Reserves



Cautionary Note for U.S.
Investors



The SEC Guidelines define
the following with respect to mining operations:



Reserves. That part
of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination.



Proven (Measured) Reserves.
Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced
so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves is well-established.



Probable (Indicated)
Reserves. Reserves for which quantity and grade and/or quality are computed from information similar to that used for proved
(measured) reserves, but the sites for inspection, sampling, and measurements are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between
points of observation.



36







In Canada, a Mineral Reserve
is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility
Study. This Feasibility Study includes adequate information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction is justified.



Mineral Reserves are those
parts of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which is
the basis of an economically viable project. The project must take account of all relevant processing, metallurgical, economic,
marketing, legal, environmental, socioeconomic and governmental factors. Mineral Reserves are inclusive of diluting material that
will be mined in conjunction with the Mineral Reserves and delivered to the treatment plant or equivalent facility. The term ‘Mineral
Reserve’ need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals
have been received. It does signify that there are reasonable expectations of such approvals.



Mineral Reserves are subdivided
in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a
lower level of confidence than a Proven Mineral Reserve.



The reserve classifications
used in this report conform to the CIM classification of NI 43-101 resource and reserve definitions and Companion Policy 43-101CP
and are listed below.



A ‘Proven Mineral Reserve’
is the economically mineable part of a Measured 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 is justified. Application of the Proven Mineral Reserve category implies that
the Qualified Person has the highest degree of confidence in the estimate with the consequent expectation in the minds of the readers
of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which
any variation in the estimate would not significantly affect potential economic viability.



A ‘Probable Mineral Reserve’
is the economically mineable part of an Indicated Mineral Resource, and in some circumstances a Measured Mineral Resource, demonstrated
by at least a Preliminary Feasibility Study. The 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.



The information that follows is excerpted
from the 2010 Technical Report as prepared by JDS.



Open
Pit Mineral Reserves



The detailed pit designs determined
the mineral reserve estimate for each pipe as summarized in Table 2. A mining recovery of 100% was used in mine design and
planning to determine the mineral reserve estimate. The full mining recovery reflects 1.5 m of waste dilution being added
to the circumference of the kimberlite pipes. Therefore, mining ore recovery is 100% because the plan mines an additional 1.5 m
of material past the ore contact around the pipe on every bench.



37







Table
2



|Pipe   |  | Classification |  | Tonnes (Mt) |      |  | Carats (Mct) |  |      | Grade (cpt) | 
|------ |  | -------------- |  | ----------- | ---- |  | ------------ |  | ---- | ----------- | 
|5034   |  | Probable       |  |             | 13.2 |  |              |  | 23.3 |             | 
|Hearne |  | Probable       |  |             | 5.4  |  |              |  | 11.5 |             | 
|Tuzo   |  | Probable       |  |             | 12.6 |  |              |  | 14.2 |             | 
|Total  |  | Probable       |  |             | 31.3 |  |              |  | 49.0 |             | 



The Mineral reserves identified
in Table 2 comply with CIM definitions and standards for an NI 43-101 Feasibility Study. Detailed information on mining, processing,
metallurgical, and other relevant factors are contained in the followings sections of this report and demonstrate, at the time
of this report, that economic extraction is justified.



The economic viability of the
Gahcho Kué Project is presented in the economic analysis section of the full 2010 Technical Report, and confirms the probable
reserve estimates meet and comply with CIM definitions and NI 43-101 standards. At the time of this report, and currently, the
Gahcho Kué Project is economically viable using current diamond prices and, JDS believes, prevailing long-term price estimates.



The 2010 Technical Report did
not identify any mining, metallurgical, infrastructure or other relevant factors that may materially affect the estimates of the
mineral reserves or potential production.



Data Interpretation



The Qualified Persons, as authors
of the 2010 Technical Report, have reviewed the data for the Gahcho Kué Project and are of the opinion that:



| | · | Mining tenure held by De Beers Canada
on behalf of the Gahcho Kué Joint Arrangement is valid and sufficient to support Mineral Reserves and plans for mine development.
The Gahcho Kué Joint Arrangement has taken appropriate steps to insure extension of the leases which will remain valid for
several years. Surface rights have not, as yet, been acquired but this is not viewed by JDS as a significant obstacle to further
development of the Gahcho Kué Project. Those rights can be obtained by application to the Crown and are part of the normal
permitting processes.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | At this time, all permits required for
ongoing exploration are in force. Permits required for construction and operation were identified and the process for obtaining
those permits defined.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The 2009 Technical Report which provided
Mineral Resource estimations and resources models suitable for feasibility project work were completed to acceptable standards.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Metallurgical testwork is appropriate
for the stage of the Gahcho Kué Project and is adequate to support Mineral Reserve estimation, Gahcho Kué Project
feasibility, and economic analysis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Estimates of Mineral Reserves conform
to industry-standard practices. Mine plans, dilution and economic parameters applied to resource estimates have been prepared to
industry standard practices.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



38







| | · | Pit slope stability analysis work has
been done to industry standards and conclusions are supported by practices at similar sized operations in the area.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Mineral reserves support a 3M tonne per
year operation with a mine life of 11 years.
| | - | ------------------------------------------------------------------------------------

| | · | Mine plans use traditional open pit mining
utilizing proven equipment.
| | - | ----------------------------------------------------------------------

| | · | Process plant design has been adequately
defined for cost estimating purposes.
| | - | ------------------------------------------------------------------------------

| | · | Mine infrastructure has been adequately
designed and estimated in the feasibility study.
| | - | ----------------------------------------------------------------------------------------

| | · | Sound environmental management plans have
been developed for the feasibility study.
| | - | -----------------------------------------------------------------------------------

| | · | Progressive reclamation plans are included
in the feasibility study.
| | - | --------------------------------------------------------------------

| | · | Mine closure plans have been developed.
| | - | ---------------------------------------

| | · | The Gahcho Kué Project is sufficiently
robust for proceeding into a staged development program commencing with environmental permitting and detail design phases as precursors
for mine construction and operations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Feasibility Study Conclusions

(All amounts, unless otherwise
indicated, are in Canadian dollars.)



The 2010 Technical Report represents
an economically viable, technically credible and environmentally sound development plan for the Gahcho Kué Project. The
Gahcho Kué Project is economically viable, generating $4,143 million in realized value (“RV”) revenues over
an 11-year mine life resulting in a 20.7% internal rate of return (“IRR”) (including agreed historic “sunk”
costs) and a $136 million net present value (“NPV”) at 15%. Excluding sunk costs, the Gahcho Kué Project yields
a 33.9% IRR and a $277 million NPV. Diamond values averaged US$74.52 per carat over the life of the mine. Total life-of-mine capital
costs are estimated at $776.5 million consisting of $141.5 million in sunk costs; $549.5 million initial capital; $49.4 million
working capital; and $36.1 million in sustaining and closure costs. Total life-of-mine pre-tax cash operating costs are estimated
at $1,522 million, which equates to $48.68 per tonne processed or $31.04 per carat recovered.



The Gahcho Kué Project
is technically credible, utilizing designs and practices that are proven in the Canadian diamond industry. The Gahcho Kué
Project design is based on open pit mining of the 5034, Hearne and Tuzo deposits in a sequential fashion. Mine plans call for the
extraction of 234 metric tonnes (“Mt”) of waste and 31.3 Mt of ore over a 13-year period utilizing standard drill/blast
- truck/shovel equipment and pit designs that are similar to other open pit diamond mines operating in the area. Ore will be fed
to a 3.0 Mt per annum (“Mt/a”) processing plant with three stages of crushing, dense media separation and X-ray/grease
belt diamond recovery circuits. Process plant designs and equipment selection are based on experience from other operations and
utilize proven suppliers. Security designs are based on De Beers Canada’s standards and practices.



Supporting infrastructure includes
a 14.1 megawatt packaged diesel power plant, 1,350 meter gravel airstrip, five-bay truckshop, emulsion plant, 40 million litres
of fuel storage and a 432 bed accommodation/office complex. The primary facilities are interconnected by utilidors (enclosed corridors)
providing interior access for personnel. These basic fit-for-purpose designs and plans are prepared by Feasibility Study project
personnel that have designed, constructed and operated similar facilities at other diamond mines operating in the area. Likewise,
the suppliers, contractors and service providers nominated in the Feasibility Study are providing similar services for other mines
in the north. Cost estimates are built up from first principles and are benchmarked against relevant operations. Appropriate contingencies
have been applied. De Beers Canada operates the Snap Lake mine in the NWT and has provided estimates of general and administrative
costs, payroll costs, licenses and fees. De Beers Canada has a trained workforce that can assist in the design, commissioning,
training and operation of the Gahcho Kué mine.



39







The Gahcho Kué Project
is environmentally sound, utilizing simple and proven management plans. Water management plans are adaptations of plans used successfully
at other diamond mines. At Gahcho Kué, all potentially contaminated water is kept within a controlled management basin formed
by natural drainage patterns. Excess storage capacity allowances provide for operational flexibility and contingencies. Normal
mine operations incorporate a program of progressive reclamation that minimizes costs and allows time monitoring of performance.
The mined out 5034 and Hearne pits are used for waste storage during the later years of the mine life providing ample time for
the completion of reclamation of waste storage areas used in the earlier years. A viable plan for fish habitat compensation has
been developed and provides for no-net-loss of habitat. New lake areas for fish habitat replacement are created at the beginning
of operations providing ample time to monitor and measure effectiveness during the mine operation period.



The Gahcho Kué Project
provides socioeconomic benefits. The mine will create close to 1,000 jobs during the two-year construction phase and some 400 permanent
jobs during the 11-year operational phase. Additional employment will be created by service providers to operations. Territorial
and Federal taxes and royalties are estimated to be close to $800 million. In addition, property and payroll taxes will add significant
tax revenues to the local municipality. Impact benefit agreements are planned for the First Nation groups in the area.



Risks for the Gahcho Kué
Project are identified and considered reasonable. The greatest economic risk/opportunity is related to diamond values. Over the
past several years, rough diamond demand/prices/sales have experienced unprecedented volatility as a result of the world economic
crisis. Currently demand is strong, and the Gahcho Kué Joint Arrangement partners forecast a 1% real growth in diamond prices
over the life of the Gahcho Kué Project.



The Gahcho Kué Project
also faces environmental and regulatory risks, as the Gahcho Kué Project must proceed through the Mackenzie Valley Environmental
Impact Review Board environmental screening process. There are risks that the permitting process might take longer than the scheduled
24 to 27 months, causing delays in construction start-up, and/or the regulatory authorities might require significant modifications
to be made to the plans, which will affect designs and costs. In this event, a decision might even be taken to not proceed with
the Gahcho Kué Project.



Economic Analysis - Summary



The financial evaluation of
the Gahcho Kué Project has been undertaken on an after-tax, unleveraged, real rate of return to the Gahcho Kué Joint
Arrangement partners as a whole. The analyses assumed that three kimberlite ore bodies will be developed, with production on the
first pipe (5034) starting in January 2015. Only probable reserves (derived from indicated resources) were used in the 2010 Technical
Report. Production for the base case ceases part way through the 11th year of production. All production, costs, and
revenues are based on calendar fiscal years.



The Gahcho Kué Project
is economically viable and the projected returns surpass the hurdle rates established by the 2009 Agreement. The Gahcho Kué
Project provides a real rate of return to the partners of 20.7% and a real net present value at 15% of $135.9 million in calendar
2010 Canadian dollars. After excluding sunk costs incurred to September 30, 2010, the Gahcho Kué Project provides a real
rate of return of 33.9% and a real NPV of $277.4 million at a discount rate of 15%. The Gahcho Kué Project is most
sensitive to changes in diamond prices, with real dollar returns decreasing the IRR by 3.4% for a 10% reduction in prices and increasing
the IRR by 3.0% for a 10% increase in prices. The Gahcho Kué Project shows a lesser sensitivity to capital with returns
changing by 1.3% for a 10% change in either direction for capital. The sensitivity to operating cost is about 1.2% in the IRR rate
for a 10% in operating costs.



40







Table 3 provides a summary
of selected financial model inputs and the corresponding results. All costs are quoted in July 2010 Canadian dollars unless otherwise
indicated.



Table
3



|Description                                                                                    |  | 3.0 Mt/a Case |       
|---------------------------------------------------------------------------------------------- |  | ------------- | ------
|Material Processed – Annual million tonnes (Mt)                                                |  |               | 3.0   
|Material Processed – Life-of-mine million tonnes (Mt)                                          |  |               | 31.3  
|Sunk Costs Exploration and Development pre-July 2009 ($millions)                               |  |               | 120.0 
|Sunk Costs Feasibility Study and Permitting– 2009-2010 ($millions)                             |  |               | 21.5  
|Initial Gahcho Kué Project Capital – 2011 to 2014 ($millions)                                  |  |               | 549.5 
|Working Capital (4 months of operating costs) ($millions)                                      |  |               | 49.4  
|Sustaining Capital including Mine Closure ($millions)                                          |  |               | 36.1  
|Operating Costs – Average over life-of-mine ($/tonne processed)                                |  |               | 48.68 
|Real Diamond Price Escalation – 2010 forward (%/annum) [amount over U.S. Consumer Price Index] |  |               | 1.00  
|Projected Mine Life (years)                                                                    |  |               | 11.0  
|Processing Diamond Cut-off Size (millimeter)                                                   |  |               | 1.0   
|Inflation used for Escalation/De-escalation – (%/annum)                                        |  |               | 1.80  
|Total Carats Recovered (millions)                                                              |  |               | 49.0  
|Diamond Price (RV life-of-mine Escalated, U.S.$/carat)                                         |  |               | 102.48
|Diamond Price (RV life-of-mine Un-Escalated, U.S.$/carat)                                      |  |               | 74.52 
|Gahcho Kué Project IRR – Including sunk costs (%)                                              |  |               | 20.7  
|NPV @ 5% – Including sunk costs ($millions)                                                    |  |               | 650.5 
|Gahcho Kué Joint Venture Required IRR Hurdle Rate (%)                                          |  |               | 15.0  
|Gahcho Kué Project IRR – Sunk costs not included (%)                                           |  |               | 33.9  
|NPV @ 5% – Sunk costs not included ($millions)                                                 |  |               | 792.0 



The Gahcho Kué Project
is a joint venture. All of the numbers presented in this table are based upon 100% ownership and do not include any management
fees or financing costs that are payable between the joint venture partners. Furthermore, the Gahcho Kué Project is evaluated
on a 100% equity basis only, and excludes any financial leveraging effects, as well as any interest expense items that could impact
taxable income and/or provide interest deduction tax shields.



One primary case has been considered,
with variations from this base case model assessed as sensitivities. The base case uses an open pit mining operation with a processing
throughput of 3.0 Mt/annum using probable reserves and is based on a nominal +1.00 mm carat cut-off size for the processing
plant. The variations of the base case are as follows:



| | · | project delay of one year due to permitting
with the same throughput of 3.0 Mt/annum for base case
| | - | --------------------------------------------------------------------------------------------------

| | · | sensitivity analyses on diamond prices, capital
costs, and operating costs.
| | - | ---------------------------------------------------------------------------



The financial analysis is based
on mineral reserves, with the objective of demonstrating economic viability; therefore, the analysis is classified as a “feasibility
study” under NI 43-101. The feasibility study is a precursor to formal permit applications, definitive engineering design,
formal commitment to construct, and includes mineral resources that are sufficiently defined geologically to have economic considerations
applied to them that would enable them to be categorized as mineral reserves.



41







GAHCHO KUÉ PROJECT LOCATION
MAP (2007)







42







Gahcho Kué Leases (2011)







43







GAHCHO
KUE MAP – LOCATION OF PIPES (2007)







44







Information Prepared by the Company



The following information
is prepared by the Company. The Company has issued press releases commenting upon recent results and activities for the Gahcho
Kué Project. Such disclosure has been reviewed by Carl G. Verley, P.Geo., or Daniel D. Johnson from JDS (for disclosure
relating to the Definitive Feasibility Study), who serve as the Qualified Persons in relation to such disclosures.



2010 Independent Diamond Valuation



On August 4, 2010, the Company
announced the results of an updated independent diamond valuation of the diamonds recovered from the Gahcho Kué Project
during the exploration phase. The valuation was conducted by WWW International Diamond Consultants Ltd. (“WWW”) and
took place at the London offices of the Diamond Trading Company in early April 2010. All diamond values presented below are based
on the WWW Price Book as at April 13, 2010.



The independent diamond valuation
resulted in substantially the same actual price of the Gahcho Kué diamonds to US$134 per carat compared to the 2008 independent
diamond valuation done by WWW International Diamond Consultants Ltd. for the Company.



Table 6 below reflects the
actual price per carat for the parcel of 8,243.56 carats of diamonds recovered from the Gahcho Kué Project.



Table 6



|Actual Price US$/carat
|----------------------
|Pipe                  
|5034                  
|                      
|                      
|5034 Total            
|Hearne                
|Tuzo                  
|Total                 



Table 7 below presents models
of the average price per carat (US$/carat) for each kimberlite lithology. The modeled price per carat is determined using statistical
methods to estimate the average value of diamonds that will be recovered from potential future production from Gahcho Kué.



Table 7



|Modeled Average Price US$/carat
|-------------------------------
|                               
|Pipe                           
|5034 NE Lobe                   
|5034 Centre                    
|5034 West                      
|Tuzo                           
|                               
|Hearne                         



Note: 1.50mm prices provided
for reference purposes only.



45







In their report to Mountain
Province, WWW stated: "The Tuzo sample and the 5034 East sample both contained one high value large stone. For Tuzo there
was a 25.13 carat stone valued at $17,000 per carat and 5034 East had a 9.90 carat stone valued at $15,000 per carat. It is encouraging
that such high value stones were recovered in samples of this size. If they are found in the same frequency throughout the resource
then the modelled APs [Average Prices] will certainly be towards the ‘high’ values."



2011
Independent Diamond Valuation



On May
5, 2011, the Company announced the results of an updated independent valuation of the diamonds recovered from the Gahcho Kué
Project. The valuation was conducted by WWW International Diamond Consultants Ltd. and took place at the London offices of the
Diamond Trading Company in early April, 2011. All diamond values presented below are based on the WWW Price Book as at April 11,
2011.



Importantly,
for the first time, the Gahcho Kué diamonds were grouped into larger parcels, each parcel representing diamonds from the
Hearne, Tuzo and the separate lobes of the 5034 kimberlite. In the opinion of WWW, grouping of the diamonds into larger parcels
increased the accuracy of the diamond valuation.



The Company
commented that the results of the independent diamond valuation reflect the strong performance of rough diamond prices since the
previous valuation conducted on April 2010. Further, it noted that based on the analysis of leading diamond producers and analysts,
the global diamond industry will experience peak diamond supply during 2011, with burgeoning demand – particularly from the
robust Chinese and Indian markets – outstripping mine supply. There is a strong probability that rough diamond prices will
continue to experience strong double digit increases as production from aging mines decrease and new mine supply falls short of
growing demand.



Table
8 below reflects the actual price per carat for the parcel of 8,317.29 carats of diamonds recovered from the Gahcho Kué
Project.



Table
8



|Actual Price US$/carat
|----------------------
|Pipe                  
|5034                  
|                      
|Hearne                
|Tuzo                  
|Total                 





Note:
Total Dollars are the result of rounding.



In their
report to Mountain Province, WWW stated: "The most valuable stone is in the Tuzo sample. This 25.13 carat stone is the largest
stone in all of the bulk samples. The stone is an octahedron of H/I colour which WWW valued at $20,000 per carat giving a total
value of $502,600”. WWW added: “The stone with the highest value per carat sample is a 9.90 carat stone in the 5034
C/E sample. This is a makeable stone of high colour (D/E) which WWW valued at $24,000 per carat giving a total value of $237,600”.



46









Table
9 below presents models of the average price per carat (US$/carat) for each kimberlite. The modeled price per carat is determined
using statistical methods to estimate the average value of diamonds that will be recovered from potential future production from
Gahcho Kué.



Table
9



|Pipe            |  | High Model |     |  | Base Model |   |     | Low Model | 
|--------------- |  | ---------- | --- |  | ---------- | - | --- | --------- | 
|5034 Centre     |  | $          | 169 |  |            | $ | 134 |           | 
|5034 West       |  |            | 172 |  |            |   | 133 |           | 
|5034 North/East |  |            | 196 |  |            |   | 144 |           | 
|Hearne          |  |            | 139 |  |            |   | 110 |           | 
|                |  |            |     |  |            |   |     |           | 
|Tuzo            |  |            | 136 |  |            |   | 103 |           | 
|Average         |  | $          | 161 |  |            | $ | 122 |           | 



Note: 1 mm nominal square
mesh

Diamond values are in US
Dollars



For mine
feasibility studies, WWW recommends using the base case models for defining the resources and reserves. The “high”
and “low” models are included for sensitivity analysis.



The WWW
averaged modeled price per carat for the Gahcho Kué kimberlites is $122, which represents a 41 percent increase over the
WWW 2010 average price. The WWW models use size distribution models (carats per size class) developed by De Beers.



2012 Updated Independent
Valuation



In March 2012, Mountain Province
retained WWW International Diamond Consultants Ltd. (“WWW”) to provide an updated valuation of the diamonds recovered
from the Gahcho Kué Project. The valuation took place at the London offices of the Diamond Trading Company. All diamond
values presented below are based on the WWW Price Book as at March 7, 2012.



Table 10 below reflects the
actual price per carat for the parcel of 8,317.29 carats of diamonds recovered from the Gahcho Kué Project.



Table 10



|Actual Price US$/carat
|----------------------
|Pipe                  
|5034                  
|                      
|Hearne                
|Tuzo                  
|Total                 



Note: Total Dollars are
the result of rounding.



47







Besides the high-value 25.13
and 9.9 carat diamonds referred to above, several other large high-value diamonds of gem quality have been recovered from Gahcho
Kué, including 7.0 carat, 6.6 carat and 5.9 carat diamonds from the 5034 kimberlite and 8.7 carat, 6.4 carat and 4.9 carat
diamonds from the Hearne kimberlite. The presence of coarser diamonds is an important driver of overall diamond value at Gahcho
Kué.



The results
of the 2012 independent diamond valuation indicated that there was almost no change (+0.9%) from the previous valuation conducted
in April 2011.



Table 11 below presents models
of the March 2012 average price per carat (US$/carat) for each kimberlite. The modeled price per carat is determined using statistical
methods to estimate the average value of diamonds that will be recovered from potential future production from Gahcho Kué.



Table 11



|Pipe            |  | High Model |     |  | Base Model |   |     | Low Model | 
|--------------- |  | ---------- | --- |  | ---------- | - | --- | --------- | 
|5034 Centre     |  |            | 167 |  |            |   | 134 |           | 
|5034 West       |  |            | 169 |  |            |   | 131 |           | 
|5034 North/East |  |            | 195 |  |            |   | 145 |           | 
|Hearne          |  |            | 138 |  |            |   | 109 |           | 
|Tuzo            |  |            | 136 |  |            |   | 104 |           | 
|Average         |  | $          | 160 |  |            | $ | 122 |           | 



Note:
1 mm nominal square mesh

Diamond
values are in US Dollars



For mine feasibility studies,
WWW recommends using the base case models for defining the resources and reserves. The “high” and “low”
models are included for sensitivity analysis.



The WWW averaged modeled price
per carat for the Gahcho Kué kimberlites is US$122, which represents a 41 percent increase over the WWW April 2010 average
modeled price. The WWW models use size distribution models (carats per size class) developed by De Beers.



2014 Updated Independent
Valuation



In February 2014, Mountain
Province retained WWW International Diamond Consultants Ltd. (“WWW”) to provide an updated valuation of the diamonds
recovered from the Gahcho Kué Project. The valuation took place at the London offices of the Diamond Trading Company. All
diamond values presented below are based on the WWW Price Book as at February 24, 2014



48









Table 12 below reflects the
actual price per carat for the parcel of 8,317.29 carats of diamonds recovered from the Gahcho Kué Project.



Table 12



|Actual Price US$/carat
|----------------------
|Pipe                  
|5034                  
|                      
|Hearne                
|Tuzo                  
|Total                 



Note: Total Dollars
are the result of rounding.



| |  | In their report to Mountain Province, WWW stated: “The valuations have fallen by more than
the WWW overall rough price index because, due to the size of the samples there were only 10 percent of the carats in the 3 to
8 grainer size fractions, and these sizes have seen significant price increases since March 2012. The prices of the two most valuable
stones have also been reduced by over 5 percent”.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Table 13 below presents models
of the February 2014 average price per carat (US$/carat) for each kimberlite. The modeled price per carat is determined using statistical
methods to estimate the average value of diamonds that are likely to be recovered from future production at Gahcho Kué.



Table 13



|Pipe            |  | High Model |     |  | Base Model |   |     | Low Model | 
|--------------- |  | ---------- | --- |  | ---------- | - | --- | --------- | 
|5034 Centre     |  |            | 167 |  |            |   | 132 |           | 
|5034 West       |  |            | 172 |  |            |   | 131 |           | 
|5034 North/East |  |            | 194 |  |            |   | 142 |           | 
|Hearne          |  |            | 137 |  |            |   | 107 |           | 
|Tuzo            |  |            | 134 |  |            |   | 101 |           | 
|Average         |  | $          | 160 |  |            | $ | 120 |           | 



Note: 1 mm nominal
square mesh

Diamond values
are in US Dollars



| |  | In their report to the Company, WWW stated: “The chart below shows the WWW overall rough
price index since 2009. Immediately after the April 2011 valuation prices increased at unsustainable levels to peak more than 30
percent higher in August before falling back to early 2011 levels.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



49











| |  | “Prices dipped in H2 2012 before recovering in H1 2013. Since then they have remained relatively
stable. The index is currently 2.2 percent lower than the last re-pricing exercise which was undertaken in March 2012, and 2.3
percent lower than April 2011 when the physical valuation took place.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | “The overall index is based on WWW’s model of world production and changes in average
prices will vary from mine to mine or sample to sample dependent upon the mix of diamonds. It should also be noted that since March
2012 prices of the 3 to 8 grainer goods are significantly higher in today’s market, whereas prices in other sizes are lower.”
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Definitive Feasibility Study



On September 1, 2009, the Company
announced that the Gahcho Kué Joint Arrangement had appointed JDS, an independent engineering firm, to produce the Definitive
Feasibility Study for the Gahcho Kué Joint Arrangement. The Definitive Feasibility Study was expected to take approximately
twelve months to complete with a budget of approximately $10 million.



On October 21, 2010, in a press
release titled “Mountain Province Diamonds Announces Positive Gahcho Kué Independent Feasibility Study”, Mountain
Province announced the results of the independent feasibility study. JDS led and prepared the feasibility study dated October 15,
2010, which was presented to the Gahcho Kué Joint Arrangement. The Company filed the 2010 Technical Report, representing
a detailed summary of the Feasibility Study, on SEDAR and provided notification of such filing under Form 6K on EDGAR on December
3, 2010. See Item 4.D, Property Plant and Equipment, for a full summary of the 2010 Technical Report.



50







The following are the financial
and project highlights from the 2010 Technical Report:



|· | Project IRR including sunk costs          | 20.7%*               
|- | ----------------------------------------- | ---------------------
|· | Project IRR excluding sunk costs          | 33.9%                
|· | Initial project capital                   | $549.5 million       
|· | Working capital                           | $49.4 million        
|· | Sustaining capital including mine closure | $36.1 million        
|· | Operating costs                           | $48.68 per tonne     
|· | Project mine life                         | 11 years             
|· | Average annual production                 | 3 million tonnes     
|· | Total diamond production                  | 49 million carats    
|· | Average annual diamond production         | 4.45 million carats  
|· | Diamond price                             | US$102.48 per carat**

*After taxes/royalties
and unleveraged

**The base case model uses an
average realized diamond price of US$102.48 per carat derived from the mean average between the modeled values of De Beers and
WWW (based on their respective April 2010 price books) inclusive of a real 1% escalation over LOM less an assumed 4% marketing
fee.



Permitting



In November 2005, De Beers
Canada, as Operator of the Gahcho Kué Project, applied to the Mackenzie Valley Land and Water Board for a Land Use Permit
and Water License to undertake the development of the Gahcho Kué diamond mine. On December 22, 2005, Environment Canada
referred the applications to the Mackenzie Valley Environmental Impact Review Board (“MVEIRB”), which commenced an
Environmental Assessment ("EA"). On June 12, 2006, the MVEIRB ordered that an Environment Impact Review (“EIR”)
of the applications should be conducted.



The EIR was designed to identify
all of the key environmental issues that could be impacted by the development of the Gahcho Kué diamond mine and to facilitate
participation by key stakeholders in addressing these issues.



The
Environmental Impact Statement (EIS) for the Gahcho Kué mine was submitted to the Gahcho Kué Environmental Impact
Review Panel (the “Panel”) of the MVEIRB in December 2010. The EIS detailed the construction and operation of the proposed
mine and was assembled to meet the rigorous Terms of Reference established by the Panel for the Gahcho Kué Project.



The feasibility study commissioned
in August 2009 was expected to impact the final project description and the Project Operator, De Beers Canada, had previously advised
the MVEIRB that submission of the EIS would be further deferred pending the completion of an updated project description.



The final Gahcho Kué
Project description was presented to the Gahcho Kué Joint Arrangement partners, and was incorporated into the EIS to be
submitted to the MVEIRB before the end of 2010. Key elements of the project description include the following:

| | · | Average
annual production rate of approximately 3 million tonnes of ore;
| | - | ------------------------------------------------------------------------

| | · | Life
of mine from the open-pit resource of approximately 11 years; and
| | - | ----------------------------------------------------------------------

| | · | Average
annual production rate of approximately 4.45 million carats.
| | - | --------------------------------------------------------------------



51









On November 5, 2010, the Company
announced that the Operator of the Gahcho Kué Joint Arrangement, De Beers Canada, had notified the MVEIRB on November 3,
2010 that the Gahcho Kué EIS was on track for completion and submission before the end of 2010. The Company also announced
that the submission of the EIS would result in the resumption of the environmental impact review by the independent administrative
tribunal established under the Mackenzie Valley Environmental Resource Management Act.



On
December 23, 2010, the Company, in a joint news release with De Beers Canada, announced that the EIS for the Gahcho Kué
mine had been submitted to the Gahcho Kué Environmental Impact Review Panel (the “Panel”) of the MVEIRB. The
EIS detailed the construction and operation of the proposed mine.



On August 2, 2011, the Company
announced that the Panel had informed the Gahcho Kué Project Operator, De Beers Canada that the EIS conformed to the terms
of reference set by the Panel, thus clearing the way for the EIR to commence.



On January 8, 2013, the Company
announced that the MVEIRB closed the public record for the Gahcho Kué environmental impact review on January 3, 2013 and
that the MVEIRB is expected to complete their report by July 2013.



On
July 22, 2013, De Beers and the Company announced that the MVEIRB on July 19, 2013 had concluded the Gahcho Kué Environmental
Impact Assessment and had recommended approval of the proposed Gahcho Kué diamond mine subject to measures and follow-up
programs. The Gahcho Kué Panel recommended, pursuant to sub-section 134(2) of the Mackenzie Valley Resource Management
Act, that the development be allowed to proceed subject to implementation of the measures and follow-up programs described in
its ‘Report’ which are necessary to prevent potentially significant adverse impacts on the environment. A full copy
of the Report of Environmental Impact Review and Reasons for Decision is available atwww.reviewboard.ca.



On October 22, 2013 Mountain
Province and De Beers Canada announced that the Minister of Aboriginal Affairs and Northern Development Canada, the Hon. Bernard
Valcourt, had approved the development of the Gahcho Kué diamond mine as recommended by the Mackenzie Valley Environmental
Impact Review Board.



On December 2, 2013 Mountain
Province and De Beers Canada announced that Mackenzie Valley Land and Water Board approved a pioneer Land Use Permit for the Gahcho
Kué diamond mine. The pioneer Land Use Permit allowed land-based site works to commence in preparation for deliveries planned
for the 2014 winter road season.



Project Costs to Date



The 2009 Agreement contains the
following key terms with respect to the Gahcho Kué Project costs:



| | 1. | Each Joint Venture partner will contribute their proportionate share to the future project development
costs;
| | -- | -------------------------------------------------------------------------------------------------------------

| | 2. | The Joint Venture partners have agreed that the sunk historic costs to the period ending on December
31, 2008 will be reduced and limited to $120 million;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Mountain Province will repay De Beers Canada $59 million (representing 49% of an agreed sum of
$120 million) in settlement of the Company’s share of the agreed historic sunk costs on the following schedule:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



52







·$200,000
on execution of the 2009 Agreement (Mountain Province’s contribution to the 2009 Joint Arrangement expenses to date of execution
of the 2009 Agreement – paid);

·        Up
to $5.1 million in respect of De Beers Canada’s share of the costs of the feasibility study commissioned in August 2009 (paid
$4,417,421 to December 31, 2013, recorded as “sunk cost repayment” in the Company’s financial statements);

·$10
million upon the completion of the feasibility study with at least a 15% IRR and approval of the necessary development work for
a mine (as defined in the 2009 Gahcho Kué Joint Arrangement Agreement – paid March 15, 2011);

·        $10
million following the issuance of the construction and operating permits;

·        $10
million following the commencement of commercial production; and

·The
balance of approximately $24.4 million plus accrued interest within 18 months following commencement of commercial production.



53







The following table outlines
the Gahcho Kué Project costs (at 100%) to date:



|Period of Time                                                                                     |  | Amount |                
|-------------------------------------------------------------------------------------------------- |  | ------ | ---------------
|Agreed historic sunk costs to December 31, 2008                                                    |  | $      | 120,000,000    
|Expenditures January 1, 2009 to December 31, 2009                                                  |  |        | 1,654,383      
|Costs for Feasibility Study from August 2009 to December 2009 (of approved budget of $10 million)  |  |        | 2,531,056      
|Total Costs to December 31, 2009                                                                   |  | $      | 124,185,439    
|Expenditures January 1, 2010 to December 31, 2010                                                  |  |        | 10,754,884     
|Costs for Feasibility Study from January 2010 to December 2010 (of approved budget of $10 million) |  |        | 5,593,913      
|Total Costs to December 31, 2010                                                                   |  | $      | 140,534,236    
|Expenditures January 1, 2011 to December 31, 2011                                                  |  |        | 16,320,970     
|Costs for Feasibility Study from January 1, 2011 to December 31, 2011                              |  |        | 466,526        
|Total Costs to December 31, 2011                                                                   |  | $      | 157,321,732    
|Expenditures January 1, 2012 to December 31, 2012                                                  |  |        | 21,698,473     
|Costs for Feasibility Study from January 1, 2012 to December 31, 2012                              |  |        | 100,114        
|Total Costs to December 31, 2012                                                                   |  | $      | 179,120,319    
|Expenditures January 1, 2013 to December 31, 2013                                                  |  |        | 47,175,630     
|Costs for Feasibility Study from January 1, 2013 to December 31, 2013                              |  |        | Nil            
|Total Costs to December 31, 2013                                                                   |  | $      | 226,295,679    
|Budget January 1, 2014 to December 31, 2014 (subject to approval in tranches)                      |  | $      | To
Be Finalized



| | Item 4A. | Unresolved Staff Comments
| | -------- | -------------------------



On December 20, 2013, we received
a comment letter from the staff of the SEC’s Division of Corporation Finance in connection with the staff’s review
of our Annual Report on Form 20-F for the fiscal year ended December 31, 2012.  We submitted our response letter to the SEC
on January 10, 2014.  On January 31, 2014 we received an additional comment letter from the staff.  On February 14, 2014,
we filed Amendment No. 1 on Form 20-F/A for the Year Ended December 31, 2012, in response to the staff’s comments, filing
a redacted version of the 2009 Agreement as Exhibit 4.14 to the Form 20-F/A.  We also applied to the SEC for confidential
treatment of certain portions of the Agreement.  On March 14, 2014, we received a comment letter from the staff with respect
to the confidential treatment application.  As of the date of this Form 20-F for the Year Ended December 31, 2013, we have
not yet submitted our response.



54







| | Item 5. | Operating and Financial Review and Prospects
| | ------- | --------------------------------------------



MOUNTAIN PROVINCE DIAMONDS
INC.

MANAGEMENT’S DISCUSSION
AND ANALYSIS

FOR THE YEAR ENDED DECEMBER
31, 2013



This Management’s Discussion and
Analysis (“MD&A”) 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, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011.



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



All amounts are expressed in Canadian dollars
unless otherwise stated.



Technical information included in this
MD&A regarding the Company’s mineral property has been reviewed by Carl Verley, a Director of the Company and a Qualified
Person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Properties (“NI 43-101”).



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



COMPANY HIGHLIGHTS



On March
12, 2014, the Company has increased the size of its previously announced public offering
to 3,500,000 common shares (the “Common Shares”), at a price of $5.10 per Common Share for gross proceeds of $17,850,000
(the “Offering”). The Offering is being led by BMO Capital Markets.



On March
11, 2014, the Company announced that it has entered into an agreement with a syndicate
of underwriters led by BMO Capital Markets, under which the underwriters have agreed to buy, on a bought deal basis by way of private
placement, 3,000,000 common shares (the “Common Shares”) of the Company, at a price of $5.10 per Common Share for gross
proceeds of $15,300,000 (“the Offering”).



Concurrent with the bought deal private
placement, the Company intends undertaking a non-brokered private placement (“Non-brokered Private Placement”) of Common
Shares of the Company at a price not less than $5.10 per Common Share. The Non-brokered Private Placement may be sold to Bottin
(International) Investments Ltd. (controlled by Dermot Desmond) (“Bottin”) and other qualified investors.



The Company intends to use the net proceeds
of the Offering for the continued development of the Company's Gahcho Kué Project (“Project”) and for general
corporate purposes.



On February 18, 2014,De Beers Canada
Inc. (“De Beers ”) and the Company announced that De Beers, as Operator (“Operator”) of the Project, entered
into an Impact Benefit Agreement (IBA) with the Yellowknives Dene First Nation for the proposed Gahcho Kué mine. The agreement
puts in place a framework for De Beers and the Yellowknives Dene First Nation (“Yellowknives”) to work together over
the life of the mine and it enables participation by the Yellowknives in the opportunities that the mine provides.



This agreement provides certainty that
training, employment and business opportunities are made available to Yellowknives and it includes financial provisions necessary
for ensuring fair participation in opportunities the project will provide.



On January 27, 2014,De Beers and
the Company announced that the Operator of the Project, has entered into an Impact Benefit Agreement with the Tłı̨chǫ
Government (“Tłı̨cho”) for the proposed Gahcho Kué mine. The agreement puts in place a framework
for De Beers and the Tłı̨chǫ to work together over the life of the mine enabling participation by the Tłı̨chǫ
in the opportunities that the mine provides.



This agreement will provide training, employment
and business opportunities from the Project for Tłı̨chǫ and also includes financial provisions that enable
the Tłı̨chǫ to participate in the opportunities that the Project provides.



55











On December
2, 2013,De Beers and the Company announced that the Mackenzie Valley Land and Water Board has approved a pioneer Land Use
Permit for the Gahcho Kué diamond mine. The pioneer Land Use Permit allows land-based site works to commence in preparation
for deliveries planned for the 2014 winter road season.



Approval of
the permit allows Gahcho Kué to position itself for the start of full construction pending the receipt of the full Land
Use Permit and Water License expected in 2014.



On November
27, 2013,the Company announcedthe closing of the previously announced non-brokered private placement of common shares
for gross proceeds of $29.4 million. The Company issued 5,889,200 common shares at a price of $5.00 per share. The shares are
subject to a four month hold period, expiring on March 26, 2014.



Proceeds
of the private placement are being used to support the Company’s share of initial capital expenditures at Gahcho Kué,
the 2014 Tuzo Deep drill program and for general corporate purposes. A finder’s fee in the amount of $567,330 was paid in
relation to the private placement.



On October
22, 2013,De Beers and the Company announced that the Minister of Aboriginal Affairs and Northern Development Canada, the
Hon. Bernard Valcourt, had approved the development of the Gahcho Kué diamond mine as recommended by the Mackenzie Valley
Environmental Impact Review Board on July 22, 2013.



On August
19, 2013,the Company announced that a National Instrument (NI) 43-101 Technical Report on the Gahcho Kué project has
been filed on SEDAR and EDGAR.



The updated
NI 43-101 resource estimate was prepared by Mineral Services Canada Inc. (“Mineral Services”) and the results were
announced on July 2, 2013.



On July
10, 2013,De Beers and the Company announced that the Operator of the Project, entered into its first Impact Benefit Agreement
with the North Slave Métis Alliance (“North Slave Metis”) for the proposed Gahcho Kué mine.



The agreement
sets in place a framework for De Beers and the North Slave Métis to optimize the participation of the North Slave Métis
in the Gahcho Kué mine through employment, business opportunities, training and development, and financial benefits.



On July
2, 2013, the Company announced the results of the updated independent mineral resource estimate completed for the Project.



Following completion
of the Tuzo Deep drill program in 2012, which was managed by the Operator, an updated National Instrument (NI) 43-101 resource
estimate for Tuzo Deep was prepared by Mineral Services and filed on SEDAR and EDGAR on August 13, 2013. This estimate incorporates
information from geological data updates completed since the previous NI 43-101 Technical Report released in 2009.



The updated
resource estimate indicates an approximate 12% percent increase in the Project indicated resource from 30.2 million tonnes to
33.8 million tonnes and an approximate 90% increase in inferred resource from 6 million tonnes to 11.3 million tonnes. The diamond
content of the indicated resource increased by approximately 12% from 50.5 million carats to 56.6 million carats and the diamond
content of the inferred resource increased by approximately 80% from 10.3 million carats to 18.5 million carats. The reasons for
these increases are the upgrading of the 300 to 360 meter zone in Tuzo from inferred resource to indicated resource and also the
inclusion of the newly defined Tuzo inferred resource from a depth of 360 meters to 564 meters below surface, which was delineated
during the 2011/12 Tuzo Deep drill program.



On
June 28, 2013 De Beers and Mountain Province announced that the Operator of the Joint Venture, had entered into a Socio Economic
Agreement (“SEA”) with the Government of the Northwest Territories (“GNWT”). The agreement formalizes
commitments made with respect to employment, training, business opportunities and other related benefits for NWT residents. It
also establishes measures to monitor possible socio-economic impacts related to the mine and establishes the mechanism to work
with communities close to the mine site to ensure an adaptive management approach to socio-economic performance of the mine.



56







Financial
position



As at December
31, 2013, Mountain Province had cash and short-term investments of $35,687,694 and a working capital balance of $35,133,368. See
Financial Position and Liquidity below.



Overview



Mountain Province
was incorporated on December 2, 1986 under the British Columbia Company Act. The Company amended its articles and continued incorporation
under the Ontario Business Corporation Act effective May 8, 2006. The Company’s registered office and its principal place
of business is 161 Bay Street, Suite 2315, PO Box 216, Toronto, ON, Canada, M5J 2S1. The Company’s shares are listed on
the Toronto Stock Exchange under the symbol ‘MPV’ and on the New York Stock Exchange – MKT under the symbol
‘MDM’.



Mountain Province
is a Canadian resource company and holds a 49% interest in the Gahcho Kué Project, located in the Northwest Territories
of Canada and De Beers Canada holds the remaining 51% interest. The Arrangement between the Company and De Beers Canada is governed
by the 2009 Agreement. The Company’s primary asset is its 49% interest in the Project.



Drilling, bulk
sampling, environmental and engineering studies have been completed. A Definitive Feasibility Study demonstrates an economically
viable project. The Project is currently in the development stage. At this time there are no revenues from the Project.



OUTLOOK



The development
of the Project remains a priority. The Project feasibility study (“GK Feasibility Study”, “Feasibility Study”)
of December 3, 2010 is currently being updated and is scheduled for completion by the end of March, 2014.  A NI 43-101 compliant
technical report will be posted on SEDAR and EDGAR within 45 days following completion and announcement of the updated results.



Following the
completion of deep drilling at the Tuzo kimberlite to a depth of 560 meters, the Company retained Mineral Services Canada Inc.
to prepare an independent NI 43-101 resource statement, which was released in Q3, 2013.  Further deep drilling to potentially
extend the Tuzo resource to 750 meters is currently underway. Drilling on ten exploration targets was completed during Q2 2013.
Kimberlite was intercepted in only one of the ten holes drilled.



The Company
is in discussion with a number of potential lenders and is currently assessing various financing proposals, which include project
financing, off-take financing and a variety of other financing instruments. These are being considered together with alternatives
available to finance the ongoing operations of the Company. See Financial Position and Liquidity below.



JOINT
VENTURE AGREEMENT



The Gahcho
Kué Project is an unincorporated Joint Arrangement between De Beers (51%) and Mountain Province (49%). The Company accounts
for the Project as a joint operation in accordance with IFRS 11. Mountain Province holds an undivided 49% ownership interest in
the assets, liabilities and expenses of the Project.



On July 3,
2009, the Company entered into an amended and restated Joint Arrangement Agreement with De Beers (jointly, the “Participants”)
under which:



| | (a) | The
                                         Participants’ continuing interests in the Gahcho Kué Project will be Mountain
                                         Province 49% and De Beers 51%, except for normal dilution provisions which are applicable
                                         to both Participants;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Each
                                         Participant will market their own proportionate share of diamond production in accordance
                                         with their participating interest;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Each
                                         Participant will contribute their proportionate share to the future project development
                                         costs;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Material
                                         strategic and operating decisions, including plans and budgets, will be made by consensus
                                         of the Participants as long as each Participant has a participating interest of 40% or
                                         more;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | The
                                         Participants have agreed that the sunk historic costs to the period ending on December
                                         31, 2008 will be reduced and limited to $120 million;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



57







| | (f) | The
                                         Company will repay De Beers $59 million (representing 49% of an agreed sum of $120 million)
                                         plus accrued interest in settlement of the Company’s share of the agreed historic
                                         sunk costs on the following schedule:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $200,000
                                         on execution of the 2009 Agreement (the Company’s contribution to the 2009 Arrangement
                                         expenses to date of execution of the 2009 Agreement) – paid and expensed;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Up
                                         to $5.1 million in respect of De Beers’ share of the costs of the feasibility study
                                         (paid - $4,417,421 to December 31, 2012, included in “Mineral Properties”;
                                         no further payments are expected);
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million upon the completion of a feasibility study with at least a 15% IRR and approval
                                         of the necessary development work for a mine (as defined in the 2009 Agreement) - paid
                                         March 15, 2011;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million following the issuance of the construction and operating permits;
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million following the commencement of commercial production; and
| | - | -------------------------------------------------------------------------------------------------------------

| | · | The
                                         balance of approximately $24.4 million plus accumulated interest within 18 months following
                                         commencement of commercial production. Accumulated interest is being calculated at the
                                         prevailing LIBOR rate plus 5%.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Since these
payments are contingent upon certain events occurring, and/or work being completed, they will be recorded as the payments become
due or are made. As these contingent payments are made, they are being capitalized to Mineral Properties as “acquired exploration
and evaluation”.



Mountain Province
has agreed that the Company’s marketing rights under the 2009 Agreement may be diluted if the Company defaults on the repayments
described above, if and when such payments become due.



The 2009 Agreement’s
provision for consensus decision-making for material strategic and operating decisions provides the Company with joint control
of the Project with De Beers, and the Company accounts for the Project as a joint operation.

The underlying
value and recoverability of the amounts shown for the Company’s Mineral Properties is dependent upon the ability of the
Project to complete the successful design, permitting, funding and construction of the mine, and future profitable production.
Failure to achieve the above will require the Company to write-off costs capitalized to date.



GAHCHO KUÉ
PROJECT



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



Technical
Feasibility and Commercial Viability



The key factors
management uses in determining technical feasibility and commercial viability of the Project are demonstrable, are the following;



| | · | Completion
                                         of a feasibility study;
| | - | ---------------------------------------------------------------------------

| | · | Obtaining
                                         required permits to construct and operate the Gahcho Kué mine;
| | - | -----------------------------------------------------------------------------------------------------------------

| | · | Completion
                                         of an evaluation of the financial resources required to construct the
| | - | -------------------------------------------------------------------------------------------------------------------------

Gahcho
Kué mine;

| | · | The
                                         availability of financial resources necessary to commence development activities to construct
                                         the Gahcho Kué mine;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



Independent
Feasibility Study



On October
21, 2010, in a press release titled “Mountain Province Announces Positive Gahcho Kué Independent Feasibility Study”,
Mountain Province announced the results of the independent feasibility study on the Gahcho Kué diamond project dated October
15, 2010. JDS Energy and Mining Inc. led and prepared the feasibility study, which was presented to the Participants. The Company
filed a detailed summary of the Feasibility Study, dated December 1, 2010, as the NI 43-101 Technical Report on SEDAR on December
3, 2010. As noted above, the Project feasibility study of December 3, 2010 is currently being updated.

58







The following
are the financial and project highlights from the 2010 Feasibility Study:



|· | Project IRR*
    including sunk costs         | 20.7%**                | 
|- | --------------------------------------------- | ---------------------- | 
|· | Project IRR excluding
    sunk costs          | 33.9%                  | 
|· | Initial project capital                       | $549.5M                | 
|· | Working capital                               | $49.4M                 | 
|· | Sustaining capital including
    mine closure | $36.1M                 | 
|· | Operating costs                               | $48.68 per tonne       | 
|· | Project mine life                             | 11 years               | 
|· | Average annual production                     | 3 million tonnes       | 
|· | Total diamond production                      | 49 million carats      | 
|· | Average annual diamond
    production         | 4.45 million carats    | 
|· | Revenue                                       | US$102.48 per carat*** | 

*Internal
Rate of Return (“IRR”)

**After
taxes/royalties and unleveraged

***The
base case model uses an average realized diamond price of US$102.48 per carat derived from the mean average between the modeled
values of De Beers and WWW International Diamond Consultants (based on their respective April 2010 price books) inclusive of a
real 1% escalation over LOM less an assumed 4% marketing fee.



The feasibility
study delivers an economically viable, technically credible and environmentally sound development plan for the Project. Also,
the IRR exceeds the minimum 15% required under the Joint Arrangement Agreement to support a decision by the Participants to proceed
to development.



On June 14,
2011, the Participants announced that they had approved the Gahcho Kué feasibility study with agreed revisions and clarifications;
approved the execution of the necessary development work for the Project; and mandated the Operator to prepare a plan and budget
for the development of the first mine at Gahcho Kué.



Gahcho Kué
Mineral Reserve



On October
21, 2010, Mountain Province announced a Mineral Reserve estimate for the Project. The Mineral Reserve is the Indicated Resource
contained in the proposed open pit mine that can be mined and processed profitably and is scheduled for treatment in the feasibility
study life of mine plan. The Gahcho Kué mineral reserve estimate is summarized in Table 1 below.



Table 1



Gahcho Kué
Mineral Reserve Estimate



|Pipe   |  | Classification |  | Tonnes(Mt) |      |  | Grade
    (carats per tonne) |  |      | Carats(Mct) | 
|------ |  | -------------- |  | ---------- | ---- |  | ---------------------------- |  | ---- | ----------- | 
|5034   |  | Probable       |  |            | 13.2 |  |                              |  | 1.77 |             | 
|Hearne |  | Probable       |  |            | 5.4  |  |                              |  | 2.10 |             | 
|Tuzo   |  | Probable       |  |            | 12.6 |  |                              |  | 1.13 |             | 
|Total  |  | Probable       |  |            | 31.3 |  |                              |  | 1.57 | *           | 



*
Fully diluted mining grade



59







Independent Diamond
Valuation



Mountain Province
retained WWW International Diamond Consultants Ltd. (“WWW”) to provide an updated independent valuation of the diamonds
recovered from the Project. All diamond values presented below are based on the WWW Price Book as at February 24, 2014.



Table 2 below
reflects the actual price per carat for the parcel of 8,317.29 carats of diamonds recovered from the Project.



Table 2



Actual Price
US$/carat



|Pipe   |  | Zone             |  | Total
    Carats |          |  | $/Carat |   |     | Total
    Dollars | 
|------ |  | ---------------- |  | ---------------- | -------- |  | ------- | - | --- | ----------------- | 
|5034   |  | Centre/East Lobe |  |                  | 1,957.54 |  |         |   | 196 |                   | 
|       |  | West Lobe        |  |                  | 1,132.14 |  |         |   | 102 |                   | 
|Hearne |  |                  |  |                  | 2,905.76 |  |         |   | 88  |                   | 
|Tuzo   |  |                  |  |                  | 2,321.85 |  |         |   | 298 |                   | 
|Total  |  |                  |  |                  | 8,317.29 |  |         | $ | 174 |                   | 



Note:
Total Dollars are the result of rounding.



In their report
to Mountain Province, WWW stated: "The most valuable stone is in the Tuzo sample. This 25.13 carat stone is the largest stone
in all of the bulk samples. The stone is an octahedron of H/I colour which WWW valued at $19,000 per carat giving a total value
of $477,470”.



WWW added:
“The stone with the highest value per carat in the sample is a 9.90 carat stone in the 5034 C/E sample. This is a makeable
stone of high colour (D/E) which WWW valued at $22,000 per carat giving a total value of $217,800”.



Besides the
high-value 25.13 and 9.9 carat diamonds, several other large high-value diamonds of gem quality have been recovered from Gahcho
Kué, including 7.0 carat, 6.6 carat and 5.9 carat diamonds from the 5034 kimberlite and 8.7 carat, 6.4 carat and 4.9 carat
diamonds from the Hearne kimberlite. The presence of larger diamonds is an important driver of overall diamond value at Gahcho
Kué.



The results
of the 2014 independent diamond valuation indicated that there was a 6.7 percent decline from the previous valuation conducted
in March 2012. In their report, WWW state: “The valuations have fallen by more than the WWW overall rough price index because,
due to the size of the samples there were only 10 percent of the carats in the 3 to 8 grainer size fractions, and these sizes
have seen significant price increases since March 2012. The prices of the two most valuable stones have also been reduced by over
5 percent.



Table 3 below
presents models of the February 2014 average price per carat (US$/carat) for each kimberlite. The modeled price per carat is determined
using statistical methods to estimate the average value of diamonds that are likely to be recovered from future production at
Gahcho Kué.



Table 3



|Pipe            |  | High
    Model |     |  | Base
    Model |   |     | Low
    Model | 
|--------------- |  | -------------- | --- |  | -------------- | - | --- | ------------- | 
|5034 Centre     |  |                | 167 |  |                |   | 132 |               | 
|5034 West       |  |                | 172 |  |                |   | 131 |               | 
|5034 North/East |  |                | 194 |  |                |   | 142 |               | 
|Hearne          |  |                | 137 |  |                |   | 107 |               | 
|Tuzo            |  |                | 134 |  |                |   | 101 |               | 
|Average         |  | $              | 160 |  |                | $ | 120 |               | 



Note:
1 mm nominal square mesh

Diamond
values are in US Dollars



60







For mine feasibility
studies, WWW recommends using the base case models for defining the resources and reserves. The “high” and “low”
models are included for sensitivity analysis.



The WWW averaged
modeled price per carat for the Gahcho Kué kimberlites is US$120 , which represents a 40 percent increase over the WWW
April 2010 average modeled price, which was the base case used in the 2010 feasibility Study. The WWW models use size distribution
models (carats per size class) developed by De Beers.



The 2010 independent
definitive feasibility study, under which the revenue assumption was based on the mean average of the April 2010 WWW and De Beers
modeled diamond prices, reported a 33.9 percent IRR excluding sunk costs. Further, sensitivity analysis shows that a 10 percent
increase in modeled diamond prices results in an approximate 3 percent increase in the project IRR.



Permitting



On July 22,
2013,De Beers and the Company announced that the Mackenzie Valley Environmental Impact Review Board had concluded the
Gahcho Kué Environmental Impact Review and recommended approval of the proposed Gahcho Kué diamond mine subject
to measures and follow-up programs.



On October
22, 2013 the Minister of Aboriginal Affairs and Northern Development Canada, the Hon. Bernard Valcourt, approved the development
of the Gahcho Kué diamond mine as recommended by the Mackenzie Valley Environmental Impact Review Board and on December
2, 2014, the Mackenzie Valley Land and Water Board has approved a pioneer Land Use Permit for the Gahcho Kué diamond mine,
which allowed land-based site works to commence in preparation for deliveries planned for the 2014 winter road season.



Issuance of
the full Class A Land Use Permit is expected in mid-2014 and issuance of a Class A Water License is expected in Q3 2014.



Gahcho
Kué Development



The first blast
in the quarry at Gahcho Kué occurred on December 13, 2013. Production of aggregate material for infrastructure foundations,
roads and the landing strip is underway. Deliveries of machinery, equipment, fuel tanks, the main camp and other supplies are
underway. Approximately 600 truck loads are planned for delivery to Gahcho Kué on the 2014 ice road. Full construction
activities will commence upon receipt of the full Class A Land Use Permit. Subject to the receipt of all necessary permits, construction
of the Gahcho Kué mine is expected to be completed by late 2015/early 2016, following which commissioning of the diamond
plant will commence. Production is expected to commence during the second half of 2016.



Tuzo
Deep Project



Following completion
of the Tuzo Deep drill program in 2012, which was managed by the Operator, an updated National Instrument (NI) 43-101 resource
estimate for Tuzo Deep (Table 4 below) was prepared by Mineral Services Canada Inc. This estimate incorporates information from
geological data updates completed since the previous NI 43-101 Technical Report released in 2009. The 2009 resource estimate for
Tuzo Deep is included for reference purposes.



Table 4



|Pipe      |  | Year |      |  | Resource
    Classification |           | Volume
    (Mm3) |  |     | Tonnes
    (Mt) |  |  | Carats
    (Mct) |  |  | Grade
    (cpht) |     
|--------- |  | ---- | ---- |  | --------------------------- | --------- | ---------------- |  | --- | --------------- |  |  | ---------------- |  |  | ---------------- | ----
|Tuzo Deep |  |      | 2009 |  |                             | Inferred  |                  |  | 1.5 |                 |  |  | 3.5              |  |  |                  | 6.2 
|Tuzo Deep |  |      | 2013 |  |                             | Indicated |                  |  | 1.5 |                 |  |  | 3.6              |  |  |                  | 6.0 
|Tuzo Deep |  |      | 2013 |  |                             | Inferred  |                  |  | 3.7 |                 |  |  | 8.9              |  |  |                  | 14.4



Notes:
1) Mineral Resources are reported at a bottom cut-off of 1.0 mm

2) cpht = carats per hundred tonnes
3) Volume, tonnes, and carats are rounded to the nearest 100,000

4) Tuzo volumes and tonnes exclude
0.6Mt of a granite raft

61







Table 4 above
reflects the updated Tuzo Deep mineral resource. There has been no change in the geological data for the Tuzo Upper, 5034 and
Hearne kimberlites since the 2009 Technical Report.



Table 5 below
incorporates the updated Tuzo Deep mineral resource estimate into the existing Gahcho Kué mineral resource estimate.



Table 5





|Pipe    |  | Resource
    Classification |  | Volume
    (Mm3) |      |  | Tonnes
    (Mt) |  |      | Carats
    (Mct) |  |  | Grade
    (cpht) | 
|------- |  | --------------------------- |  | ---------------- | ---- |  | --------------- |  | ---- | ---------------- |  |  | ---------------- | 
|5034    |  | Indicated                   |  |                  | 5.1  |  |                 |  | 12.7 |                  |  |  | 23.9             | 
|        |  | Inferred                    |  |                  | 0.3  |  |                 |  | 0.8  |                  |  |  | 1.2              | 
|Hearne  |  | Indicated                   |  |                  | 2.3  |  |                 |  | 5.3  |                  |  |  | 11.9             | 
|        |  | Inferred                    |  |                  | 0.7  |  |                 |  | 1.6  |                  |  |  | 2.9              | 
|Tuzo    |  | Indicated                   |  |                  | 6.6  |  |                 |  | 15.8 |                  |  |  | 20.8             | 
|        |  | Inferred                    |  |                  | 3.7  |  |                 |  | 8.9  |                  |  |  | 14.4             | 
|Summary |  | Indicated                   |  |                  | 14.0 |  |                 |  | 33.8 |                  |  |  | 56.6             | 
|        |  | Inferred                    |  |                  | 4.7  |  |                 |  | 11.3 |                  |  |  | 18.5             | 







As discussed
in the Highlight Section, the updated Tuzo Deep resource estimate indicates an approximate 12% percent increase in the Gahcho
Kué indicated resource from 30.2 million tonnes to 33.8 million tonnes and an approximate 90% increase in inferred resource
from 6 million tonnes to 11.3 million tonnes. The diamond content of the indicated resource increased by approximately 12% from
50.5 million carats to 56.6 million carats and the diamond content of the inferred resource increased by approximately 80% from
10.3 million carats to 18.5 million carats. The reasons for these increases are the upgrading of the 300 to 360 meter zone in
Tuzo from inferred resource to indicated resource and also the inclusion of the newly defined Tuzo inferred resource from a depth
of 360 meters to 564 meters below surface, which was delineated during the 2011/12 Tuzo Deep drill program.



The Tuzo Deep
resource update released in mid-2013 defined a resource at the Tuzo kimberlite to a depth of 560 meters, with the kimberlite remaining
open to depth. A follow-up deep drilling program commenced in February 2014 to test the Tuzo kimberlite to a depth of at least
750 meters. Drilling of three planned vertical holes has commenced. The 2,250 meter drill program is expected to be completed
by May, 2014.



Qualified Person

The Qualified
Person for the updated Tuzo Deep estimate is Mr. Tom Nowicki, PhD, P Geo, a Mineral Services employee. The estimation and classification
of the mineral resources conform to industry-best practices and meet the requirements of CIM (2005).



Gahcho Kué
Capital Program



On May 28,
2012, the Company announced that the Participants had approved the initial capital of $31.3 million to advance the Gahcho Kué
diamond mine in preparation for development and in January 2013 approved additional $85.6 million. The 2014 budget is currently
under review.



The 2012 and
2013 budget focused on advancing:

| | 1. | Preparation
                                         work for the construction and operating permit applications;
| | -- | -----------------------------------------------------------------------------------------------------------------

| | 2. | Front-end
                                         engineering and design (FEED);
| | -- | ---------------------------------------------------------------------------------

| | 3. | Preparations
                                         and procurement for the 2013 winter road;
| | -- | -----------------------------------------------------------------------------------------------

| | 4. | Detailed
                                         engineering;
| | -- | --------------------------------------------------------------

| | 5. | Purchase
                                         of critical long-lead equipment; and
| | -- | --------------------------------------------------------------------------------------

| | 6. | Feasibility
                                         study update.
| | -- | ------------------------------------------------------------------





62







As mentioned
above, an update of the 2010 feasibility study is currently underway, which will incorporate agreed revisions and clarifications,
design refinements and cost adjustments to reflect changes since completion of the 2010 feasibility study and is expected to be
filed within 45 days after the draft results are released on March 28, 2014.



RESULTS
OF OPERATIONS



The financial
results for the years ended December 31, 2013, 2012 and 2011 are reported under IFRS as issued by the IASB, as well as for the
quarterly interim periods.



Selected
Annual Information



|                                 |  | December 31, 2013 |             |   | December 31, 2012 |   |             | December 31, 2011 | 
|-------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ----------- | ----------------- | 
|Other income                     |  | $                 | 355,428     |   |                   | $ | 10,869,407  |                   | 
|Operating expenses               |  |                   | (26,935,484 | ) |                   |   | (14,179,216 | )                 | 
|Other expenses                   |  |                   | (23,882     | ) |                   |   | (27,801     | )                 | 
|Net loss for the period          |  |                   | (26,603,938 | ) |                   |   | (3,337,610  | )                 | 
|Basic and diluted loss per share |  |                   | (0.28       | ) |                   |   | (0.04       | )                 | 
|Cash flow used in operations     |  |                   | (32,619,536 | ) |                   |   | (13,786,541 | )                 | 
|Cash, end of year                |  |                   | 11,344,472  |   |                   |   | 274,696     |                   | 
|Total assets                     |  |                   | 110,367,203 |   |                   |   | 95,590,052  |                   | 
|Long-term liabilities            |  |                   | 5,224,662   |   |                   |   | 6,284,770   |                   | 
|Dividends declared               |  |                   | Nil         |   |                   |   | Nil         |                   | 



FINANCIAL
REVIEW



Three and
Twelve months ended December 31, 2013 compared to the Three and Twelve months ended December 31, 2012

For the three
months ended December 31, 2013, the Company recorded a net loss of $6,839,466 or $0.07 per share, compared to $3,089,892 net loss
or $0.04 per share for the three months ended December 31, 2012. For the twelve months ended December 31, 2013, the Company recorded
a net loss of $26,603,938 or $0.28 per share, compared to $3,337,610 net loss or $0.04 per share for the twelve months ended December
31, 2012.



Three and
Twelve months ended December 31, 2012 compared to the Three and Twelve months ended December 31, 2011

For the three
months ended December 31, 2012, the Company recorded a net loss of $3,089,892 or $0.04 per share, compared to $5,347,662 net loss
or $0.07 per share for the three months ended December 31, 2011. For the twelve months ended December 31, 20123, the Company recorded
a net loss of $3,337,610 or $0.04 per share, compared to $11,538,935 net loss or $0.15 per share for the twelve months ended December
31, 2011.



Quarterly financial information
for the past eight quarters is shown in Table 1.





63







SUMMARY OF QUARTERLY
RESULTS



Table 1 - Quarterly Financial
Data



|                                 |  | Three
    months ended |            
|-------------------------------- |  | ---------------------- | -----------
|                                 |  | December 31            |            
|Unaudited                        |  | 2013                   |            
|                                 |  | $                      |            
|Earnings and Cash Flow           |  |                        |            
|Interest income                  |  |                        | 60,810     
|Expenses                         |  |                        | (6,894,257 
|Net loss for period              |  |                        | (6,839,466 
|Cash flow from operations        |  |                        | (17,625,994
|Basic and diluted loss per share |  |                        | (0.07      
|Investing activities             |  |                        | (6,186,388 
|Financing activities             |  |                        | 29,366,941 
|Balance Sheet                    |  |                        |            
|Total assets                     |  |                        | 110,368,408



|                                                |  | Three months ended |            
|----------------------------------------------- |  | ------------------ | -----------
|                                                |  | December 31        |            
|Unaudited                                       |  | 2012               |            
|                                                |  | $                  |            
|Earnings and Cash Flow                          |  |                    |            
|Interest income                                 |  |                    | 44,313     
|Expenses                                        |  |                    | (3,127,198 
|Gain on asset transfer to Kennady Diamonds Inc. |  |                    | -          
|Net income (loss) for period                    |  |                    | (3,089,892 
|Cash flow from operations                       |  |                    | (2,285,124 
|Basic and diluted earnings (loss) per share     |  |                    | (0.04      
|Investing activities                            |  |                    | (44,446,197
|Financing activities                            |  |                    | 43,062,632 
|Balance Sheet                                   |  |                    |            
|Total assets                                    |  |                    | 95,590,052 





COSTS AND EXPENSES



The costs
and expenses for the three and twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011 are comparable except
for the following:



Consulting fees



Consulting
fees for the three months ended December 31, 2013, 2012 and 2011 respectively were $509,589, $316,101 and $353,188. For the twelve
months ended December 31, 2013, 2012 and 2011 consulting fees respectively were $2,459,140, $1,434,917 and $1,631,188. Included
in these amounts for the twelve months ended December 31, 2013, 2012 and 2011 respectively were $1,240,821, $463,500 and $487,085
relating to stock based compensation.





64







Exploration and evaluation expenses



Exploration
and evaluation expenses for the three months ended December 31, 2013, 2012 and 2011 respectively were $5,456,405, $2,617,266 and
$4,462,899. For the twelve months ended December 31, 2013, 2012 and 2011 exploration and evaluation expenses respectively were
$21,837,083, $10,651,622 and $9,032,585. The increase from 2011 through 2013 is a result of increased work being conducted by
various engineering companies in preparation for the construction of the mine at Gahcho Kué.



Gahcho Kué
Project management fees



Gahcho Kué
Project management fees for the three months ended December 31 2013, 2012 and 2011 respectively were $460,104, $80,663 and $106,269.
For the twelve months ended December 31, 2013, 2012 and 2011 Gahcho Kué Project management fees respectively were $1,113,848,
$311,076 and $236,464. The increase for the same period in 2012 is mainly as a result of increased activity and expenditure being
incurred at the Company’s Gahcho Kué Project. The management fee is payable to the Operator and is expected to increase
during construction of the Project.



Professional
fees



Professional
fees for the three and twelve months ended December 31 2013, 2012 and 2011 respectively were $74,115, ($43,288) and $56,669. For
the twelve months ended December 31, 2013, 2012 and 2011 professional fees respectively were $344,701, $664,878 and $361,148.
During 2012, the Company incurred significant professional fees relating to the spin-out of Kennady Diamonds Inc.



Interest income



Interest income
for the three and twelve months ended December 31 2013, 2012 and 2011 respectively were $60,810, $44,313 and $118,658. For the
twelve months ended December 31, 2013, 2012 and 2011 interest income respectively were $355,428, $147,762 and $303,354 respectively.
The increase in 2013 is as a result of the $47 million proceeds from the Rights Offering, which closed in late 2012 being invested
in short-term investments.



Gain on asset
transfer to Kennady Diamonds Inc.



The gain on
asset transfer to Kennady Diamonds of $10,721,645 in the twelve months ended December 31, 2012 resulted from the spin out of the
Kennady North Project.



INCOME AND RESOURCE
TAXES



The Company
is subject to income 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.



FINANCIAL POSITION
AND LIQUIDITY



Since inception,
the Company’s capital resources have been limited. The Company has had to rely upon the sale of equity securities to fund
property acquisitions, exploration, capital investments and administrative expenses, among other things.



The Company
reported working capital of $35,133,368 at December 31, 2013 ($46,653,539 as at December 31, 2012), including cash and short-term
investments of $35,687,694 ($47,693,693 at December 31, 2012). The short-term investments reflected in the December 31, 2013 and
2012 figures were guaranteed investment certificates held with a major Canadian financial institution with nominal counter party
credit risk associated with the bank.



65







The Company
had no long-term debt at December 31, 2013 and 2012. The Company’s required payments to De Beers, described within Note
8 to the Company’s audited consolidated financial statements for December 31, 2013, are contingent on certain events occurring
such as receipt of permits, and production.



As at December
31, 2013, the Company has not achieved profitable operations and continues to be dependent upon its ability to obtain external
financing to meet the Company’s liabilities as they become payable. The Company’s ability to continue operations beyond
the next twelve months is dependent on the successful permitting, the ability of the Company to obtain necessary financing to
fund its operations, the successful construction of the mine, and the future production or proceeds from developed properties.



The Company’s
mineral asset, the Gahcho Kué Project was in the exploration and evaluation stage. On December 2, 2013,the approval
of a pioneer Land Use Permit for the Gahcho Kué diamond mine was obtained. Based on this approval the Company believes
that all further permits will be of a procedural nature and when considered in connection with the other identified criteria to
demonstrate technical feasibility and commercial viability (Note 3(vii)) of the consolidated financial statements) of the Gahcho
Kué Project, the Company will now capitalize all future development expenditures incurred related to the Gahcho Kué
Project.



The Company
currently has no source of revenues. In the years ended December 31, 2013, 2012 and 2011, the Company incurred losses, had negative
cash flows from operating activities, and will be required to obtain additional sources of financing to complete its business
plans going into the future. Although the Company had working capital of $35,133,368 at December 31, 2013, including $35,687,694
of cash and short-term investments, the Company has insufficient capital to finance its operations and the Company’s share
of development costs of the Gahcho Kué Project (Note 8) over the next 12 months.  The Company is currently investigating
various sources of additional funding to increase the cash balances required for ongoing operations over the foreseeable future.
These additional sources include, but are not limited to, share offerings, private placements, rights offerings, credit and debt
facilities, as well as the exercise of outstanding options. However, there is no certainty that the Company will be able to obtain
financing from any of those sources.  These conditions indicate the existence of a material uncertainty that results in substantial
doubt as to the Company’s ability to continue as a going concern.



The Company’s
audited consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, and
do not reflect adjustments to assets and liabilities that would be necessary if the going concern assumption were not appropriate.
These adjustments could be material.



Off-Balance
Sheet Arrangements



The Company
has no off-balance sheet arrangements.



SUBSEQUENT
EVENTS



On February
14, 2014, the Company issued 200,000 stock options to officers and employees of the Company at an exercise of $5.29 per option,
expiring on February 13, 2019.



The fair value
of the stock options has been estimated on the date of the grant using the Black-Scholes option pricing model, using the assumptions
below, and total $274,600. The expected volatility is calculated by reference to the weekly closing price for a period that reflects
the expected life of the options, recalculated for each of the grants.

66







|Date of grant                |  |   | February 14, 2014 |  
|---------------------------- |  | - | ----------------- | -
|Number of options granted    |  |   | 200,000           |  
|Fair Value per option        |  | $ | 1.373             |  
|Fair Value total for grant   |  | $ | 274,600           |  
|Term of option               |  |   | 5 years           |  
|Vesting                      |  |   | immediate         |  
|Assumptions:                 |  |   |                   |  
|Exercise price               |  | $ | 5.29              |  
|Expected volatility          |  |   | 38.19             | %
|Expected option life (years) |  |   | 3                 |  
|Expected forfeiture          |  |   | none              |  
|Expected option cancellation |  |   | none              |  
|Expected dividend yield      |  |   | 0                 | %
|Risk-free interest rate      |  |   | 1.21              | %



On March 11,
2014, the Company entered into an agreement with a syndicate of underwriters, under which the underwriters have agreed to buy,
on a bought deal basis by way of private placement, 3,000,000 common shares of the Company, at a price of $5.10 per Common Share
for gross proceeds of $15,300,000 (“the Offering”).



On March 12,
2014, the Company has increased the size of its Offering to 3,500,000 common shares, at a price of $5.10 per Common Share for
gross proceeds of $17,850,000.



Concurrent
with the bought deal private placement, the Company is undertaking a non-brokered private placement (“Non-brokered Private
Placement”) of Common Shares of the Company at a price not less than $5.10 per Common Share. The Non-brokered Private Placement
may be sold to Bottin (International) Investments Ltd. (controlled by Dermot Desmond) (“Bottin”) and other qualified
investors.



The Company
intends to use the net proceeds of the offering for the continued development of the Company's Project and for general corporate
purposes.



The Offering
and the Non-brokered Private Placement are expected to close on or about March 28, 2014 and are subject to the Company receiving
all necessary regulatory approvals, including the approval of the Toronto Stock Exchange and NYSE MKT.



SIGNIFICANT
ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS



The preparation
of the Company’s audited consolidated financial statements requires management to make judgments, estimates and assumptions
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. Actual outcomes could differ from these estimates. These audited consolidated financial statements
include estimates, which, by their nature, are uncertain and may require accounting adjustments based on future occurrences. Revisions
to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects
both current and future periods. These estimates are based on historical experience, current and future economic conditions, and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.



| | i) | Significant
                                         Judgments in Applying Accounting Policies
| | -- | ----------------------------------------------------------------------------------------------

The
areas which require management to make significant judgments in applying the Company’s accounting policies in determining
carrying values include, but are not limited to:



a)         Mineral
reserves



The
information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments
to interpret the data. Changes in the proven mineral reserves or measured and indicated and inferred mineral estimates may impact
the carrying value of the properties.



67







b)         Impairment
analysis – mineral properties





As
required under IFRS 6 – Exploration for and evaluation of mineral resources and IAS 36 – Impairment of assets (“IAS
36”), the Company reviewed its mineral properties 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 is that as at December 31, 2013, no impairment in the carrying
value of its mineral properties had occurred.



c)         Determination
of development phase



The
Company applies significant judgment when determining and assessing its criteria used to determine technical feasibility and commercial
viability is demonstrable. The Company determined that the Gahcho Kué Project has met the key factors used by management
and, accordingly, that all costs of development activities will be capitalized to mineral properties.



| | 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 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.



b)         Impairment
analysis - mineral properties



As
required under IFRS 6 – Exploration for and evaluation of mineral resources and IAS 36 – Impairment of assets (“IAS
36”), the Company reviewed its mineral properties 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. Upon the Company’s determination of
technical feasibility and commercial viability an impairment test of the capitalized costs related to the Gahcho Kué Project
was completed. IAS 36 requires the Company to make certain estimates in respect of recoverability of the asset, including estimated
development costs, life of mine, discount rates and diamond prices. The Company’s assessment is that there is no impairment
in the carrying value of its mineral properties.



c)         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.



d)         Stock
options



The
stock option pricing model requires the input of highly subjective assumptions including the expected life and volatility. Changes
in the subjective input assumptions can materially affect the fair value estimate.



e)         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, it is probable that they
will be realized. The Company has not recorded the benefit of any tax losses or deductible temporary differences.



68







STANDARDS,
AMENDMENTS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED EARLY BY THE COMPANY



At the date
of authorization of these financial statements, certain new standards, amendments and interpretations 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 relevant pronouncements will be adopted in the Company’s accounting policy for the first period beginning
after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected
to be relevant to the Company’s financial statements is provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on the Company’s financial statements and are therefore
not discussed below.



IFRS
9 – Financial Instruments

The IASB issued
IFRS 9 “Financial Instruments” (“IFRS 9”) which proposes to replace IAS 39 “Financial Instruments:
recognition and measurement”. The replacement standard has the following significant components: establishes two primary
measurement categories for financial assets — amortized cost and fair value; establishes criteria for classification of
financial assets within the measurement category based on business model and cash flow characteristics; and eliminates existing
held to maturity, available-for-sale, and loans and receivable categories.



In November
2013, the IASB issued an amendment to IFRS 9 which includes a new hedge model that aligns accounting more closely with risk management,
as well as enhancements to the disclosures about hedge accounting and risk management. Additionally as the impairment guidance
in IFRS 9, as well as certain limited amendments to the classification and measurement requirements of IFRS 9 is not yet complete,
the previously mandated effective date of IFRS 9 of January 1, 2015, has been removed. Entities may apply IFRS 9 before the IASB
completes the amendments, but are not required to. The Company has not yet determined the impact of adoption of IFRS 9 and will
evaluate the impact of the change to its financial statements based on the characteristics of its financial instruments at the
time of adoption.



IFRIC
21 – Levies

IFRIC 21 Levies
(“IFRIC 21”) was issued in May 2013 and is an interpretation of IAS 37 – Provisions, Contingent Liabilities
and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments. IAS 37 sets out criteria for
the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past
event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy
is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual
periods commencing on or after January 1, 2014. The Company is assessing the impact of this new standard, if any, on the consolidated
financial statements.



IAS 32
– Offsetting Financial Assets and Liabilities

IAS 32 was
amended to clarify that an entity currently has a legally enforceable right to set-off if that right is not contingent on a future
event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity
and all counterparties. This amendment also clarifies when a settlement mechanism provides for net settlement or gross settlement
that is equivalent to net settlement. Amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014.
The Company intends to adopt the amendments to IAS 32 in its consolidated financial statements for the annual period beginning
January 1, 2014. The Company does not expect the amendments to have a material impact on the consolidated financial statements.



RELATED
PARTY TRANSACTIONS



The Company’s
related parties include the operator of the Gahcho Kué Project, Bottin (International) Investments Ltd. (“Bottin”),
key management and their close family members, and the Company’s directors. Kennady Diamonds Inc. (“Kennady Diamonds”)
is also a related party since the Company and Kennady Diamonds have common members of key management.



69







None of the
transactions with related parties incorporate special terms and conditions, and no guarantees were given or received. Related
party transactions are recorded at their exchange amount, being the amount agreed to by the parties. Outstanding balances are
settled in cash.



The Company
had the following transactions and balances with its related parties including key management personnel and the Company’s
directors, Bottin, the operator of the Gahcho Kué Project, and Kennady Diamonds. The transactions with key management personnel
are in the nature of remuneration. The transactions with the operator of the Gahcho Kué Project relate to the funding of
the Company’s interest in the Gahcho Kué Project for the current year’s expenditures and capital additions.
The transactions with Kennady Diamonds are for a monthly management fee charged by the Company and reimbursement of expenses paid
on behalf of Kennady Diamonds.



|                                                  |  | December 31, |           |  | December 31, |   |           | December 31, | 
|------------------------------------------------- |  | ------------ | --------- |  | ------------ | - | --------- | ------------ | 
|                                                  |  | 2013         |           |  | 2012         |   |           | 2011         | 
|The total of the transactions:                    |  |              |           |  |              |   |           |              | 
|Bottin - Stand-by Fee under Stand-by Agreement    |  | $            | -         |  |              | $ | 706,261   |              | 
|Kennady Diamonds                                  |  |              | 152,500   |  |              |   | 120,940   |              | 
|Remuneration                                      |  |              | 2,457,759 |  |              |   | 1,477,715 |              | 
|Payable to the operator of the Gahcho Kué Project |  |              | 5,647,892 |  |              |   | 685,290   |              | 
|Payable to key management personnel               |  |              | 357,967   |  |              |   | 30,180    |              | 





The remuneration
expense of directors and other members of key management personnel for the years ended December 31, 2013, 2012 and 2011 were as
follows:



|                                                                    |  | Year ended  |           |  | Year ended   |   |           | Year ended   | 
|------------------------------------------------------------------- |  | ----------- | --------- |  | ------------ | - | --------- | ------------ | 
|                                                                    |  | December 31 |           |  | December 31, |   |           | December 31, | 
|                                                                    |  | 2013        |           |  | 2012         |   |           | 2011         | 
|Consulting fees, director fees, bonus and other short-term benefits |  | $           | 1,216,938 |  |              | $ | 1,014,215 |              | 
|Share-based payments                                                |  |             | 1,240,821 |  |              |   | 463,500   |              | 
|                                                                    |  | $           | 2,457,759 |  |              | $ | 1,477,715 |              | 



In accordance
with IAS 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.



CONTRACTUAL
OBLIGATIONS



The Company
has consulting agreements with the President and CEO and the VP Finance, CFO and Corporate Secretary for their services in these
capacities.



For the year
ended December 31, 2013, the Company’s proportional interest (49%) of purchase commitments relevant to project expenditure
by the operator of the Gahcho Kué Project is $31,609,307.



|                                      |  | 2014 |            |  | 2015 |   |           | 2016 |  |   | Total   | 
|------------------------------------- |  | ---- | ---------- |  | ---- | - | --------- | ---- |  | - | ------- | 
|Future Gahcho Kué Project commitments |  | $    | 25,296,426 |  |      | $ | 6,164,608 |      |  | $ | 148,273 | 



The total future
minimum lease payments for office space by the Company under non-cancellable operating leases are as follows:



|                              |  | 2014 |         |  | 2015 |   |         | 2016 |  |   | 2017    |  |  | Total |       
|----------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ----- | ------
|Future minimum lease payments |  | $    | 142,256 |  |      | $ | 142,256 |      |  | $ | 142,256 |  |  | $     | 11,855





Other
Management Discussion and Analysis Requirements



RISKS



Mountain Province’s
business of exploring, permitting and developing 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.







70







Mountain Province’s
business of exploring, permitting and developing mineral properties is subject to a variety of risks and uncertainties, including,
without limitation:



| | § | 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 feasibility 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 and prices of diamonds;
| | - | ---------------------------------------------------------------------------------------------------------------

| | § | risks
                                         related to commodity price fluctuations;
| | - | ---------------------------------------------------------------------------------------

| | § | the
                                         uncertainty of profitability based upon the Company's history of losses;
| | - | ---------------------------------------------------------------------------------------------------------------------

| | § | risks
                                         related to failure of the Company and/or its joint venture partner to obtain adequate
                                         financing on a timely basis and on acceptable terms, particularly given recent volatility
                                         in the global financial markets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § | 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 construction and/or operating permits that are approved
                                         and/or issued;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § | political
                                         and regulatory risks associated with mining, exploration and development;
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | § | geological
and technical conditions at the Company’s Gahcho Kué Project being adequate to permit development;
| | - | -------------------------------------------------------------------------------------------------------------

| | § | the
                                         ability to develop and operate the Company’s Gahcho Kué Project on an economic
                                         basis and in accordance with applicable timelines;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



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 (TSX) under the symbol MPV and on the New York Stock Exchange MKT under
the symbol MDM.



At March 25,
2014, there were 100,501,351 shares issued and 1,400,000 stock options 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



The Company's
Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and
procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) under the "Exchange Act" as of the end of the
period covered by this annual report (the "Evaluation Date"). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective. Such disclosure controls and
procedures are designed to ensure that the information required to be disclosed by the Company in reports that it files or submits
to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in applicable rules and forms, and includes controls and procedures designed to ensure information relating
to the Company required to be included in our reports filed or submitted under the Exchange Act is accumulated and communicated
to the Company’s management to allow timely decision regarding disclosure.



71







INTERNAL
CONTROL OVER FINANCIAL REPORTING



The Company’s
management, under the supervision of the Chief Executive Officer and Chief Financial Officer, are responsible for establishing
and maintaining the Company’s Internal Control Over Financial Reporting (“ICFR”). Management has conducted an
evaluation of internal control over financial reporting based on the framework established in “Internal Control –
Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
as at December 31, 2013. There have not been any changes in the Company’s ICFR or in other factors during 2013 or that have
been identified in connection with the evaluation that occurred during the year ended December 31, 2013, that has materially affected,
or is reasonably likely to materially affect, the Company’s ICFR.



Management’s
Annual 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 International Financial
Reporting Standards as issued by the International Accounting Standards Board.



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 (1992), 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, 2013.
The Company's independent auditors, KPMG LLP, have issued an unqualified opinion on the effectiveness of the Company's internal
control over financial reporting as of December 31, 2013.



CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS



Certain
of the statements made and information contained herein is “forward-looking information” within the meaning of the
Ontario Securities Act. Forward-looking information may include, but is not limited to, statements with respect to the success
of exploration activities, future mineral exploration, permitting time lines, requirements for additional capital, sources and
uses of funds, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and mineral resource
estimates, future remediation and reclamation activities, the timing of activities and the amount of estimated revenues and expenses. 
Forward-looking information is based on various assumptions including, without limitation, the expectations and beliefs of management,
the assumed long term price of diamonds; that the Company can access financing, appropriate equipment and sufficient labour and
that the political environment where the Company operates will continue to support the development and operation of mining projects.
Should underlying assumptions prove incorrect, or one or more of the risks and uncertainties described below materialize,
actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to
place undue reliance on forward-looking statements.



72







Forward-looking
information is subject to a variety of risks and uncertainties which could cause actual events or results to differ from those
reflected in the forward-looking information, including, without limitation, risks and uncertainties relating to foreign currency
fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological
formations, ground control problems and flooding; delays or the inability to obtain necessary governmental permits or financing; 
risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits;
the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations;
the potential for and effects of labor disputes or other unanticipated difficulties with or shortages of labor or interruptions
in production; failure of plant, equipment or processes to operate as anticipated; actual ore mined varying from estimates of
grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates
and the potential for unexpected costs and expenses, diamond price fluctuations; uncertain political and economic environments;
changes in laws or policies, and other risks and uncertainties, including those described under Risk Factors.



Historical
results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate
future results from operations. The Company undertakes no obligation to publicly update or review the forward-looking statements
whether as a result of new information, future events or otherwise, other than as required under applicable securities laws.



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 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.  In particular,
and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”. 
Under U.S. standards, 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 U.S.
standards in documents filed with the SEC.  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 SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
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 SEC’s Industry Guide 7, and reserves reported by the Company
in compliance with NI 43-101 may not qualify as “reserves” under Industry 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 U. S. standards.



73







| | Item 6. | Directors, Senior Management
and Employees
| | ------- | ------------------------------------------



| | A. | Directors
                                         and Senior management.
| | -- | -------------------------------------------------------------------------



Each
director of MPV 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 MPV, as of March 25, 2014.





|Name               |  | Position with Company                           |  | Date of First Appointment                                                                      
|------------------ |  | ----------------------------------------------- |  | -----------------------------------------------------------------------------------------------
|Jonathan Comerford |  | Chairman and Director(2)(3)                     |  | Chairman of the Company since May 11, 2006 and Director since September 21, 2001               
|Patrick Evans      |  | President, Chief Executive Officer and Director |  | President and Director of the Company since November 15, 2005                                  
|Bruce Ramsden      |  | Vice-President Finance and CFO                  |  | Vice President Finance since February 1, 2013 and Chief Financial Officer effective May 1, 2013
|Bruce Dresner      |  | Director(1)                                     |  | Director since March 11, 2013                                                                  
|Peeyush Varshney   |  | Director(1) (2)                                 |  | Director since April 13, 2007                                                                  
|Carl Verley        |  | Director(1)(3)                                  |  | Director of Old MPV since December 2, 1986 and Director of the Company since November 1, 1997  
|David E. Whittle   |  | Director(2)(3)                                  |  | Director 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.



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.



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 Chairman since April 2006. 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 serves as a director
of Kennady Diamonds Inc. since February 2012, and is Chairman of Optimal Payment Plc.



74







Patrick
C. Evans, B.A., B.Sc.



Mr.
Patrick C. Evans has been President, CEO and a director of Mountain Province Diamonds Inc. since November 2005. He is a resident
of Arizona, USA.  Mr. Evans is a graduate of the University of Cape Town where he received his Bachelor of Arts degree in
1977 and Bachelor of Science degree in 1978. In 1999 he was appointed a Vice President of Placer Dome Inc. (a major gold mining
company) and a non-executive director of SouthernEra Resources Ltd. (a diamond and platinum exploration, development and mining
company).  In 2001, he was appointed President and CEO of SouthernEra Resources Ltd. and Messina Limited (a platinum mining
company). In 2004, he was appointed President, CEO and a director of Southern Platinum Corp. (a platinum mining company), which
was acquired by Lonmin Plcin June 2005. In September 2005, he was appointed President, CEO and a director of Weda Bay
Minerals Inc. (a nickel exploration and development company), which was acquired by Eramet S.A. in May 2006.   Mr. Evans
was appointed the CEO and a director of Norsemont Mining Inc. (a copper exploration and development company) in June 2007 which
was taken over by Hudbay in the March 2011.  He also served as a non-executive director of Anvil Mining Limited (a copper
mining company) from March 2009 to February 2012 when Anvil Mining was acquired by Minmetals. Mr. Evans has served as the President
and CEO and a director of Kennady Diamonds Inc. since February 2012. Mr. Evans is a non-executive director of Indico Resources
Ltd.



Bruce
C. Ramsden, B.Comm, A.C.I.S.



Mr.
Bruce Ramsden has been the Company’s Vice President Finance and Chief Financial Officer since May 2013. Mr. Ramsden is also
Vice President Finance and Chief Financial Officer for Kennady Diamonds Inc., since May 2013. He has been a resident of Ontario,
Canada since February 1996 and prior to that resided in South Africa where he graduated by correspondence with a Bachelor of Commerce
degree from the University of South Africa and gained through correspondence a C.I.S through the Institute of Chartered Secretaries
and Administrators. Mr. Ramsden worked for a number of large companies in South Africa, including Mobil Oil, Philips South Africa
and Castrol Oil South Africa prior to immigrating to Canada in 1996. Since 1996, Mr. Ramsden has provided financial consulting
services to Vaaldiam Resources Ltd. (May 1996 to December 2001) and in addition to his CFO and Corporate Secretary roles was also
a Director. Mr. Ramsden was also a Director and Chief Financial Officer of Sierra Minerals Inc. (January 1998 to September 2006).
Mr. Ramsden also consulted to St Andrew Goldfields Ltd. (January 2002 to June 2005) and was VP Finance, CFO and Corporate Secretary.
Mr. Ramsden was also CFO and a Director for Heritage Exploration Ltd. (January 2005 to June 2005). Mr. Ramsden joined Vaaldiam
Mining Inc., formerly Tiomin Resources Inc. (June 2005 to June 2010) as VP Finance, CFO and Corporate Secretary. Mr. Ramsden was
also a Director of Freegold Ventures Limited (October 2009 to April 2011). Mr. Ramsden consulted to Andean American Gold Corp.
(July 2010 to October 2012), which was acquired by Lupaka Gold Corp. (October 2012) and Southern Legacy Minerals Inc., formerly
Sinchao Metals Corp. (July 2010 to June 2012) where in addition to his VP Finance, CFO and Corporate Secretary roles, he also
provided financial and administrative services to both companies.



Bruce
Dresner, MBA, BA



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-present),
and a trustee of the Gottex Multi-Asset Endowment and Alternative Asset Funds (2011-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 Connecticut, USA. Mr. Dresner was appointed as
a director of Mountain Province in March 2013. He is also a director of the Sherman Fairchild Foundation (nonprofit).



75







Peeyush
Varshney, 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 Canada Zinc Metals Corp., a resource exploration
company listed on the TSX Venture Exchange. Mr. Varshney obtained a Bachelor of Commerce degree (Finance) in 1989 and a Bachelor
of Laws in 1993, both from the University of British Columbia. He then articled at Farris, Vaughan, Wills & Murphy, a law
firm in Vancouver, British Columbia, from 1993 to 1994, and has been a member of the Law Society of British Columbia since September
1994. Mr. Varshney is also director of Afrasia Mineral Fields Inc., Mexigold Corp., Trigen Resources Inc., Minaean International
Corp., Open Gold Corp., Broome Capital Inc. and JDV Capital Corp.



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. Currently and since 1986 he has been a director
of Mountain Province Diamonds Inc. and since February 2012, he has been a director of Kennady Diamonds Inc.  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.



David
E. Whittle, B.Comm., C.A.



Mr.
Whittle is a Chartered Accountant and is a resident of British Columbia, Canada.  He has been a director of Mountain Province
Diamonds Inc. since November 1997.  From 2004 to August 2007, Mr. Whittle was Chief Financial Officer of Hillsborough Resources
Limited, a public company in the mining business.  Since October 2007, Mr. Whittle’s principal occupation has been
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 is also a director of Kennady
Diamonds Inc. since February 2012.



| | B. | Compensation.
| | -- | -------------



The
Company has two executive officers (collectively, the "Executive Officers"): Patrick Evans, the President and CEO, and
Bruce Ramsden, Vice President Finance and CFO. For particulars on these executive officers, reference should be made to “Item
6A - Directors and Senior Management”.



The
compensation paid to the executive officers and details of management contracts and incentive options granted to the two executive
officers of the Company for the Company's most recently completed financial years is as follows:



76











| | · | Patrick
                                         Evans, President and Chief Executive Officer, earned other annual compensation of $536,667
                                         in the most recent fiscal year ending December 31, 2013 including $530,000 pursuant to
                                         a consulting agreement (as amended) for his services as President and CEO, as well as
                                         a director’s fee of $6,667 for the year ended December 31, 2013. As at December
                                         31, 2013, he had 300,000 stock options.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



77







|Grant date       |  | Number |         |  | Vesting |             | Exercise Price |   |      | Term
|---------------- |  | ------ | ------- |  | ------- | ----------- | -------------- | - | ---- | ----
|January 10, 2011 |  |        | 100,000 |  |         | Immediately |                | $ | 6.13 |     
|March 8, 2012    |  |        | 100,000 |  |         | Immediately |                | $ | 4.84 |     
|May 14, 2013     |  |        | 100,000 |  |         | Immediately |                | $ | 5.00 |     











| | · | Bruce
                                         Ramsden, Chief Financial Officer and Corporate Secretary, was paid $183,040 pursuant
                                         to a consulting agreement for his services as CFO and Corporate Secretary for the year
                                         ended December 31, 2013. As at December 31, 2013, he has 100,000 stock options as follows:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Grant date       |  | Number |         |  | Vesting |                                                        | Exercise Price |   |      | Term
|---------------- |  | ------ | ------- |  | ------- | ------------------------------------------------------ | -------------- | - | ---- | ----
|February 1, 2013 |  |        | 100,000 |  |         | 1/3 immediately, 1/3 after year 1 and 1/3 after year 2 |                | $ | 4.08 |     



Effective
January 1, 2013, compensation for the directors was approved at the following levels: Chairman of the Board receives $30,000 per
annum, the Chairman of the Audit Committee receives $25,000 per annum, the Director acting as Qualified Person receives $25,000,
and all other Directors receive $20,000 per annum. These amounts continue to be paid semi-annually, in advance. Effective January
1, 2014 , compensation for the directors was approved at the following levels: Chairman of the Board receives $40,000 per annum,
the Chairman of the Audit Committee receives $35,000 per annum, the Director acting as Qualified Person receives $35,000, and
all other Directors receive $30,000 per annum. These amounts continue to be paid semi-annually, in advance.



For
the year ended December 31, 2012, the compensation for the directors was approved and paid at the following levels: Chairman of
the Board - $30,000, the Chairman of the Audit Committee - $25,000, and all other Directors- $20,000 per annum. These amounts
were paid semi-annually, in advance.

During
each of the years ended December 31, 2013, December 31, 2012, and December 31, 2011, director fees were earned by the following
directors:



|Director/Position                             |  | December 31, 2013 |        |  | December 31, 2012 |   |        | December 31, 2011 | 
|--------------------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | ----------------- | 
|Jonathan Comerford Chairman of the Board      |  | $                 | 30,000 |  |                   | $ | 30,000 |                   | 
|David Whittle Chairman of the Audit Committee |  | $                 | 25,000 |  |                   | $ | 25,000 |                   | 
|Bruce Dresner(2) Director                     |  | $                 | 16,082 |  |                   |   | $N/A   |                   | 
|Patrick Evans Director                        |  | $                 | 6,667  |  |                   | $ | 20,000 |                   | 
|Elizabeth Kirkwood(3) Director                |  | $                 | 10,000 |  |                   | $ | 20,000 |                   | 
|Carl Verley Director                          |  | $                 | 25,000 |  |                   | $ | 25,000 |                   | 
|Peeyush Varshney Director                     |  | $                 | 20,000 |  |                   | $ | 20,000 |                   | 



78







| | (1) | The
                                         Directors’ Fees were prorated for the first semi-annual payment in 2010 to adjust
                                         for the payment, in advance, of the January 1, 2010-March 31, 2010 fees paid in October
                                         2009 before the Company’s change in year end.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Mr.
                                         Dresner joined the board on March 18, 2013.
| | --- | ----------------------------------------------------------------------------------------

| | (3) | Ms.
                                         Kirkwood resigned from the board on June 11, 2013.
| | --- | -----------------------------------------------------------------------------------------------



The
Company has no Long-Term Incentive Plan ("LTIP”) in place and therefore there were no awards made under any long-term
incentive plan to the Executive Officers during the Company's most recently completed financial year. A "Long-Term Incentive
Plan" is a plan providing compensation intended to motivate performance over a period of greater than one financial year,
other than a plan for options, SARs (stock appreciation rights) or compensation through shares or units that are subject to restrictions
on resale.



The
following table sets out incentive stock options exercised by the Executive Officers during the most recently completed financial
year, as well as the financial year end value of stock options held by the Executive Officers. During this period, no outstanding
SARs were held by the Executive Officers.



|Name          |  | Securities,  Acquired on  Exercise (#) |  |  | Aggregate ValueRealized ($)(1) |  |  | Unexercised Options at  Financial Year-End  Exercisable / Unexercisable (#) |  | Value of Unexercised In-the-Money Options at FinancialYear-End Exercisable /Unexercisable ($)(2)
|------------- |  | -------------------------------------- |  |  | ------------------------------ |  |  | --------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------
|Patrick Evans |  | Nil                                    |  |  | Nil                            |  |  | 300,000/0                                                                   |  | $74,000/$0                                                                                      
|Bruce Ramsden |  | Nil                                    |  |  | Nil                            |  |  | 33,334/66,666                                                               |  | $40,334/$80,666                                                                                 



(1)   
Based on the difference between the option exercise price and the closing market price of the Company's shares on the date of
exercise.

(2)   
In-the-Money Options are those where the market value of the underlying securities as at the most recent financial year end exceeds
the option exercise price. The closing market price of the Company's shares as at December 31, 2013, (i.e. financial year end)
was $3.89.



There
were no options or freestanding SARs held by the Executive Officers that were re-priced downward during the most recently completed
financial year of the Company.



The
Company does not have a defined benefit/actuarial plan, under which benefits are determined primarily by final compensation and
years of service of the Company's officers and key employees.



In
addition to the foregoing, some of the executive officers of the Company are also entitled to medical and dental benefits, reimbursement
of all reasonable business expenses and, from time to time, the grant of stock options.



No
plan exists, and no amount has been set aside or accrued by the Company or any of its subsidiaries, to provide pension, retirement
or similar benefits for directors and officers of the Company, or any of its subsidiaries.



| | C. | Board
                                         practices.
| | -- | ---------------------------------------------------------



The
directors of the Company are elected annually and hold office until the next annual general meeting of the shareholders of the
Company or until their successors in office are duly elected or appointed. The Company does not have an executive committee. All
directors are elected for a one-year term. All officers serve at the pleasure of the Board. None of the directors, with the exception
of Patrick Evans, who serves as the Company’s President and CEO, have any service agreements with the Company. Mr. Evans’
agreement contains a termination clause that would provide him with 24 months of compensation if there is a change of control
of the Company plus benefits and full incentive compensation for the same period, all payable within 30 days of termination. In
addition, the Company will fully fund Mr. Evans RBC life insurance policy to maturity through a lump sum payment, estimated at
approximately $400,000 based on term of the policy and prevailing interest rates. All stock options held by Mr. Evans will vest
upon the Change of Control.

79







The
next Annual General Meeting of the shareholders of the Company has been scheduled for June 17, 2014.



The
Board has adopted a Charter under which it and the Board's committees operate. The Company's board of directors has three committees-
the Audit Committee, the Nominating/Corporate Governance Committee and the Compensation Committee.



Audit
Committee



The
members of the Audit Committee do not have any fixed term for holding their positions and are appointed and replaced from time
to time by resolution of the Board of Directors. It is composed of at least three directors, and the Board has determined that
David Whittle, C.A. of the Audit Committee meets the requirement of an "audit committee financial expert" as defined
in Item 16A of Form 20-F. Each member of the Audit Committee has the financial ability to read and understand a balance sheet,
an income statement and a cash flow statement. All three members of the Audit Committee are independent.



The
current members of the Audit Committee are Jonathan Comerford, Peeyush Varshney and David Whittle. Except for the chairman, David
Whittle, the Audit Committee members receive no separate remuneration for acting as such and their appointments are not for any
fixed term.



The
Audit Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibilities. Its primary duties
and responsibilities are to:



| | a. | identify
                                         and monitor the management of the principal risks that could impact the financial reporting
                                         of the Company;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | monitor
                                         the integrity of the Company's financial reporting process and system of internal controls
                                         regarding financial reporting and accounting compliance;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | make
                                         recommendations regarding the selection of the Company's external auditors (by shareholders)
                                         and monitor their independence and performance;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | provide
                                         an avenue of communication among the external auditors, management and the Board;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



| | e. | handle
                                         complaints regarding the Company's accounting practices; and
| | -- | ------------------------------------------------------------------------------------------------------------



| | f. | administer
                                         and monitor compliance with the Company's Ethics and Conflict of Interest Policy.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



Corporate
Governance Committee



The
members of the Corporate Governance Committee are Peeyush Varshney (Chair), Carl Verley and Bruce Dresner. They are unrelated.



The
Corporate Governance Committee is responsible for assessing directors on an ongoing basis and for developing the Company's approach
to governance issues and for the Company's response to the Sarbanes-Oxley Act of 2002, as implemented by the U.S. Securities and
Exchange Commission, and the Toronto Stock Exchange's governance guidelines.



80











Compensation Committee



The Compensation Committee is
composed of Carl Verley (Chair), David Whittle, and Jonathan Comerford, all of whom are independent. The Committee, in consultation
with the Chairman and CEO of the Company, makes recommendations to the Board on the Company's framework of executive remuneration
and its cost and on specific remuneration packages for each of the executives. The remuneration of non-executives, including members
of the Compensation Committee, is determined by the Board.



| | D. | Employees.
| | -- | ----------



As at the end of the fiscal years
ended December 31, 2013, 2012, and 2011, the Company had no full-time employees. The President and CEO, Patrick Evans, and the
VP Finance, CFO and Corporate Secretary, Bruce Ramsden, have consulting agreements with the Company. The Toronto administrative
and executive office uses outsourced administrative assistance on an as-needed, part-time basis. De Beers Canada employs personnel
who conduct the development, permitting and other activities for the Gahcho Kué Project.



| | E. | Share ownership.
| | -- | ----------------



The following table sets forth,
as of March 25, 2014, the number of the MPV Shares beneficially owned by (a) the directors and members of senior management of
the Company, individually, and as a group, and (b) the percentage ownership of the outstanding common shares represented by such
shares. The security holders listed below are deemed to be the beneficial owners of common shares underlying options which are
exercisable within 60 days from the above date.



|Name of Beneficial Owner            |  | Amount and Nature |           |  | Percentage(9)(10)of Class | 
|----------------------------------- |  | ----------------- | --------- |  | ------------------------- | 
|Patrick C. Evans(1)                 |  |                   | 1,719,055 |  |                           | 
|Bruce Dresner(2)                    |  |                   | 474,148   |  |                           | 
|Carl G. Verley(3)                   |  |                   | 433,890   |  |                           | 
|Jonathan Comerford(4)               |  |                   | 273,500   |  |                           | 
|Peeyush  Varshney(5)                |  |                   | 212,622   |  |                           | 
|David E. Whittle(6)                 |  |                   | 236,600   |  |                           | 
|Bruce Ramsden(7)                    |  |                   | 116,667   |  |                           | 
|Officer and Directors as a Group(9) |  |                   | 3,466,482 |  |                           | 



*     less than 1%



| |  | Includes 1,317,555 MPV Shares and 400,000 options. 100,000 options are exercisable at a price of
$6.13 per MPV Share, and expire on January 9, 2016. 100,000 options are exercisable at a price of $4.84 per MPV share, and expire
on March 7, 2017. 100,000 options are exercisable at a price of $5.00 per MPV share, and expire on May 13, 2018. 100,000 options
are exercisable at a price of $5.29 per MPV share, and expire on February 13, 2019.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Includes 324,148 MPV Shares and 150,000 options. 100,000 options are exercisable at a price of
$4.06 per MPV Share, and expire on March 10, 2018. 50,000 options are exercisable at a price of $5.28 per MPV share, and expire
on July 2, 2018.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Includes 333,890 MPV Shares and 100,000 options. 100,000 options are exercisable at a price of
$5.28 per MPV share, and expire on July 2, 2018.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Includes 123,500 MPV Shares and 150,000 options. 150,000 options are exercisable at a price of
$5.28 per MPV share, and expire on July 2, 2018.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Includes 112,622 MPV Shares and 100,000 options. 100,000 options are exercisable at a price of
$5.28 per MPV share, and expire on July 2, 2018.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Includes 136,600 MPV Shares and 100,000 options. 100,000 options are exercisable at a price of
$5.28 per MPV share, and expire on July 2, 2018.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Includes Nil MPV Shares, and 116,666 options. 66,666
options are exercisable at a price of $4.08 per MPV Share and expire on January 1, 2018. 50,000 options exercisable at a price
of $5.29 per MPV share, and expire on February 13, 2019.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



81







| | (8) | Includes 1,400,000 options outstanding, of which 1,116,667 are held by the directors and senior
management (exercisable). The calculation does not include stock options that are not exercisable presently or within 60 days (of
which there are 33,332).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (9) | Total issued and outstanding capital as at the close of March 25, 2014 was 100,501,351 shares.
| | --- | ----------------------------------------------------------------------------------------------



| | (10) | The Company has no actual knowledge of the holdings of each individual. The above information was provided by the respective
individuals to the Company.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has a stock option
plan pursuant to which stock options may be granted to its directors, officers and employees. Stock options are awarded by resolution
of the board of directors.



| | Item 7. | Major Shareholders and Related Party Transactions
| | ------- | -------------------------------------------------



| | A. | Major shareholders.
| | -- | -------------------



A major shareholder is a shareholder
beneficially owning more than 5% of the issued shares of the Company.



As at March 25, 2014, the Company's
issued and outstanding capital was 100,501,351 MPV Shares.



The Company is a publicly-owned
corporation the majority of the MPV Shares of which are owned by persons resident outside the United States. To the best of the
Company's knowledge, the Company is not directly owned or controlled by another corporation or any foreign government. As at March
25, 2014, the Company believes that approximately 17,402,000 of the MPV Shares were held by 76 shareholders with addresses in the
United States. A number of these shares are held in "street" name and may, therefore, be held by several beneficial owners.



The following table shows, to
the best knowledge of the Company, the number (as at March 25, 2014) and percentage of MPV Shares, warrants and options held by
the Company's major shareholders:



|Name of Shareholder(1)                                                 |  | No. of MPV Shares Held(2) |            |  | Percentage of issued and outstanding share capital of 94,168,151 shares as at March 28, 2013) | 
|---------------------------------------------------------------------- |  | ------------------------- | ---------- |  | --------------------------------------------------------------------------------------------- | 
|Bottin (International) Investments Ltd. (controlled by Dermot Desmond) |  |                           | 23,481,490 |  |                                                                                               | 
|Desmond P. Sharkey Dublin, Ireland                                     |  |                           | 6,356,000  |  |                                                                                               | 
|De Beers Canada Inc.                                                   |  |                           | 3,045,543  |  |                                                                                               | 



| | (1) | The Company has no actual knowledge of the above shareholdings. The above information was provided
to the Company by the named shareholders.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | There are no options or warrants held by these shareholders.
| | --- | ------------------------------------------------------------



Major shareholders of the Company
do not have any special voting rights.



| | B. | Related party transactions.
| | -- | ---------------------------



The Company is not directly or
indirectly controlled by any enterprise and does not control, directly or indirectly, any other enterprises other than its subsidiaries,
other than that listed under “Item 4A. Bottin (International) Investments Ltd.” (“Bottin”). Bottin is controlled
by Dermot Desmond and has significant influence over the Company because it is currently the Company’s largest single shareholder
with 23.36% of the outstanding shares: see “Item 7A - Major shareholders”, above.



82









The Company’s related parties
include the operator of the Gahcho Kué Joint Project, Bottin, key management and their close family members, and the Company’s
directors. Kennady Diamonds Inc. (“Kennady Diamonds”) is also a related party since the Company and Kennady Diamonds
have common members of key management.



None of the transactions with
related parties incorporate special terms and conditions, and no guarantees were given or received. Related party transactions
are recorded at their exchange amount, being the amount agreed to by the parties. Outstanding balances are settled in cash.



Key management personnel of the
Company are Patrick Evans, who is President and CEO, and Bruce Ramsden, who is VP Finance, Chief Financial Officer and Corporate
Secretary. Patrick Evans is also a director of the Company. See “Item 6B – Compensation”. Both Mr. Evans and
Mr. Ramsden have consulting agreements with the Company.



There are no debts owing directly
or indirectly to the Company or its subsidiaries by any director or officer of the Company or vice versa other than normal accounts
payable for timing of payments of fees.



| | C. | Interests of experts and counsel.
| | -- | ---------------------------------



Not Applicable



| | Item 8. | Financial Information
| | ------- | ---------------------



| | A. | Consolidated Statements and Other Financial Information
| | -- | -------------------------------------------------------



Listed in Item 19 hereto are
audited consolidated financial statements as at December 31, 2013 and 2012, and for the years ended December 31, 2013 and 2012
and 2011, accompanied by the report of our independent registered accounting firm, including:



| | · | Report of Independent Registered Public
Accounting Firm on Internal Control over Financial Reporting.
| | - | -----------------------------------------------------------------------------------------------------



| | · | Report of Independent Registered Public
Accounting Firm on Consolidated Financial Statements.
| | - | ---------------------------------------------------------------------------------------------



| | · | Consolidated Balance Sheets as of December
31, 2013 and 2012.
| | - | -------------------------------------------------------------



| | · | Consolidated Statements of Equity for
the years ended December 31, 2013, 2012, and 2011.
| | - | ----------------------------------------------------------------------------------------



| | · | Consolidated Statements of Comprehensive
Loss for the years ended December 31, 2013, 2012, and 2011.
| | - | ----------------------------------------------------------------------------------------------------



| | · | Consolidated Statements of Cash Flows
for the years ended December 31, 2013 and 2012 and 2011.
| | - | ----------------------------------------------------------------------------------------------



| | · | Notes to the Consolidated Financial Statements.
| | - | -----------------------------------------------



There are no legal proceedings
currently pending.



The Company has not paid dividends
in the past and does not expect to pay dividends in the near future.



| | B. | Significant Changes.
| | -- | --------------------



There have been no significant
changes to the Company since the end of last fiscal year, other than the granting of options as disclosed in the financial statements
included in this Form 20-F.



83







| | Item 9. | The Offer and Listing.
| | ------- | ----------------------



A.Offer and listing details.



The MPV Shares were listed and
posted for trading on TSX on January 22, 1999. The MPV Shares were delisted from the VSE on January 31, 2000, and from the Nasdaq
Smallcap Market on September 29, 2000. The MPV Shares traded on the OTC-Bulletin Board ("OTCBB") under the symbol "MPVI"
until June 1, 2005. Commencing on April 4, 2005, the MPV Shares were listed for trading on the NYSE MKT under the symbol "MDM".



The following tables set forth
the reported high and low prices of the MPV Shares on the TSX, and for the NYSE MKT,for (a) the five most recent fiscal
years; (b) each quarterly period for the past two fiscal years, and (c) for the most recent six months.



|High and Low Prices for the Five Most Recent Fiscal Years
|---------------------------------------------------------
|Fiscal Year Ended                                        
|                                                         
|December 31, 2013                                        
|December 31, 2012                                        
|December 31, 2011                                        
|December 31, 2010                                        
|December 31, 2009                                        



The MPV Shares were listed on
the Nasdaq Smallcap Market on May 1, 1996 and delisted from the Nasdaq Smallcap Market on September 29, 2000, at which time they
commenced trading on the OTCBB and continued through April 1, 2005. On April 4, 2005, the MPV Shares began trading on the AMEX.
AMEX was taken over by NYSE Euronext which then rebranded to NYSE Amex, and subsequently to NYSE MKT.



|High and Low Prices for Each Quarterly Period for the
|-----------------------------------------------------
|Past Two Fiscal Years                                
|                                                     
|Period Ended:                                        
|December 31, 2013                                    
|September 30, 2013                                   
|June 30, 2013                                        
|March 31, 2013                                       
|December 31, 2012                                    
|September 30, 2012                                   
|June 30, 2012                                        
|March 31, 2012                                       



84







|High and Low Prices for the Most Recent Six Months
|--------------------------------------------------
|                                                  
|Month Ended                                       
|February 2014                                     
|January 2014                                      
|December 2013                                     
|November 2013                                     
|October 2013                                      
|September 2013                                    



(1) On December
31, 2013, the closing price of the MPV Shares on the TSX was $5.29 and on March 24, 2014 was $5.17. The closing price of MPV Shares
on NYSE MKT on December 31, 2013 was US$4.96 per share. The closing price on March 24, 2014 on the NYSE MKT was US$4.64 per MPV
Share.



B. Plan of distribution.



Not Applicable.



C. Markets.



The MPV Shares are listed on
the TSX under the symbol "MPV" and were also quoted on the over-the-counter (OTC) Bulletin Board pursuant to Rule 6530(a)
of the NASD's OTC Bulletin Board Rules under the symbol "MPVI.OB" until April 1, 2005. Commencing April 4, 2005, the
Company's shares commenced trading on the AMEX (subsequently NYSE Amex and now NYSE MKT) under the symbol "MDM". The
Common Shares are not registered to trade in the United States in the form of American Depository Receipts or similar certificates.



D. Selling shareholders.



Not Applicable.



E. Dilution.



Not Applicable.



F. Expenses of the issue.



Not Applicable.



| | Item 10. | Additional Information.
| | -------- | -----------------------



| | A. | Share capital.
| | -- | --------------



Not applicable.



| | B. | Memorandum and articles of association.
| | -- | ---------------------------------------



Incorporation



The Company was amalgamated in
British Columbia under incorporation number 553442 on November 1, 1997 under the name of Mountain Province Mining Inc. The
Company changed its name to Mountain Province Diamonds Inc. on October 16, 2000. The Company was amalgamated under the British
Columbia Company Act, which has now been replaced by the Business Corporations Act (British Columbia)(the "BCA").
The BCA came into effect on March 29, 2004. The Company has completed its transition from the Company Act to the BCA and adopted
new Articles which reflect the provisions of the BCA. The Company's Memorandum of Articles has been replaced by a Notice of Articles.
Pursuant to the Shareholders special resolution on September 20, 2005 approving the continuance of the Company into Ontario, the
Company continued under the laws of the Province of Ontario pursuant to Articles of Continuance dated May 8, 2006.



85







The Company is also registered
as an extra-territorial corporation in the Northwest Territories (Registration no. E 6486, on February 25, 1998, amended October
16, 2000 for the name change).



The Company does not have any
stated "objects" or "purposes" as such are not required by the corporate laws of the Province of Ontario. Rather,
the Company is, by such corporate laws, entitled to carry on any activities whatsoever, which are not specifically precluded by
other statutory provisions of the Province of Ontario.



Powers, functions and qualifications
of Directors



The powers and functions of directors
are set forth in the Ontario Securities Act and in theBylaws of the Company.



With respect to the voting powers
of directors, the Ontario Securities Act provides that a director (or senior officer) has a disclosable interest in a contract
or transaction if the contract or transaction is material to the Company and the director has a material interest in the contract.



The Bylaws provide that a director
or senior officer who has, directly or indirectly, a material interest in an existing or proposed material contract or transaction
of the Company or who holds any office or possesses any property whereby, directly or indirectly, a duty or interest might be created
to conflict with his duty or interest as a director or senior officer, has to disclose the nature and extent of this interest or
conflict with his duty and interest as a director or senior officer, in accordance with the provisions of the Ontario Securities
Act. A director is also prohibited from voting in respect of any such proposed material contract or transaction and if he does
so, his vote shall not be counted, but he shall be counted in the quorum at the meeting at which such vote is taken. Notwithstanding
this, if all of the directors have a material interest in a proposed material contract or transaction, any or all of those directors
may vote on a resolution to approve the contract or transaction. However, in this case the directors must have the contract or
transaction approved by special resolution of the shareholders to avoid accountability for any profits.



The Bylaws further provide that,
subject to the provisions of the Ontario Securities Act, no disclosure is required of a director or senior officer, and a director
need not refrain from voting in respect of the following types of contracts and transactions:



| | a) | A contract or transaction where both the Company and the other party to the contract or transaction
are wholly owned subsidiaries of the same corporation;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | A contract or transaction where the Company is a wholly owned subsidiary of the other party to
the contract or transaction;
| | -- | ---------------------------------------------------------------------------------------------------------------------------



| | c) | A contract or transaction where the other party to the contract or transaction is a wholly owned
subsidiary of the Company;
| | -- | ---------------------------------------------------------------------------------------------------------------------------



| | d) | A contract or transaction where the director or senior officer is the sole shareholder of the Company
or of a corporation of which the Company is a wholly owned subsidiary;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



86







| | e) | An arrangement by way of security granted by the Company for money loaned to, or obligations undertaken
by, the director or senior officer, or a person in whom the director or senior officer has a material interest, for the benefit
of the Company or an affiliate of the Company;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | A loan to the Company, which a director or senior officer or a specified corporation or a specified
firm in which he has a material interest has guaranteed or joined in guaranteeing the repayment of the loan or any part of the
loan;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | Any contract or transaction made or to be made with, or for the benefit of a corporation that is
affiliated with the Company and the director or senior officer is also a director or senior officer of that corporation or an affiliate
of that corporation;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h) | Any contract by a director to subscribe for or underwrite shares or debentures to be issued by
the Company or a subsidiary of the Company;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------



| | i) | Determining the remuneration of the director or senior officer in that person's capacity as director,
officer, employee or agent of the Company or an affiliate of the Company;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | j) | Purchasing and maintaining insurance to cover a director or senior officer against liability incurred
by them as a director or senior officer; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | k) | The indemnification of any director or senior officer by the Company.
| | -- | ---------------------------------------------------------------------



The Ontario Securities Act provides
that a contract or transaction with a company is not invalid merely because a director or senior officer of the company has an
interest, direct or indirect, in the contract or transaction, a director or senior officer of the company has not disclosed an
interest he or she had in the contract or transaction, or because the directors or shareholders of the company have not approved
the contract or transaction in which a director or senior officer of the company has an interest.



The Ontario Securities Actalso provides that a director or senior officer with a "disclosable interest" in a contract or transaction with the
Company is liable to account for any profit made from the contract or transaction unless disclosure of the director's interest
in such contract or transaction had been made and the director abstained from voting on the approval of the transaction.



Subject to the provisions of
the Ontario Securities Act, the directors may vote on compensation for themselves or any members of their body. A contract relating
primarily to a fiduciary's remuneration as a director, officer, employee or agent of the Company or its affiliates is a permitted
conflict of interest under the Company's Corporate Governance Policy.



There are no limitations on the
exercise by the board of directors of the Company's borrowing powers.



There are no provisions for the
retirement or non-retirement of directors under an age limit.



There is no requirement for any
director to hold any shares in the Company.



Rights and Restrictions
Attached to Shares



As all of the authorized and
issued MPV Shares are of one class, there are no special rights or restrictions of any nature or kind attached to any of the shares.
All authorized and issued shares rank equally in respect of the declaration and receipt of dividends, and the rights to share in
any profits or surplus on liquidation, dissolution or winding up of the Company. Each MPV Share has attached to it one vote.



87









Alteration of Share Rights



To alter the rights of holders
of issued shares of the Company, such alteration must be approved by a vote of not less than two-thirds of the shareholders voting
in person or by proxy at a meeting of the shareholders of the Company.



Annual General Meetings



Annual general meetings are called
and scheduled upon decision by the board of directors. The directors may also convene a general meeting of shareholders at any
time. There are no provisions in the Company's Bylaws for the requisitioning of special meetings by shareholders. However, the
Ontario Securities Act provides that the holders of not less than 5% of the issued shares of the Company may requisition the directors
to call a general meeting of the shareholders for the purposes stated in the requisition. All meetings of the shareholders may
be attended by registered shareholders or persons who hold powers of attorney or proxies given to them by registered shareholders.



On June 13, 2013 the shareholders
of the Company adopted an Advance Notice Policy for director nominations to the Board of the Company prior to any meeting of Shareholders
where directors are to be elected.



Foreign Ownership Limitations



There are no limitations prohibiting
shares being held by non-residents, foreigners or any other group.



Change of Control



There are no provisions in the
Company's Bylaws that would have the effect of delaying, deferring or preventing a change in the control of the Company, or that
would operate with respect to any proposed merger, acquisition or corporate re-structuring of the Company.



At the November 18, 2010 Annual
and Special Meeting of the shareholders, a Shareholder Rights Plan dated September 9, 2010 (the “Shareholder Rights Plan”)
was approved, ratified, confirmed and adopted by the shareholders of the Company in accordance with and subject to its terms and
conditions. The objectives of the Shareholder Rights Plan are to ensure, to the extent possible, that all shareholders of the Company
are treated equally and fairly in connection with any take-over bid for the Company.



The Shareholder Rights Plan is
designed to discourage discriminatory or unfair take-over bids for the Company and gives the Board of Directors time, if appropriate,
to pursue alternatives to maximize shareholder value in the event of an unsolicited (or "hostile") take-over bid for
the Company. The Shareholder Rights Plan will encourage a person proposing to make, or who has made, a take-over bid for the Company
(an "Offeror") to proceed by way of a Permitted Bid or to approach the Board with a view to negotiation, by creating
the potential for substantial dilution of the Offeror's position. The Permitted Bid provisions of the Shareholder Rights Plan are
designed to ensure that, in any take-over bid, all shareholders are treated equally, receive the maximum value for their investment
and are given adequate time to properly assess the take-over bid on a fully informed basis.



The Shareholder Rights Plan may,
however, increase the price to be paid by a potential Offeror to obtain control of the Company and may discourage certain transactions,
including a take-over bid for less than all the common shares of the Company. Accordingly, the Shareholder Rights Plan may deter
some take-over bids.



88







In addition, the Shareholder
Rights Plan Agreement provides that the continued existence of the Shareholder Rights Plan must be ratified by a majority of the
shareholders of the Company at a meeting of the shareholders at or prior to the annual meeting of the shareholders in the year
2013.



Share Ownership Reporting
Obligations



There are no provisions in the
Company's Bylaws requiring share ownership to be disclosed. The securities laws of the Province of Ontario and other provinces
in Canada having jurisdiction over the Company require disclosure of shareholdings by:



b)	  insiders who are directors
or senior officers of the Company; and



c)	  a person who has direct
or indirect beneficial ownership of, control or direction over, or a combination of direct or indirect beneficial ownership of
and of control or direction over securities of the Company carrying more than 10% of the voting rights attached to all the Company's
outstanding voting securities.



The threshold of share ownership
percentage requiring disclosure of ownership is higher in the home jurisdiction of Ontario than in the United States where United
States law prescribes a 5% threshold for ownership disclosure.



| | C. | Material contracts.
| | -- | -------------------



The Company did not enter into
any material contracts in the last two fiscal periods, up to the date of this Form 20-F other than a plan of arrangement agreement
(the “Kennady Arrangement Agreement), which was executed on March 12, 2012. The Kennady Arrangement Agreement was between
the Company and its subsidiary company, Kennady Diamonds Inc., and was the agreement for the spin-out of the Company’s Kennady
North Project to Kennady Diamonds Inc. It included various terms and conditions for the parties, and was included in an information
circular mailed to shareholders of the Company for a special shareholder meeting held April 25, 2012. The plan of arrangement was
concluded on July 6, 2012 with court, regulatory and shareholder approval.



De Beers Canada, as Operator
of the Gahcho Kué Project, has entered into purchase agreements relating to the Gahcho Kué Project. As at December
31, 2013, the Company’s proportional interest (49%) of the commitments made by the Operator is $31,609,307. The commitments
are in the course of normal development of the Gahcho Kué Project.



| | D. | Exchange controls.
| | -- | ------------------



Exchange Controls and Investment
Canada Act



Canada has no system of exchange
controls. There are no exchange restrictions on borrowing from foreign countries nor on the remittance of dividends, interest,
royalties and similar payments, management fees, loan repayments, settlement of trade debts, or the repatriation of capital. Any
such remittances to United States residents, however, may be subject to a withholding tax pursuant to the Canadian Income Tax Act
as modified by the reciprocal tax treaty between Canada and the United States. See "Item 10E, Taxation".



89









Subject to certain exemptions,
every "acquisition of control"1 by a "non-Canadian"2 of a "Canadian business",3
even where such business is already controlled by a non-Canadian, requires either notification (essentially a post-closing administrative
formality) or detailed review under the Investment Canada Act (the “ICA”). Whether a transaction is subject
to notification or review depends upon whether certain asset thresholds are satisfied, which thresholds generally depend on (1)
the transaction structure (direct or indirect acquisition),4 (2) whether the purchaser (referred to as the "investor"
under the ICA) and/or current owner of the Canadian business is a "WTO investor"5, (3) whether the Canadian
business is a "cultural business"6, and (4) whether the value of the Canadian assets and assets of the Canadian
entities being acquired exceeds 50% of the value of all assets being acquired. The table below provides a summary of the relevant
asset thresholds.



|Transaction Structure |  | Status of Investor/ Vendor          |  | Cultural Business |  | Threshold for Review  
|--------------------- |  | ----------------------------------- |  | ----------------- |  | ----------------------
|                      |  | WTO Investor or Vendor              |  | No                |  | ≥C$330 million7       
|Direct                |  |                                     |  | Yes               |  | ≥C$5 million          
|                      |  | Non-WTO Investor and Non-WTO Vendor |  | No                |  | (book value of assets)
|                      |  |                                     |  | Yes               |  |                       
|                      |  | WTO Investor or Vendor              |  | No                |  | Exempt from review    
|Indirect              |  |                                     |  | Yes               |  | ≥C$50 million*        
|                      |  | Non-WTO Investor and Non-WTO Vendor |  | No                |  | (book value of assets)
|                      |  |                                     |  | Yes               |  |                       



* Note that a C$5 million threshold (rather than C$50 million)
applies to indirect acquisitions where the value of the assets of the entity carrying on the Canadian business and of all other
entities in Canada being acquired exceeds 50% of the value of all the assets acquired.








1 What constitutes
an "acquisition of control" is set out in the ICA and includes the acquisition of all or substantially all of the assets
used in carrying on the Canadian business, or the acquisition of a majority of the voting interests of an entity, whether the entity
is of corporate or some other form (e.g., a partnership). The acquisition of less than one-third of the voting shares of
a corporation is deemed not to be an acquisition of control of that corporation, while the acquisition of less than a majority
but one-third or more of such shares is presumed to be an acquisition of control unless it can be established that the purchaser
will not control the corporation in fact through the ownership of voting shares. The acquisition of less than a majority of the
voting interests of a non-corporation is deemed not to be an acquisition of control.

2 A "non-Canadian"
is a purchaser the ultimate control of which resides outside of Canada.

3 A "Canadian
business" is defined as a business carried on in Canada that has (a) a place of business in Canada, (b) an individual or individuals
in Canada who are employed or self-employed in connection with the business, and (c) assets in Canada used in carrying on the business.

4 A direct acquisition
is the acquisition of assets or voting interests of an entity in Canada that carries on the Canadian business, while an indirect
acquisition is the acquisition of the voting shares of a non-Canadian corporation that controls, directly or indirectly, an entity
in Canada carrying on the Canadian business.

5 A "WTO investor"
is a purchaser that is controlled ultimately by nationals or residents of a World Trade Organization (“WTO”) member
country.

6 A "cultural
business" is one that (i) publishes, distributes or sells books, magazines, periodicals or newspapers, (ii) produces, distributes,
sells or exhibits film or video recordings or audio or video music recordings, (iii) produces, distributes or sells music in print
or machine readable form, or (iv) is a radio, television, cable television or satellite broadcast undertaking.

7 Note that the
current C$330 million threshold is based on the book value of assets of the Canadian business for the fiscal year immediately preceding
implementation of the transaction. On a day that is to be fixed by order of the Governor in Council (the federal Cabinet), the
threshold for direct acquisitions by WTO investors will change to one based on the “enterprise value” of the Canadian
business. The enterprise value threshold will be established at C$600 million for investments made in the first two-year period;
and will increase to C$800 million in the following two years and C$1 billion thereafter , subject to indexation to Canada’s
GDP. The ICA does not define "enterprise value"; its manner of calculation will be set out in as yet to be promulgated
regulations.



90









Where the ICA applies and a transaction
is not reviewable, a notification (containing certain prescribed information about the purchaser, the transaction and the Canadian
business) is required to be filed by the investor with the Investment Review Division of Industry Canada any time prior to closing
the transaction or within thirty (30) days thereafter. However, in the case of an investment in a Canadian business that has activities
related to Canada's cultural heritage or national identity (as prescribed), the Governor in Council has the option of ordering
a review, if notice of same is provided to the investor within 21 days of the filing of the completed notification. (Note that
notification under the ICA is also required with respect to the establishment of a new Canadian business.)



Where a transaction is reviewable
and is a direct acquisition, an application for review must be filed by the investor prior to closing and the parties are prohibited
from closing until the Minister of Industry and/or, in the case of acquisitions of "cultural businesses", the Minister
of Canadian Heritage, confirms to the purchaser that he/she is satisfied or is deemed to be satisfied that the investment is likely
to be of "net benefit to Canada", based on certain prescribed factors set out in the ICA (set out below) and in view
of any legally binding undertakings the purchaser is willing to make. Where a transaction is reviewable and is an indirect acquisition,
an application for review must be filed by the investor within 30 days after closing.



Once an application for review
has been filed, whether pre-or post-closing, and has been certified to be complete, the responsible Minister has a 45-day period
within which to make a "net benefit" determination, which period may be unilaterally extended once by the Minister for
an additional 30 days, and thereafter extended with the consent of the investor. (Where notices related to a national security
review are given to an investor (see below), the length of the initial 45-day review period and any subsequent extension periods
are deemed to expire five days after the expiry of certain time periods or the issuance of certain notices related to the national
security review.)



The Minister will determine whether
the investment is likely to be of net benefit to Canada, taking into account the information provided and having regard to certain
assessment factors. These factors include: (i) the effect of the investment on the level and nature of economic activity in Canada,
including the effect on employment, on resource processing, and on the utilization of parts, components and services produced in
Canada; (ii) the effect of the investment on exports from Canada; (iii) the degree and significance of participation by Canadians
in the Canadian business and in any industry in Canada of which it forms a part; (iv) the effect of the investment on productivity,
industrial efficiency, technological development, product innovation and product variety in Canada; (v) the effect of the investment
on competition within any industry or industries in Canada; (vi) the compatibility of the investment with national industrial,
economic and cultural policies taking into consideration industrial, economic and cultural objectives enunciated by the government
or legislature of any province likely to be significantly affected by the investment; and (vii) the contribution of the investment
to Canada's ability to compete in world markets.



Where the Minister has advised
the investor that he is not satisfied that the investment is likely to be of net benefit to Canada, the investor has the right
to make representations and submit undertakings within 30 days of the date of the notice (or any further period that is agreed
upon between the investor and the Minister). Within a reasonable time after the expiration of this 30 day period (or the agreed
extension), the Minister must notify the acquiror (i) that he is now satisfied that the investment is likely to be of net benefit
to Canada or (ii) that he is not satisfied that the investment is likely to be of net benefit to Canada. In the latter case, the
investor may not proceed with the investment or, if the investment has already been consummated, must divest itself of control
of the Canadian business.



91







Effective February 6, 2009, every
investment by a non-Canadian to (i) establish a new Canadian business, (ii) acquire control of a Canadian business, or (iii) acquire
in whole or in part (e.g., a minority interest) or establish an entity carrying on all or any part of its operations in
Canada (if the entity has a place of operations in Canada, employees or assets in Canada used in connection with its operations)
may be subjected to a national security review under the ICA, regardless of the value of the investment. Investors that receive
notice of a potential or actual national security review are prohibited from implementing a proposed investment pending the outcome
of the review. Where the Minister of Industry, after consultation with the Minister of Public Safety and Emergency Preparedness,
is satisfied that the investment would be "injurious to national security" (an undefined phrase), the Governor in Council
may "take any measures it considers advisable" to protect national security, including: (i) prohibiting implementation
of a proposed investment; (ii) authorizing the investment on terms and conditions or subject to written undertakings from the investor;
and (iii) in the case of completed investments, requiring the investor to divest control of the Canadian business or its interest
in the Canadian business.



Unless a transaction is otherwise
subject to notification or to review under the ICA, an investor is not required to notify Industry Canada of transactions that
may raise potential national security issues. Where, however, a national security review is ordered, an investor is afforded the
right to make representations to the Minister, and is required to provide any information considered necessary by the Minister
for purposes of the review. New National Security Review of Investments Regulations, in effect since September 2009, set out timelines
for each step of the national security review process. If the maximum prescribed periods are fully utilized, a national security
review could take 130 days (assuming a notice of possible review is issued), with the potential for the Minister of Industry to
request from the investor an extension of the review period.



| | E. | Taxation.
| | -- | ---------



A brief description of certain
provisions of the tax treaty between Canada and the United States, Canada-United States Tax Convention (1980), as amended,
(the "Convention"), is included below, together with a brief outline of certain taxes, including withholding provisions,
to which United States holders of common stock of the Company are subject under the Income Tax Act (Canada) and the regulations
thereunder (the "Canadian Tax Act"). The consequences, if any, of provincial, territorial, state, local or foreign taxes
(other than Canadian federal income taxes) are not considered.



The following information
is of a general nature only and is not, and is not intended to be, legal or tax advice to any holder or prospective holder of common
stock of the Company and no representations with respect to the income tax consequences to any such holder are made. Holders of
common stock of the Company should seek the advice of their own tax advisors, tax counsel or accountants with respect to the applicability
or effect on their own individual circumstances of the matters referred to herein.



Certain Canadian Federal
Income Tax Consequences



The discussion under this heading
is a general summary of the principal Canadian federal income tax consequences pursuant to the Canadian Tax Act of acquiring, holding
and disposing of shares of common stock of the Company for a shareholder of the Company who, at all relevant times and for purposes
of the Canadian Tax Act and the Convention, is not, and is not deemed to be, a resident of Canada, and is solely a resident of
the United States, holds shares of common stock of the Company as capital property, deals at arm's length and is not affiliated
with the Company, and, does not use or hold, is not deemed to use or hold shares of the common stock of the Company in, or in the
course of, carrying on business in Canada. (a "U.S. Holder"). This summary is based on the current provisions of the
Canadian Tax and on the Company's understanding of the administrative policies and assessing practices of Canada Revenue Agency,
in effect as of the date hereof, and takes into account all specific proposals to amend the Canadian Tax Act and regulations to
it publicly announced by the Minister of Finance of Canada prior to the date hereof. No assurances can be given that such proposed
amendments will be enacted in the form proposed, or at all. This summary is not exhaustive of all potential Canadian federal income
tax consequences to a U.S. Holder and does not take into account or anticipate any other changes in law or administrative policies
or assessing practices, whether by judicial, governmental or legislative action or decision. This discussion is general only and
is not a substitute for independent advice from a shareholder's own Canadian and U.S. tax advisors.



92







The provisions of the Canadian
Tax Act are subject to income tax treaties to which Canada is a party, including the Convention.



Dividends on Common Shares
and Other Income



Under the Canadian Tax Act, a
non-resident of Canada is generally subject to Canadian non-resident tax at the rate of 25 percent on amounts that are paid or
credited or deemed under the Canadian Tax Act to be paid or credited as, on account or in lieu of payment of, or in satisfaction
of dividends to a U.S. Holder by a corporation resident in Canada. The Convention limits the rate to 15 percent if the shareholder
is a resident of the United States entitled to all of the benefits of the Convention and the dividends are beneficially owned by
and paid to such shareholder, and to 5 percent if the shareholder is a corporation entitled to all of the benefits of the Convention
that beneficially owns at least 10 percent of the voting stock of the Canadian payor corporation.



The non-resident tax payable
on dividends is to be withheld at source by the Company or people acting on its behalf.



Dispositions of Common
Shares



Under the Canadian Tax Act, a
U.S. Holder will generally not be subject to tax in respect of capital gains realized on the disposition or deemed disposition
of shares of the common stock of the Company unless, at the time of disposition, the shares constitute "taxable Canadian property"
(as defined in the Canadian Tax Act) of the U.S. Holder at the time of disposition and the U.S. Holder is not entitled to relief
under the Convention.



Provided that shares are listed
on a “designated stock exchange” (which includes the TSX) at the time of disposition, the shares of common stock of
the Company will not constitute taxable Canadian property of a U.S. Holder at a particular time unless (i) at any time in the 60
months immediately preceding the disposition of such shares 25% or more of the issued shares of any class or series in the capital
stock of the Company were owned by one or more persons in a group comprising the U.S. Holder and persons with whom the U.S. Holder
did not deal at arm's length; and (ii) more than 50% of the fair market value of the common stock of the Company was derived directly
or indirectly from one or any combination of: (a) real or immoveable property situated in Canada; (b) “Canadian resource
properties” (as defined in the Canadian Tax Act), (c) “timber resource properties” (as defined in the Canadian
Tax Act), or (d) options in respect of, or interests in, or for civil law right in, any of the foregoing, whether or not the property
exists.



The Convention generally relieves
U.S. Holders from liability for Canadian tax on capital gains derived on a disposition of shares that are "taxable Canadian
property" unless



| | a) | the value of the shares is derived principally from "real property" situated in Canada,
including the right to explore for or exploit natural resources and rights to amounts computed by reference to production, or
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



93







| | b) | the shareholder was an individual resident in Canada for 120 months during any period of 20 consecutive
years preceding the disposition of the shares, and at any time during the 10 years immediately preceding the disposition of the
shares the individual was a resident of Canada, and the shares were owned by the individual when he or she ceased to be resident
in Canada.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If a U.S. Holder realizes a capital
gain or capital loss from a disposition of a share of common stock of the Company which constitutes taxable Canadian property for
purposes of the Canadian Tax Act and is not otherwise exempt from Canadian tax under the Convention, then the capital gain or capital
loss is the amount, if any, by which the U.S. Holder's proceeds of disposition exceed (or are exceeded by, respectively) the aggregate
of the U.S. Holder's adjusted cost base of the share and reasonable expenses of disposition as determined under the Canadian Tax
Act. The capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties.
Generally one-half of a capital gain (“taxable capital gain”) is included in income for Canadian tax purposes in the
year of the disposition, and one-half of a capital loss (“an allowable capital loss”) must be deducted from taxable
capital gains realized by the U.S. Holder in that year. Allowable capital losses in excess of taxable capital gains for that year
may generally be carried back three years or forward indefinitely and deducted against net taxable capital gains in those years,
in the manner permitted under the Canadian Tax Act.



United States Federal Income
Tax Consequences



The following is a summary of
certain U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition,
ownership, and disposition of shares of common stock of the Company ("Common Shares").



This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that
may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of Common Shares. In addition, this summary
does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of Common Shares. Except as specifically set forth below,
this summary does not discuss applicable tax reporting requirements. This summary is not intended to be, and should not be construed
as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder should consult its own tax advisor
regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of
Common Shares.



No legal opinion from U.S. legal
counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding
the U.S. federal income tax consequences of the acquisition, ownership and disposition of Common Shares. This summary is not binding
on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in
this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS
and the U.S. courts could disagree with one or more of the conclusions described in this summary.



94







Circular 230 Disclosure



Any statement made herein
regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for purposes of avoiding
any penalties. Any such statement herein is written in connection with the marketing or promotion of the transaction to which the
statement relates. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent
tax advisor.



Scope of this Disclosure



Authorities



This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published IRS rulings, published administrative
positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital,
signed September 26, 1980, as amended (the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable
as of the date of this Annual Report. Any of the authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a retroactive basis. This summary does not discuss the potential
effects, whether adverse or beneficial, of any proposed legislation or proposed changes to the Canada-U.S. Tax Convention.



U.S. Holders



For purposes of this summary,
a "U.S. Holder" is a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is (a) an individual
who is a citizen or, or resident in, the U.S., (each as defined under U.S. tax laws),(b) a corporation, or other entity classified
as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state
in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income
tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a
U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration
of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.



Non-U.S. Holders



A "non-U.S. Holder"
is a beneficial owner of Common Shares other than a U.S. Holder. This summary does not address the U.S. federal income tax consequences
of the acquisition, ownership, and disposition of Common Shares to non-U.S. Holders.



U.S. Holders Subject to Special
U.S. Federal Income Tax Rules Not Addressed



This summary does not address
the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to U.S. Holders that are
subject to special provisions under the Code, including but not limited to the following: (a) U.S. Holders that are tax-exempt
organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders
that are financial institutions, insurance companies, real estate investment trusts, regulated investment companies or broker-dealers
or dealers in securities; (c) U.S. Holders that have a "functional currency" other than the U.S. dollar; (d) U.S.
Holders that are subject to the alternative minimum tax provisions of the Code; (e) former U.S. citizens or former long-term
residents of the United States as defined in Section 877 of the Code; (f) U.S. Holders that own Common Shares as part of a straddle,
hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S.
Holders that acquired Common Shares in connection with the exercise of employee stock options or otherwise as compensation for
services; (h) partners of partnerships that hold Common Shares or owners of other entities classified as partnerships or "pass-through"
entities for U.S. federal income tax purposes that hold Common Shares, (i) U.S. Holders that hold Common Shares other than
as a capital asset within the meaning of Section 1221 of the Code, and (j) U.S. Holders that own or have owned (directly,
indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company. U.S. Holders
that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their
own tax advisors regarding the tax consequences of the acquisition, ownership, and disposition of Common Shares.



95







Tax Consequences Other than
U.S. Federal Income Tax Consequences Not Addressed



This summary does not address
U.S. state, local or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares,
nor does it address U.S. federal tax consequences other than income tax. Each U.S. Holder should consult its own tax advisors regarding
these and other tax consequences of the acquisition, ownership, and disposition of Common Shares.



U.S. Federal Income Tax Consequences
of the Acquisition, Ownership, and Disposition of Common Shares



Passive Foreign Investment
Company



The Company generally will be
a PFIC if, for a taxable year, (a) 75% or more of the gross income of the Company for such taxable year is passive income
or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive
income. “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments
and from incidental or outside operations or sources. "Passive income" includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.



For purposes of the PFIC income
and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding
shares of another foreign corporation, the Company will be treated as if it (a) held a proportionate share of the assets of
such other foreign corporation and (b) received directly a proportionate share of the income of such other foreign corporation.
If the Company is a PFIC, in addition to the rules discussed below, U.S. Holders generally may be required to file certain information
returns with the IRS. The PFIC rules are extremely complex, and U.S. Holders should consult their own U.S. tax advisors concerning
the application of the PFIC rules.



The Company believes it was classified
as a PFIC during the tax year ended December 31, 2013, and based on current business plans and financial expectations, the Company
believes that it will be a PFIC for the tax year ending December 31, 2014 and may be a PFIC in subsequent tax years. The determination
of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal
income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax
year depends on the assets and income of such corporation over the course of each such year and, as a result, cannot be predicted
with certainty as of the date of this document. There can be no assurance, however, that the IRS will agree with a determination
made by the Company concerning its PFIC status.



In any year in which the Company
is classified as a PFIC, U.S. Holders would be required to file an annual report with the IRS containing such information as Treasury
Regulations and/or other IRS guidance may require. U.S. Holders should consult their own tax advisors regarding the requirements
of filing such information returns under these rules, including the requirement to file a IRS Form 8621.



96







Default PFIC Rules Under Section 1291
of the Code



If the Company is a PFIC, the
U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of Common Shares will depend
on whether such U.S. Holder makes an election to treat the Company as a "qualified electing fund" or "QEF"
under Section 1295 of the Code (a "QEF Election") or makes a mark-to-market election under Section 1296 of
the Code (a "Mark-to-Market Election"). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election
will be referred to in this summary as a "Non-Electing U.S. Holder."



A Non-Electing U.S. Holder will
be subject to the rules of Section 1291 of the Code with respect to (a) any gain on the disposition of Common Shares
and any “excess” distribution paid on the Common Shares.



Under Section 1291 of the
Code, any gain recognized on the sale or other disposition of Common Shares, and any excess distribution paid on the Common Shares,
must be rateably allocated to each day in a Non-Electing U.S. Holder's holding period for the Common Shares. The amount of any
such gain or excess distribution allocated to prior years of such Non-Electing U.S. Holder's holding period for the Common Shares
will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year. A Non-Electing
U.S. Holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax
liability had been due in each such prior year. The amount of any such gain or excess distribution allocated to the current year
of such Non-Electing U.S. Holder's holding period for the Common Shares will be treated as ordinary income in the current year
(but will not qualify for the preferential dividend rate previously discussed), and no interest charge will be incurred with respect
to the resulting tax liability for the current year.



If the Company is a PFIC for
any taxable year during which a Non-Electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC
with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent
years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under
the rules of Section 1291 of the Code discussed above) as if such Common Shares were sold on the last day of the last taxable
year for which the Company was a PFIC.



QEF Election



A U.S. Holder that makes a QEF
Election generally will not be subject to the rules of Section 1291 of the Code discussed above. However, a U.S. Holder that
makes a QEF Election will be subject to U.S. federal income tax annually on such U.S. Holder's pro rata share of (a) “net
capital gain” of the Company, which will be taxed as capital gain to such U.S. Holder, and (b) the “ordinary earnings”
of the Company, which will be taxed as ordinary income to such U.S. Holder, regardless of whether such amounts are actually distributed
to such U.S. Holder by the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect
to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. In addition, a U.S. Holder
that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares,
as long as the U.S. Holder always had a QEF election in effect.



Each U.S. Holder should consult
its own U.S. tax advisors regarding the advisability of, and procedure for making, a QEF Election. U.S. Holders should be aware
that there can be no assurance that the Company will satisfy record keeping requirements so that a U.S. Holder may make certain
information returns to the IRS, or that the Company will supply U.S. Holders with information that such U.S. Holders are required
to report under the QEF rules, in the event that the Company is a PFIC and a U.S. Holder wishes to make a QEF Election. Thus, U.S.
Holders may not be able to make a QEF Election with respect to their Common Shares. Each U.S. Holder should consult its own tax
advisor regarding the availability of, and procedure for making, a QEF Election.



97







Mark-to-Market Election



As an alternative to the foregoing
rules, a U.S. Holder may make a Mark-to-Market. A U.S. Holder that makes a Mark-to-Market Election generally will not be subject
to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder makes a Mark-to-Market Election after
the beginning of such U.S. Holder's holding period for the Common Shares and such U.S. Holder has not made a timely QEF Election,
the rules of Section 1291 of the Code discussed above will apply to dispositions of, and certain distributions on, the Common
Shares.



A U.S. Holder that makes a Mark-to-Market
Election will include as ordinary income, for each taxable year in which the Company is a PFIC, an amount equal to the excess,
if any, of (a) the fair market value of the Common Shares as of the close of such taxable year over (b) such U.S. Holder's
tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal
to the lesser of (a) the excess, if any, of (i) such U.S. Holder's adjusted tax basis in the Common Shares over (ii) the
fair market value of such Common Shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount
included in ordinary income because of such Mark-to-Market Election for prior taxable years over (ii) the amount allowed as
a deduction because of such Mark-to-Market Election for prior taxable years.



A U.S. Holder that makes a Mark-to-Market
Election generally also will adjust such U.S. Holder's tax basis in the Common Shares to reflect the amount included in gross income
or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of Common
Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if
any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the
amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years).



Each U.S. Holder should consult
its own tax advisors regarding the advisability of, and procedure for making, a Mark-to-Market Election.



Other PFIC Rules



Under Section 1291(f) of
the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that
had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise
be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations).



An individual U.S. Holder's estate
may not receive a step-up in basis in the Common Shares at the U.S. Holder's death, if the Company is or was a PFIC during the
U.S. Holder's period of ownership of the Common Shares.



Certain additional adverse rules
will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election.
For example under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except
as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.



98







The PFIC rules are complex, and
each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC
rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.



Distributions on Common Shares



General Taxation of Distributions



Generally, and subject to the
discussion above, concerning PFICs, a U.S. Holder that receives a distribution, including a constructive distribution, with respect
to the Common Shares will be required to include the amount of such distribution in gross income as a dividend (without reduction
for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated "earnings and profits"
of the Company (as determined under U.S. tax principles). To the extent that a distribution exceeds the current and accumulated
"earnings and profits" of the Company, such distribution will be treated (a) first, as a tax-free return of capital
to the extent of a U.S. Holder's tax basis in the Common Shares and, (b) thereafter, as gain from the sale or exchange of
such Common Shares. (See more detailed discussion at "Disposition of Common Shares" below). However, the Company may
not maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder
should therefore assume that any distribution by the Company with respect to the Common Shares will constitute ordinary dividend
income. Dividends received on Common Shares generally will not be eligible for the “dividends received deduction”.
Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, dividends
paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates
applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including
that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are
complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.



Disposition of Common Shares



Subject to the discussion of
the PFIC rules, above, a U.S. Holder will recognize gain or loss on the sale or other taxable disposition of Common Shares in an
amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received
and (b) such U.S. Holder's tax basis in the Common Shares sold or otherwise disposed of. Any such gain or loss generally will
be capital gain or loss, which will be long-term capital gain or loss if the Common Shares are held for more than one year.



Although preferential tax rates
currently apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust, such preferential tax rates
are not available if the Company is a PFIC, unless a “qualified electing fund” (“QEF”) election is timely
made, as described above. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a
corporation. Deductions for capital losses and net capital losses are subject to complex limitations.



Foreign Tax Credit



A U.S. Holder who pays (whether
directly or through withholding) Canadian income tax with respect to the Common Shares generally will be entitled, at the election
of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit is more advantageous
because it will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will
reduce a U.S. Holder's income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to
all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.



99







Complex limitations apply to
the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder's
U.S. federal income tax liability that such U.S. Holder's "foreign source" taxable income bears to such U.S. Holder's
worldwide taxable income. In applying this limitation, a U.S. Holder's various items of income and deduction must be classified,
under complex rules, as either "foreign source" or "U.S. source." Generally, dividends paid by a foreign corporation
should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S.
Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and
if an election is properly made under the Code. In addition, this limitation is calculated separately with respect to specific
categories of income known as "baskets", and there are limitations under the basket rules also. Unused foreign tax credits
generally can be carried back one year and forward ten years. The foreign tax credit rules are complex, and each U.S. Holder should
consult its own tax advisors regarding the foreign tax credit rules.



Receipt of Foreign Currency



The amount of any distribution
paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares, generally will
be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless
of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency
equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency
after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and
generally will be U.S. source income or loss for foreign tax credit purposes. Each U.S. Holder should consult its own U.S. tax
advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.



Additional Tax on Passive Income



For tax years beginning after
December 31, 2012, certain individuals, estates and trusts whose income exceeds certain thresholds will be required to pay a 3.8%
Medicare surtax on “net investment income” including, among other things, dividends and net gain from dispositions
of property (other than property held in a trade or business). U.S. Holders should consult with their own tax advisors regarding
the effect, if any, of this tax on their ownership and disposition of Common Shares.



Information Reporting; Backup
Withholding Tax



Under U.S. federal income tax
law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment
in, or involvement in, a foreign corporation. For example, recently enacted legislation generally imposes new U.S. return disclosure
obligations (and related penalties) on individuals who are U.S. Holders that hold certain specified foreign financial assets in
excess of $50,000. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign
financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by
a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S.
person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their Common Shares
are held in an account at a domestic financial institution. Penalties for failure to file certain of these information returns
are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns
under these rules, including the requirement to file an IRS Form 8938.



100







Payments of dividends made on,
and proceeds arising from certain sales or other taxable dispositions of, Common Shares generally will be subject to information
reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder's correct
U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number,
(c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding
tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification
number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S. Holders that
are corporations generally are excluded from these information reporting and backup withholding tax rules. Any amounts withheld
under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability,
if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS. Each U.S. Holder should consult its
own tax advisors regarding the information reporting and backup withholding tax rules.



| | F. | Dividend and paying agents
| | -- | --------------------------



Not Applicable



| | G. | Statement by experts.
| | -- | ---------------------



The references herein to excerpts
of or summaries from the “Gahcho Kué Project, Definitive Feasibility Study, NI 43-101 Technical Report, Northwest
Territories, Canada” dated December 1, 2010 (Information effective as of October 15, 2010)” have been consented to
by Daniel D. Johnson, P.Eng., Michael Makarenko, P.Eng, and Kenneth Meikle, P.Eng., all of JDS at Suite 200 - 532 Leon Ave Kelowna,
British Columbia V1Y 6J6. The references herein to excerpts of or summaries from the “Update of the Mineral Resource Estimate
for the Tuzo Kimberlite, Gahcho Kué Project, Northwest Territories, Canada: NI 43-101 Technical Report” with an effective
date of July 2, 2013 have been consented to by Tom E. Nowicki, Ph.D., P. Geo., Stephen Moss, Ph.D., P. Geo. and Gareth Garlick,
all of Mineral Services Canada Inc. at 501-88 Lonsdale Avenue, North Vancouver, British Columbia V7M 2E6 and Michael Makarenko,
P.Eng. of JDS at Suite 200 - 532 Leon Ave Kelowna, British Columbia V1Y 6J6.



| | H. | Documents on display.
| | -- | ---------------------



Any statement in this Annual
Report about any of the Company's contracts or other documents is not necessarily complete. If the contract or document is filed
as an exhibit to this Annual Report, the contract or document is deemed to modify the description contained in this Annual Report.
Readers must review the exhibits themselves for a complete description of the contract or document.



Readers may review a copy of
the Company's filings with the U.S. Securities and Exchange Commission ("the "SEC"), including exhibits and schedules
filed with it, at the SEC's public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. Readers may call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains a Web site (http://www.sec.gov) that
contains reports, submissions and other information regarding registrants that file electronically with the SEC. The Company has
only recently become subject to the requirement to file electronically through the EDGAR system most of its securities documents,
including registration statements under the Securities Act of 1933, as amended and registration statements, reports and other documents
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).



101







Readers may read and copy any
reports, statements or other information that the Company files with the SEC at the address indicated above and may also access
them electronically at the Web site set forth above. These SEC filings are also available to the public from commercial document
retrieval services.



The Company is required to file
reports and other information with the SEC under the Exchange Act. Reports and other information filed by the Company with the
SEC may be inspected and copied at the SEC's public reference facilities described above. As a foreign private issuer, the Company
is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and the Company's officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in section
16 of the Exchange Act. Under the Exchange Act, as a foreign private issuer, the Company is not required to publish financial statements
as frequently or as promptly as United States companies.



Any of the documents referred
to above can also be viewed at the offices of the Company's attorneys, Dorsey and Whitney LLP, 161 Bay Street, Suite 4310, Toronto,
Ontario M5J 2S1. All of the documents referred to above are in English.



| | I. | Subsidiary Information.
| | -- | -----------------------



Not applicable.



| | Item 11. | Quantitative and Qualitative Disclosures About Market
Risk.
| | -------- | -----------------------------------------------------------



The Company owns shares of other
listed companies. Certain of these shares are presented under current assets on the Company's balance sheet as at December 31,
2013 as "Marketable Securities" at an amount of $3,590, which is their quoted market value.  Market risk represents
the risk of loss that may impact the financial position, results of operations, or cash flows of the Company due to adverse changes
in financial market prices, including interest rate risk, foreign currency exchange rate risk, commodity price risk, and other
relevant market or price risks.



As the Company is in the permitting
and development stage, it presently has no activities related to derivative financial instruments or derivative commodity instruments.



The financial results are quantified
in Canadian dollars. In the past, the Company has raised equity funding through the sale of securities denominated in Canadian
dollars, and the Company may in the future raise additional equity funding or financing denominated in Canadian dollars. The Company
currently does not believe it currently has any materially significant market risks relating to operations resulting from foreign
exchange rates. However, if the Company enters into financing or other business arrangements denominated in currency other than
the Canadian or United States dollar, variations in the exchange rate may give rise to foreign exchange gains or losses that may
be significant.



The Company currently has no
long-term debt obligations. The Company does not use financial instruments for trading purposes and was not at December 31, 2013
a party to any leverage derivatives. In the event the Company experiences substantial growth in the future, the Company's business
and results of operations may be materially affected by changes in interest rates and certain other credit risk associated with
the Company's operations.



| | Item 12. | Description of Securities Other than Equity Securities
| | -------- | ------------------------------------------------------



Not Applicable.



102







PART II



| | Item 13. | Defaults, Dividend Arrearages and Delinquencies.
| | -------- | ------------------------------------------------



None.



| | Item 14. | Material Modifications to the Rights of Security Holders
and Use of Proceeds.
| | -------- | -----------------------------------------------------------------------------



Not Applicable.



| | Item 15. | Controls and Procedures.
| | -------- | ------------------------



| | d) | Disclosure Controls and Procedures.
| | -- | -----------------------------------



| |  | The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) under the "Exchange
Act" as of the end of the period covered by this annual report (the "Evaluation Date"). Based on such evaluation,
such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective. Such
disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in reports
that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in applicable rules and forms, and includes controls and procedures designed to ensure
information relating to the Company required to be included in our reports filed or submitted under the Exchange Act is accumulated
and communicated to the Company’s management to allow timely decision regarding disclosure.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Management’s
Annual Report on Internal Control Over Financial Reporting.



Management 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 International Accounting Standards Board.



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
(1992), 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, 2013.



103







(c)  Attestation Report of the
Company’s Registered Accounting Firm.



The Registrant’s independent
registered public accounting firm, KPMG LLP, has issued an attestation report expressing an opinion on the Company’s internal
control over financial reporting as of December 31, 2013. For KPMG LLP’s report, see Item 19 of this Annual Report on Form
20-F.



| | (d) | Changes in Internal Controls over Financial Reporting.
| | --- | ------------------------------------------------------



| |  | There have not been any changes in the Company's internal controls over financial reporting or
in other factors that have been identified in connection with the evaluation described above that occurred during the period covered
by this Annual Report that has materially affected, or is reasonably likely to materially affect, the Company's internal controls
over financial reporting.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Item 16A. | Audit Committee Financial Expert.
| | --------- | ---------------------------------



The Company's Board of Directors
has determined that there is at least one audit committee financial expert, as defined under Item 16A of Form 20-F, serving on
its audit committee, namely, David Whittle, whose qualifications are set out in Item 6, above.Mr. Whittle is independent,
as such term is defined by the listing standards of the NYSE MKT. All other members of the Audit Committee are also independent
as defined by the listing standards of the NYSE MKT.



| | Item 16B. | Code of Ethics.
| | --------- | ---------------



The Board of Directors, on February
2, 2003, adopted a Code of Ethics (the "Code") entitled "Ethics and Conflict of Interest Policy" which applies
to each of the directors and officers of the Company and its affiliates. A copy of the 2003 Code has been previously filed. On
May 29, 2006, the Board of Directors adopted an updated and expanded set of Corporate Governance Policies, which replaced the 2003
Code. On September 7, 2010, the Board of Directors approved an updated set of the 2006 Corporate Governance Policies. A copy of
the updated 2006 Corporate Governance Policies has been previously filed, and is incorporated by reference to this Annual Report.



The Corporate Governance Policy
governs the actions of and is applicable to all of the directors and officers of the Company and its subsidiaries, and their affiliates.
The updated 2006 Corporate Governance Policies address the following:



| | · | compliance with all the laws and regulations
identified therein and with the requirements of the U.S. Securities and Exchange Commission as mandated by the Sarbanes-Oxley Act
of 2002, and the requirements of the Toronto Stock Exchange;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | corporate opportunities and potential
conflicts of interest;
| | - | ------------------------------------------------------------



| | · | the quality of public disclosures;
| | - | ----------------------------------



| | · | the protection and appropriate use of
the Company's assets and resources;
| | - | -------------------------------------------------------------------------



| | · | the protection of confidential information;
| | - | -------------------------------------------



| | · | insider trading;
| | - | ----------------



| | · | fair behaviour; and
| | - | -------------------



| | · | reporting violations of the Policy or
Board Directives.
| | - | -------------------------------------------------------



104







The Company has also adopted
an Insider Trading Policy which applies to all employees of the Company.



The
Company will provide a copy of the updated 2006 Corporate Governance Policies to any person, without charge. To obtain a copy without
charge, send a request, in writing, to the Company at Mountain Province Diamonds Inc., Attention: Corporate Secretary, 161 Bay
Street, Suite 2315, PO Box 216, Toronto, Ontario, Canada M5J 2S1.



| | Item 16C. | Principal Accountant Fees and Services.
| | --------- | ---------------------------------------



| | A. | Audit Fees
| | -- | ----------



"Audit Fees" are the
aggregate fees billed by KPMG LLP (“KPMG”) for the audit of the Company's consolidated annual financial statements,
assistance with interim financial statements, attestation services that are provided in connection with statutory and regulatory
filings or engagements, services associated with registration statements, prospectuses, periodic reports and other documents filed
with securities regulatory bodies and stock exchanges and other documents issued in connection with securities offerings and admissions
to trading, and assistance in responding to comment letters from securities regulatory bodies, and consultations with the Company's
management as to accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or
proposed rules, standards or interpretations by the securities regulatory authorities, accounting standard setting bodies, or other
regulatory or standard setting bodies.



Aggregate audit fees paid to
KPMG in fiscal December 31, 2013 were $211,759 including fees for the 2013 audits of the consolidated financial statements and
services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements (fiscal
year ended December 31, 2012 - $257,619). All such fees were approved by the Audit Committee.



| | B. | Audit-Related Fees
| | -- | ------------------



"Audit-Related Fees"
are fees that are or would be charged by KPMG for services reasonably related to the performance of the audit or interim review
that are not reported under “Audit Fees”. "Audit Related Fees" charged by KPMG during the fiscal period ended
December 31, 2013 were $nil and $nil for the fiscal year ended December 31, 2012.



| | C. | Tax Fees
| | -- | --------



"Tax Fees" are fees
for professional services rendered by KPMG for tax compliance, tax advice on actual or contemplated transactions.



Aggregate tax fees for compliance
services paid to KPMG in fiscal December 2013 were $15,000 (December 31, 2012 - $19,112). These services were approved by the Audit
Committee.



| | D. | All Other Fees
| | -- | --------------



In the fiscal year ending December
31, 2013, all other fees billed by KPMG were $nil (December 31, 2012 - $nil).



The Audit Committee pre-approves
all audit services to be provided to the Company by its independent auditors. The Audit Committee's policy regarding the pre-approval
of non-audit services to be provided to the Company by its independent auditors is that all such services shall be pre-approved
by the Audit Committee. Non-audit services that are prohibited to be provided to the Company by its independent auditors may not
be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee must be satisfied that the performance
of the services in question will not compromise the independence of the independent auditors. All non-audit services, performed
by the Company's auditor, for the fiscal year ended December 31, 2013, were pre-approved by the Audit Committee of the Company.
No non-audit services were approved pursuant to the de minimis exemption to the pre-approval requirement.



105







| | Item 16D. | Exemptions from the Listing Standards for Audit Committees.
| | --------- | -----------------------------------------------------------



Not Applicable.



| | Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated
Purchasers.
| | --------- | -----------------------------------------------------------------------



There were no purchases made
by or on behalf of the Company or any affiliated purchaser of shares or other units of the Company's equity securities.



| | Item 16F. | Change in Registrant’s Certifying Accountant.
| | --------- | ---------------------------------------------



Not Applicable.



| | Item 16G. | Corporate Governance.
| | --------- | ---------------------



NYSE MKT Corporate
Governance Matters



The MPV Shares are listed on
NYSE MKT. Section 110 of the NYSE MKT Company Guide permits the NYSE MKT to consider the laws, customs and practices of the foreign
issuer’s country of domicile in relaxing certain NYSE MKT listing criteria. A description of the significant ways in which
the Company’s governance practices differ from those followed by domestic companies pursuant to NYSE MKT standards is as
follows:



| | • | Shareholder Meeting Quorum Requirement:
The NYSE MKT minimum quorum requirement for a shareholder meeting is one-third of the outstanding common shares. In addition, a
company listed on NYSE MKT is required to state its quorum requirement in its bylaws. The Company’s quorum requirement (set
forth in its Articles) is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5%
of the issued shares entitled to be voted at the meeting.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Proxy Delivery Requirement: NYSE
MKT requires the solicitation of proxies and delivery of proxy statements for all shareholder meetings, and requires that these
proxies shall be solicited pursuant to a proxy statement that conforms to SEC proxy rules. The Company is a “foreign private
issuer” as defined in Rule 3b-4 under the Exchange Act and Rule 405 under the Securities Act and the equity securities of
the Company are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act.
The Company solicits proxies in accordance with applicable rules and regulations in Canada.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Shareholder Approval Requirement:The
Company will follow the Canadian securities regulatory authorities and TSX rules for shareholder approval of new issuances of its
common shares. Following securities and exchange rules, shareholder approval is required for certain issuances of shares that:
(i) materially affect control of the Company; or (ii) provide consideration to insiders in aggregate of 10% or greater of the market
capitalization of the listed issuer and have not been negotiated at arm’s length. Shareholder approval is also required,
pursuant to TSX rules, in the case of most private placements: (x) for an aggregate number of listed securities issuable greater
than 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of closing
of the transaction if the price per security is less than the market price; or (y) that during any six month period are to insiders
for listed securities or options, rights or other entitlements to listed securities greater than 10% of the number of securities
of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of the closing of the first private placement
to an insider during the six month period.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



106







| | • | Board of Director Nomination Requirements:
the NYSE MKT requires Board of Director nominations must be either selected, or recommended for the Board's selection, by either
a nominating committee comprised solely of independent directors or by a majority of the independent directors. The Company currently
does not have a nominating committee and follows the Canadian securities regulatory authority and Toronto Stock Exchange rules
with respect to the nomination and selection of directors. The directors of the Company are elected annually and hold office until
the next annual general meeting of the shareholders of the Company or until their successors in office are duly elected or appointed.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Executive Sessions:the
                                         NYSE MKT requires the Company to hold meetings of its Board of Directors on at least
                                         a quarterly basis. The independent directors should meet on a regular basis as often
                                         as necessary to fulfill their responsibilities, including at least annually in executive
                                         session without the presence of non-independent directors and management. The Company
                                         follows the Canadian securities regulatory authority and Toronto Stock Exchange rules.
                                         The Company is not required to, and currently does not, conduct executive sessions without
                                         the presence of non-independent directors and management.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Item 16H. | Mine Safety Disclosure.
| | --------- | -----------------------



Not applicable.



PART III



| | Item 17. | Financial Statements.
| | -------- | ---------------------



Not Applicable.



| | Item 18. | Financial Statements.
| | -------- | ---------------------



The Company's consolidated financial
statements are stated in Canadian dollars and are prepared in accordance with IFRS as issued by the IASB.



The financial statements and
notes thereto as required under Item 18 are attached hereto and filed as part of this Annual Report, are individually listed under
Item 19, and are found immediately following the text of this Annual Report. The reports of KPMG LLP, independent registered public
accounting firm, are included herein immediately preceding the financial statements.



| | Item 19. | Exhibits
| | -------- | --------



Financial Statements



The Consolidated Financial Statements
of the Company and exhibits listed below are filed with this annual report on Form 20-F in the United States. This report is also
filed in Canada as an Annual Information Form and the Canadian filing includes the Consolidated Financial Statements and exhibits
listed below. Canadian investors should refer to the audited Financial Statements of the Company as at and for the years ended
December 31, 2013, 2012 and 2011 filed with Canadian Securities Regulators on SEDAR under "Audited Annual Financial Statements
- English" and incorporated herein by reference.



107







The following financial statements
are attached to and form a part of this Annual Report filed with the SEC (see Appendix):



Consolidated Financial Statements
of the Company:



| | · | Management’s Annual Report on Internal
Control Over Financial Reporting
| | - | -----------------------------------------------------------------------



| | · | Report of Independent Registered Public
Accounting Firm on Internal Control over Financial Reporting.
| | - | -----------------------------------------------------------------------------------------------------



| | · | Report of Independent Registered Public
Accounting Firm on Consolidated Financial Statements.
| | - | ---------------------------------------------------------------------------------------------



| | · | Consolidated Balance Sheets as of December
31, 2013 and 2012.
| | - | -------------------------------------------------------------



| | · | Consolidated Statements of Comprehensive
Loss for the years ended December 31, 2013 and 2012 and 2011.
| | - | ------------------------------------------------------------------------------------------------------



| | · | Consolidated Statements of Equity for
the years ended December 31, 2013 and 2012 and 2011.
| | - | ------------------------------------------------------------------------------------------



| | · | Consolidated Statements of Cash Flows
for the years ended December 31, 2013 and 2012 and 2011.
| | - | ----------------------------------------------------------------------------------------------



| | · | Notes to the Consolidated Financial Statements.
| | - | -----------------------------------------------



SIGNATURES



The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.



Mountain
Province Diamonds Inc.
(Company)



By: “Patrick C. Evans”
(Signature)*



|Date: March 26, 2014 | Patrick C. Evans           
|-------------------- | ---------------------------
|                     | President, CEO and Director



*Print the name and title of the signing
officer under this signature.



108







EXHIBIT INDEX



The following exhibits are attached to and form part of this
Annual Report:



|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                |  | Remarks.
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|1.1     |  | By-Laws of the Company                                                                                                                                                                                                                                                                                                                                                                                         |  | (3)     
|1.2     |  | Arrangement Agreement between the Company and Glenmore Highlands Inc. dated May 10, 2000.                                                                                                                                                                                                                                                                                                                      |  | (5)     
|1.3     |  | Joint Information Circular of the Company and Glenmore Highlands Inc.                                                                                                                                                                                                                                                                                                                                          |  | (4)     
|4.1     |  | Transfer agreement between MPV, Monopros and Camphor dated November 24, 1999 pursuant to which MPV and Camphor transferred the GOR to Monopros.                                                                                                                                                                                                                                                                |  | (3)     
|4.2     |  | Letter Agreement between MPV, Monopros, Glenmore and Camphor dated December 17, 1999 relating to acquisition of property, within the "Area of Interest" as defined in the agreement and acquisition of property through third party agreements.                                                                                                                                                                |  | (3)     
|4.3     |  | Letter Agreement dated December 17, 1999 between MPV, Monopros, Camphor and Glenmore amending the Monopros Joint Venture Agreement.                                                                                                                                                                                                                                                                            |  | (3)     
|4.4     |  | Form of Subscription Agreement for the private placement described in item 1 of "Material Contracts".                                                                                                                                                                                                                                                                                                          |  | (3)     
|4.5     |  | Agreement dated as of January 1, 2002 between the Company, Camphor Ventures Inc. and De Beers Canada Exploration Inc.                                                                                                                                                                                                                                                                                          |  | (1)     
|4.6     |  | Second Amendment Agreement dated January 1, 2002 between the Company and Paul Shatzko.                                                                                                                                                                                                                                                                                                                         |  | (3)     
|4.7     |  | Second Amendment Agreement dated January 1, 2002 between the Company and Jan Vandersande.                                                                                                                                                                                                                                                                                                                      |  | (3)     
|4.8     |  | Third Amendment Agreement dated December 13, 2002 between the Company and Jan Vandersande                                                                                                                                                                                                                                                                                                                      |  | (3)     
|4.9     |  | Letter agreement dated December 13, 2002 between the Company and Elizabeth Kirkwood                                                                                                                                                                                                                                                                                                                            |  | (3)     
|4.10    |  | Consulting Agreement dated January 1, 2004 between the Company and Jan W. Vandersande                                                                                                                                                                                                                                                                                                                          |  | (3)     
|4.11    |  | Consulting Agreement dated November 1, 2005 between the Company and Patrick Evans                                                                                                                                                                                                                                                                                                                              |  | (3)     
|4.12    |  | Revised Consulting Agreement dated January 31, 2006 between the Company and Patrick Evans                                                                                                                                                                                                                                                                                                                      |  | (3)     
|4.13    |  | Consulting Agreement dated May 11, 2006 between the Company and Jennifer Dawson                                                                                                                                                                                                                                                                                                                                |  | (3)     
|4.14    |  | Amended and Restated Joint Venture Agreement, dated July 3, 2009, by and among the Company, Camphor Ventures Inc. and De Beers Canada Inc.                                                                                                                                                                                                                                                                     |  | (1), (3)
|8.1     |  | List of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                           |  | (2)     
|11.1    |  | Corporate Governance Policies dated May 29, 2006, and updated September 7, 2010                                                                                                                                                                                                                                                                                                                                |  | (3)     
|11.2    |  | Ethics and Conflict of Interest Policy                                                                                                                                                                                                                                                                                                                                                                         |  | (3)     
|12.1    |  | Section 302 Certification of the Company's Chief Executive Officer                                                                                                                                                                                                                                                                                                                                             |  | -       
|12.2    |  | Section 302 Certification of the Company's Chief Financial Officer                                                                                                                                                                                                                                                                                                                                             |  | -       
|13.1    |  | Section 906 Certification of the Company's Chief Executive Officer                                                                                                                                                                                                                                                                                                                                             |  | -       
|13.2    |  | Section 906 Certification of the Company's Chief Financial Officer                                                                                                                                                                                                                                                                                                                                             |  | -       
|15.1    |  | Independent Qualified Persons’ Technical Report dated April 20, 2009 entitled Gahcho Kué Kimberlite Project NI 43-101 Technical Report prepared by Ken Brisebois, P.Eng., Dr. Ted Eggleston, P.Geo., and Alexandra Kozak, P.Eng., all of AMEC Americas Limited.                                                                                                                                                |  | (6)     
|15.2    |  | Independent Qualified Persons’ Technical Report dated December 1, 2010 (with Information Effective as of October 15, 2010) entitled “Gahcho Kué Definitive Feasibility Study NI 43-101 Technical Report” prepared by Daniel D. Johnson, Mike Makarenko, and Ken Meikle, all of JDS Energy and Mining Inc.                                                                                                      |  | (6)     
|15.3    |  | Independent Qualified Persons’ Technical Report with effective
    date July 2, 2013 entitled “Update of the Mineral Resource Estimate for the Tuzo Kimberlite, Gahcho Kué Project,
    Northwest Territories, Canada: NI 43-101 Technical Report” prepared by Tom E. Nowicki, Stephen Moss, and Gareth  Garlick,
    all of Mineral Services Canada Inc. and Michael Makarenko, of JDS Energy and Mining Inc. |  | (7)     
|15.4    |  | Consents for inclusion of the Technical Report in Exhibit 15.1 and reference in Form 20-F                                                                                                                                                                                                                                                                                                                      |  | (6)     
|15.5    |  | Consents for inclusion of the Technical Report in Exhibit 15.2 and reference in Form 20-F                                                                                                                                                                                                                                                                                                                      |  | (6)     
|15.6    |  | Consents for use of information and inclusion of the Technical Report in Exhibit 15.3 and reference in Form 20-F                                                                                                                                                                                                                                                                                               |  | -       





109







(1)    
Portions of the Agreement have been omitted pursuant to a request for confidential treatment filed with SEC.

(2)     See list of
subsidiaries on page 11 of this Annual Report.

(3)     Previously
filed and incorporated by reference.

(4)     Previously
furnished under cover of Form 6K dated June 2, 2000 and incorporated by reference.

(5)    Attached as
Appendix A to the Joint Information Circular of the Company and Glenmore Highlands Inc. which information circular was previously
furnished under cover of Form 6K dated June 2, 2000, and incorporated by reference.

(6)    Previously filed and incorporated by
reference.

(7)    Previously
filed  Exhibit 99.1 to Form 6K dated August 14, 2013 and incorporated by reference.



110







Appendix



Item 18. Financial Statements











Consolidated Financial
Statements

(Expressed in Canadian
Dollars)



MOUNTAIN
PROVINCE
DIAMONDS INC.

As at December 31, 2013
and 2012

And for the years ended
December 31, 2013, 2012 and 2011











|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



CONTENTS



|                                                                                                         | Page   
|-------------------------------------------------------------------------------------------------------- | -------
|                                                                                                         |        
|Responsibility for
    Consolidated Financial Statements                                                 | 3      
|                                                                                                         |        
|Management’s
    Annual Report on Internal Control Over Financial Reporting                              | 4      
|                                                                                                         |        
|Independent Auditors’
    Report of Registered Public Accounting Firm                                    | 5      
|                                                                                                         |        
|Report of Independent
    Registered Public Accounting Firm on Internal Control Over Financial Reporting | 6      
|                                                                                                         |        
|Consolidated Statements
    of Balance Sheets                                                            | 8      
|                                                                                                         |        
|Consolidated Statements
    of Comprehensive Loss                                                        | 9      
|                                                                                                         |        
|Consolidated Statements
    of Equity                                                                    | 10     
|                                                                                                         |        
|Consolidated Statements
    of Cash Flows                                                                | 11     
|                                                                                                         |        
|Notes to the Consolidated
    Financial Statements                                                       | 12 – 35



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, results of operations 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. An 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 consideration
in approving the 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.



|“Patrick
    C. Evans”                    | “Bruce
    Ramsden”                       
|----------------------------------------- | ------------------------------------------
|Patrick C. Evans                          | Bruce Ramsden                             
|President and Chief
    Executive Officer | VP Finance and Chief
    Financial Officer
|                                          |                                           
|Toronto, Canada                           |                                           
|March 25, 2014                            |                                           



Page | 3







|MOUNTAIN
                                       PROVINCE DIAMONDS INC.
|----------------------------------------------------------------------



MANAGEMENT’S
ANNUAL 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 International Financial
Reporting Standards as issued by the International Accounting Standards Board.



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 (1992), 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, 2013.
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 25, 2014



Page | 4







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



INDEPENDENT
AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders
of Mountain Province Diamonds Inc.



We have audited
the accompanying consolidated financial statements of Mountain Province Diamonds Inc., which comprise the consolidated balance
sheets as at December 31, 2013 and December 31, 2012, the consolidated statements of comprehensive loss, equity and cash
flows for each of the years in the three-year period ended December 31, 2013, and notes, comprising a summary of significant accounting
policies and other explanatory information.



Management’s
Responsibility for the Consolidated Financial Statements



Management
is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.



Auditors’
Responsibility



Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.



An audit involves
performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.



We believe
that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion,
the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Mountain
Province Diamonds Inc. as at December 31, 2013 and December 31, 2012, and its consolidated financial performance and its consolidated
cash flows for each of the years in the three-year period ended December 31, 2013 in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.



Page | 5







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



Emphasis of
Matter



Without modifying
our opinion, we draw attention to Note 1 in the consolidated financial statements which describes that the Company expects to
require additional capital resources to meet planned expenditures in 2014. These conditions, along with other matters as set forth
in Note 1, indicate the existence of a material uncertainty that casts substantial doubt about the Company’s ability to
continue as a going concern.



Other Matter



We also have
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Mountain Province
Diamonds Inc.’s internal control over financial reporting as of December 31, 2013, based on the criteria established in
Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 25, 2014 expressed an unmodified (unqualified) opinion on the effectiveness of Mountain
Province Diamonds Inc.’s internal control over financial reporting.







Chartered Professional Accountants,
Licensed Public Accountants

March 25, 2014

Toronto, Canada



Page | 6







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING



The Shareholders
of Mountain Province Diamonds Inc.



We have audited
Mountain Province Diamonds Inc.’s internal control over financial reporting as of December 31, 2013, based on criteria
established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Mountain Province Diamonds Inc.’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, included
in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.



We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 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.



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.



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.



In our opinion,
Mountain Province Diamonds Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2013, based on the criteria established in Internal Control – Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).



We also have
audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Mountain Province Diamonds Inc. as of December 31, 2013
and 2012, and the related consolidated statements of comprehensive loss, equity, and cash flows for each of the years in the three-year
period ended December 31, 2013, and our report dated March 25, 2013 expressed an unqualified opinion on those consolidated
financial statements.







Chartered Professional
Accountants, Licensed Public Accountants

Toronto, Canada

March 25, 2014



Page | 7







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



Consolidated
Balance Sheets

In Canadian dollars



|                                               |  |       |                                                       |  | December 31, |   |              | December 31, | 
|---------------------------------------------- |  | ----- | ----------------------------------------------------- |  | ------------ | - | ------------ | ------------ | 
|                                               |  | Notes |                                                       |  | 2013         |   |              | 2012         | 
|ASSETS                                         |  |       |                                                       |  |              |   |              |              | 
|Current assets                                 |  |       |                                                       |  |              |   |              |              | 
|Cash                                           |  |       | 5                                                     |  |              | $ | 11,344,472   |              | 
|Short-term investments                         |  |       | 5                                                     |  |              |   | 24,343,222   |              | 
|Marketable securities                          |  |       | 5                                                     |  |              |   | 3,590        |              | 
|Amounts receivable                             |  |       | 5                                                     |  |              |   | 614,609      |              | 
|Advances, prepaid expenses,
    and supplies   |  |       | 6                                                     |  |              |   | 12,776,825   |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|                                               |  |       |                                                       |  |              |   | 49,082,718   |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Property and equipment                         |  |       | 7                                                     |  |              |   | 15,687,956   |              | 
|Mineral properties                             |  |       | 8                                                     |  |              |   | 45,596,529   |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Total assets                                   |  |       |                                                       |  |              | $ | 110,367,203  |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|LIABILITIES AND SHAREHOLDERS’ EQUITY           |  |       |                                                       |  |              |   |              |              | 
|Current liabilities                            |  |       |                                                       |  |              |   |              |              | 
|Accounts payable and accrued
    liabilities   |  |       | 5
                                         & 13       |  |              | $ | 13,949,350   |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Decommissioning and restoration liability      |  |       | 9                                                     |  |              |   | 5,224,662    |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Shareholders' equity:                          |  |       |                                                       |  |              |   |              |              | 
|Share capital                                  |  |       | 10                                                    |  |              |   | 209,820,460  |              | 
|Share-based payments reserve                   |  |       | 10                                                    |  |              |   | 2,191,406    |              | 
|Deficit                                        |  |       |                                                       |  |              |   | (120,817,633 | )            | 
|Accumulated other comprehensive
    income     |  |       |                                                       |  |              |   | (1,042       | )            | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Total shareholders'
    equity                 |  |       |                                                       |  |              |   | 91,193,191   |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Total liabilities and shareholders'
    equity |  |       |                                                       |  |              | $ | 110,367,203  |              | 
|                                               |  |       |                                                       |  |              |   |              |              | 
|Going concern                                  |  |       | 1                                                     |  |              |   |              |              | 
|Contingencies and commitments                  |  |       | 8
                                         & 12       |  |              |   |              |              | 
|Subsequent events                              |  |       | 10(iii)
                                         & 18 |  |              |   |              |              | 



On behalf of the Board:



|“Patrick
    Evans” |  | “Jonathan
    Comerford”
|------------------- |  | ------------------------
|Director            |  | Director                



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



Page | 8







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



Consolidated
Statements of Comprehensive Loss

In Canadian dollars



|                                                                     |  |       |                                                  |  | Year ended            |   |             | Year ended        |  |   | Year ended        |  
|-------------------------------------------------------------------- |  | ----- | ------------------------------------------------ |  | --------------------- | - | ----------- | ----------------- |  | - | ----------------- | -
|                                                                     |  | Notes |                                                  |  | December
    31, 2013 |   |             | December 31, 2012 |  |   | December 31, 2011 |  
|Expenses:                                                            |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Consulting fees                                                      |  |       | 10
                                         & 13 |  |                       | $ | (2,459,140  | )                 |  | $ | (1,434,917        | )
|Depreciation                                                         |  |       |                                                  |  |                       |   | (259,334    | )                 |  |   | (21,246           | )
|Exploration and evaluation expenses                                  |  |       | 14                                               |  |                       |   | (21,837,083 | )                 |  |   | (10,651,622       | )
|Gahcho Kué Project management fee                                    |  |       |                                                  |  |                       |   | (1,113,848  | )                 |  |   | (311,076          | )
|Office and administration                                            |  |       |                                                  |  |                       |   | (286,539    | )                 |  |   | (285,698          | )
|Professional fees                                                    |  |       |                                                  |  |                       |   | (344,701    | )                 |  |   | (664,878          | )
|Promotion and investor relations                                     |  |       |                                                  |  |                       |   | (179,277    | )                 |  |   | (245,936          | )
|Director fees                                                        |  |       |                                                  |  |                       |   | (145,153    | )                 |  |   | (166,668          | )
|Transfer agent and regulatory fees                                   |  |       |                                                  |  |                       |   | (180,412    | )                 |  |   | (200,461          | )
|Travel                                                               |  |       |                                                  |  |                       |   | (129,997    | )                 |  |   | (196,714          | )
|                                                                     |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Net loss for the year from operations                                |  |       |                                                  |  |                       | $ | (26,935,484 | )                 |  | $ | (14,179,216       | )
|Accretion expense on decommissioning and restoration
    liability   |  |       | 9                                                |  |                       |   | (23,882     | )                 |  |   | (27,801           | )
|Other income:                                                        |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Interest income                                                      |  |       |                                                  |  |                       |   | 355,428     |                   |  |   | 147,762           |  
|Gain on revaluation of warrants exercisable
    in foreign currency  |  |       |                                                  |  |                       |   | -           |                   |  |   | -                 |  
|Gain on asset transfer
    to Kennady Diamonds Inc.                  |  |       | 17                                               |  |                       |   | -           |                   |  |   | 10,721,645        |  
|                                                                     |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Net loss for the year                                                |  |       |                                                  |  |                       | $ | (26,603,938 | )                 |  | $ | (3,337,610        | )
|                                                                     |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Other Comprehensive Loss                                             |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Items that may be reclassified subsequently to profit and loss:      |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Change in fair value of
    available-for-sale marketable securities |  |       |                                                  |  |                       |   | (5,931      | )                 |  |   | (8,157            | )
|Comprehensive loss for the year                                      |  |       |                                                  |  |                       | $ | (26,609,869 | )                 |  | $ | (3,345,767        | )
|                                                                     |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Basic and diluted loss per share                                     |  |       | 10(iv)                                           |  |                       | $ | (0.28       | )                 |  | $ | (0.04             | )
|                                                                     |  |       |                                                  |  |                       |   |             |                   |  |   |                   |  
|Weighted average number of shares outstanding                        |  |       |                                                  |  |                       |   | 94,838,537  |                   |  |   | 82,191,626        |  





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



Page | 9







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



Consolidated
Statements of Equity

In Canadian dollars



|                                                                           |  | Notes |         |  | Number
    of shares |  |             | Share
    Capital |  |   | Warrants    |   |  | Share-based
    Payments  Reserve |          |   | Deficit |   |           | Accumulated
    other  comprehensive income 
(loss) |  |   | Total        |  
|-------------------------------------------------------------------------- |  | ----- | ------- |  | -------------------- |  | ----------- | ----------------- |  | - | ----------- | - |  | --------------------------------- | -------- | - | ------- | - | --------- | --------------------------------------------------- |  | - | ------------ | -
|Balance, January 1, 2011                                                   |  |       |         |  |                      |  | 77,416,057  |                   |  | $ | 133,344,866 |   |  | $                                 | 969,942  |   |         | $ | 1,026,302 |                                                     |  | $ | (79,337,150  | )
|Net loss for the year                                                      |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | (11,538,935  | )
|Issuance of common shares – exercise of options                            |  |       |         |  |                      |  | 270,635     |                   |  |   | 665,000     |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Issuance of common shares – exercise of warrants                           |  |       |         |  |                      |  | 2,658,866   |                   |  |   | 7,242,471   |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Fair value of options exercised from share-based payments
    reserve      |  |       |         |  |                      |  | -           |                   |  |   | 429,965     |   |  |                                   | -        |   |         |   | (429,965  | )                                                   |  |   | -            |  
|Fair value of warrants exercised transferred from
    Warrants             |  |       |         |  |                      |  | -           |                   |  |   | 969,942     |   |  |                                   | (969,942 | ) |         |   | -         |                                                     |  |   | -            |  
|Fair value of warrants (exercised in a foreign currency)                   |  |       |         |  |                      |  | -           |                   |  |   | 4,259,751   |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Share-based payment expense                                                |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | 487,085   |                                                     |  |   | -            |  
|Other Comprehensive
    Loss:                                              |  |       |         |  |                      |  |             |                   |  |   |             |   |  |                                   |          |   |         |   |           |                                                     |  |   |              |  
|Available-for-sale
    financial assets - current period unrealized losses |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Balance, December 31, 2011                                                 |  |       |         |  |                      |  | 80,345,558  |                   |  | $ | 146,911,995 |   |  | $                                 | -        |   |         | $ | 1,083,422 |                                                     |  | $ | (90,876,085  | )
|Net loss for the year                                                      |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | (3,337,610   | )
|Issuance of common shares – Rights Offering,
    net of costs              |  |       | 10(ii)  |  |                      |  | 13,452,593  |                   |  |   | 46,062,632  |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Issuance of common shares – exercise of options                            |  |       |         |  |                      |  | 370,000     |                   |  |   | 604,200     |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Fair value of options exercised from Share-based Payments
    Reserve      |  |       |         |  |                      |  | -           |                   |  |   | 313,065     |   |  |                                   | -        |   |         |   | (313,065  | )                                                   |  |   | -            |  
|Share-based payment expense                                                |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | 463,500   |                                                     |  |   | -            |  
|Dividend-in-kind                                                           |  |       | 17      |  |                      |  | -           |                   |  |   | (13,721,645 | ) |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Other Comprehensive
    Loss:                                              |  |       |         |  |                      |  |             |                   |  |   |             |   |  |                                   |          |   |         |   |           |                                                     |  |   |              |  
|Available-for-sale
    financial assets - current period unrealized losses |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Balance, December 31, 2012                                                 |  |       |         |  |                      |  | 94,168,151  |                   |  | $ | 180,170,247 |   |  | $                                 | -        |   |         | $ | 1,233,857 |                                                     |  | $ | (94,213,695  | )
|Net loss for the year                                                      |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | (26,603,938  | )
|Issuance of common shares – Private Placement                              |  |       | 10(ii)  |  |                      |  | 5,889,200   |                   |  |   | 28,807,501  |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Issuance of common shares – exercise of options                            |  |       | 10(iii) |  |                      |  | 444,000     |                   |  |   | 559,440     |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Fair value of options exercised from share-based payments
    reserve      |  |       |         |  |                      |  | -           |                   |  |   | 283,272     |   |  |                                   | -        |   |         |   | (283,272  | )                                                   |  |   | -            |  
|Share-based payment expense                                                |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | 1,240,821 |                                                     |  |   | -            |  
|Other Comprehensive
    Loss:                                              |  |       |         |  |                      |  |             |                   |  |   |             |   |  |                                   |          |   |         |   |           |                                                     |  |   |              |  
|Available-for-sale
    financial assets - current period unrealized losses |  |       |         |  |                      |  | -           |                   |  |   | -           |   |  |                                   | -        |   |         |   | -         |                                                     |  |   | -            |  
|Balance, December 31, 2013                                                 |  |       |         |  |                      |  | 100,501,351 |                   |  | $ | 209,820,460 |   |  | $                                 | -        |   |         | $ | 2,191,406 |                                                     |  | $ | (120,817,633 | )



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



Page | 10







|MOUNTAIN
    PROVINCE DIAMONDS INC.
|-----------------------------------



Consolidated
Statements of Cash Flows

In Canadian dollars



|                                                                    |  |       |         |  | Year ended            |   |             | Year ended        |  |   | Year ended        |  
|------------------------------------------------------------------- |  | ----- | ------- |  | --------------------- | - | ----------- | ----------------- |  | - | ----------------- | -
|                                                                    |  | Notes |         |  | December
    31, 2013 |   |             | December 31, 2012 |  |   | December 31, 2011 |  
|Cash provided by (used in):                                         |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Operating activities:                                               |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Net loss for the year                                               |  |       |         |  |                       | $ | (26,603,938 | )                 |  | $ | (3,337,610        | )
|                                                                    |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Adjustments:                                                        |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Accretion expense on decommissioning and restoration
    liability  |  |       | 9       |  |                       |   | 23,882      |                   |  |   | 27,801            |  
|Depreciation                                                        |  |       |         |  |                       |   | 259,334     |                   |  |   | 21,246            |  
|Share-based payment expense                                         |  |       |         |  |                       |   | 1,240,821   |                   |  |   | 463,500           |  
|Interest income                                                     |  |       |         |  |                       |   | (355,428    | )                 |  |   | (147,762          | )
|Gain on asset transfer to Kennady Diamonds Inc.                     |  |       | 17      |  |                       |   | -           |                   |  |   | (10,721,645       | )
|Gain on revaluation of warrants exercisable in
    foreign currency |  |       |         |  |                       |   | -           |                   |  |   | -                 |  
|Changes in non-cash operating
    working capital:                  |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Amounts receivable                                                  |  |       |         |  |                       |   | (276,702    | )                 |  |   | 948,267           |  
|Advances, prepaid expenses and supplies                             |  |       |         |  |                       |   | (12,054,423 | )                 |  |   | (620,761          | )
|Accounts payable and accrued
    liabilities                        |  |       |         |  |                       |   | 5,146,918   |                   |  |   | (419,577          | )
|                                                                    |  |       |         |  |                       |   | (32,619,536 | )                 |  |   | (13,786,541       | )
|Investing activities:                                               |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Mineral properties                                                  |  |       |         |  |                       |   | -           |                   |  |   | (51,058           | )
|Interest income                                                     |  |       |         |  |                       |   | 355,428     |                   |  |   | 147,762           |  
|Purchase of property and equipment                                  |  |       |         |  |                       |   | (9,108,832  | )                 |  |   | (124,031          | )
|Redemption (purchase) of
    short-term investments                 |  |       |         |  |                       |   | 23,075,775  |                   |  |   | (29,599,814       | )
|                                                                    |  |       |         |  |                       |   | 14,322,371  |                   |  |   | (29,627,141       | )
|Financing activities:                                               |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Transfer to Kennady Diamonds Inc.                                   |  |       | 17      |  |                       |   | -           |                   |  |   | (3,000,000        | )
|Proceeds from option exercises                                      |  |       | 10(iii) |  |                       |   | 559,440     |                   |  |   | 604,200           |  
|Proceeds from exercise of warrants                                  |  |       |         |  |                       |   | -           |                   |  |   | -                 |  
|Proceeds from rights offering                                       |  |       |         |  |                       |   | -           |                   |  |   | 46,062,632        |  
|Proceeds from share issuance,
    net of costs                      |  |       | 10(ii)  |  |                       |   | 28,807,501  |                   |  |   | -                 |  
|                                                                    |  |       |         |  |                       |   | 29,366,941  |                   |  |   | 43,666,832        |  
|                                                                    |  |       |         |  |                       |   |             |                   |  |   |                   |  
|Increase in cash                                                    |  |       |         |  |                       |   | 11,069,776  |                   |  |   | 253,150           |  
|Cash, beginning of year                                             |  |       |         |  |                       |   | 274,696     |                   |  |   | 21,546            |  
|Cash, end of year                                                   |  |       |         |  |                       | $ | 11,344,472  |                   |  | $ | 274,696           |  



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



Page | 11







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | 1. | Nature
                                         of OperationsAND GOING CONCERN
| | -- | ------------------------------------------------------------------------------



Mountain Province
Diamonds Inc. (“Mountain Province” or 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 Corporation Act
effective May 8, 2006. The Company is involved in the discovery and development of diamond properties in Canada’s Northwest
Territories.



The address
of the Company’s registered office and its principal place of business is 161 Bay Street, Suite 2315, PO Box 216, Toronto,
ON, Canada, M5J 2S1. The Company’s shares are listed on the Toronto Stock Exchange under the symbol ‘MPV’ and
on the New York Stock Exchange – MKT under the symbol ‘MDM’.



The Company
is in the process of permitting and developing the Gahcho Kué project (“Gahcho Kué Project”) in conjunction
with De Beers Canada Inc. (“De Beers Canada”) (Note 8). The underlying value and recoverability of the amounts shown
as “Mineral Properties” are dependent upon the ability of the Company and/or its mineral property partner to develop
economically recoverable reserves, to have successful permitting and development, and upon future profitable production or proceeds
from disposition of the Company’s mineral properties. Failure to meet the obligations to the Company’s share in the
Gahcho Kué Project may lead to dilution of the interest in the Gahcho Kué Project and may require the Company to
write off costs capitalized to date.



As at December
31, 2013, the Company has not achieved profitable operations and continues to be dependent upon its ability to obtain external
financing to meet the Company’s liabilities as they become payable. The Company’s ability to continue operations beyond
the next twelve months is dependent on the successful permitting, the ability of the Company to obtain necessary financing to
fund its operations, the successful construction of the Gahcho Kué Project, and the future production or proceeds from
developed properties.



The Company’s
mineral asset, the Gahcho Kué Project was in the exploration and evaluation stage. On December 2, 2013,the approval
of a pioneer Land Use Permit for the Gahcho Kué diamond mine was obtained. Based on this approval the Company believes
that all further permits will be of a procedural nature and when considered in connection with the other identified criteria to
demonstrate technical feasibility and commercial viability (Note 3(vii)) of the Gahcho Kué Project, the Company will now
capitalize all future development expenditures incurred related to the Gahcho Kué Project.



The Company
currently has no source of revenues. In the years ended December 31, 2013, 2012 and 2011, the Company incurred losses, had negative
cash flows from operating activities, and will be required to obtain additional sources of financing to complete its business
plans going into the future. Although the Company had working capital of $35,133,368 at December 31, 2013, including $35,687,694
of cash and short-term investments, the Company has insufficient capital to finance its operations and the Company’s share
of development costs of the Gahcho Kué Project (Note 8) over the next 12 months.  The Company is currently investigating
various sources of additional funding to increase the cash balances required for ongoing operations over the foreseeable future.
These additional sources include, but are not limited to, share offerings, private placements, rights offerings, credit and debt
facilities, as well as the exercise of outstanding options. However, there is no certainty that the Company will be able to obtain
financing from any of those sources.  These conditions indicate the existence of a material uncertainty that results in substantial
doubt as to the Company’s ability to continue as a going concern.



The Company’s
audited consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, and
do not reflect adjustments to assets and liabilities that would be necessary if the going concern assumption were not appropriate.
These adjustments could be material.

Page | 12







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



Authorization
of Financial Statements



The audited
consolidated financial statements for the year ended December 31, 2013 (including comparatives) were approved by the Board of
Directors on March 25, 2014.



| | 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 (“IASB”).  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 cash, short-term investments
and available-for-sale financial assets at fair value.



| | 3. | Significant
                                         accounting policies
| | -- | ------------------------------------------------------------------------



| | (i) | Basis of Preparation
| | --- | --------------------

The consolidated
financial statements are presented in accordance with IAS 1, Presentation of Financial Statements.



The Company
has elected to present the ‘Statements of Comprehensive Loss’ as a single financial statement with its statements
of loss, titled ‘Consolidated Statements of Comprehensive Loss’.



The significant
accounting policies adopted in the preparation of the consolidated financial statements are set out below.



| | (ii) | Basis of consolidation
| | ---- | ----------------------

The consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiary:



| | · | Camphor
                                         Ventures Inc. (100% owned - inactive)
| | - | --------------------------------------------------------------------------------------



The Company’s
interest in the Gahcho Kué Project has been proportionally consolidated (see Note 8).



A subsidiary
is an entity controlled by the Company. Control is defined as the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. A subsidiary is included in the consolidated financial statements from the date
control is obtained until the date control ceases. 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 Gahcho Kué Project through its joint arrangement is a joint operation under IFRS
11 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 Gahcho Kué Project is bound by a contractual arrangement establishing joint control
over the project through required unanimous consent of each of the Participants for strategic, financial and operating policies
of the Gahcho Kué Project. The Gahcho Kué Project management committee has two representatives of each of Mountain
Province and De Beers Canada. The Participants have appointed De Beers Canada as the operator of the Gahcho Kué Project.



| | (iii) | Foreign Currency
| | ----- | ----------------

The Company’s
presentation currency is the Canadian Dollar (“CAD”). 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, known as
foreign currencies, are recognized at the rates of exchange prevailing at the dates of the transactions.



Page | 13







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



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 carried at fair value that are denominated in foreign currencies are re-translated at the rates prevailing
at the date when the fair value was determined.



Exchange differences
are recognized in profit or loss in the period in which they arise and presented in consolidated Statements of Comprehensive Loss
within Office and administration.



In the year
ended December 31, 2013, $1,482 of foreign exchange loss was recognized in Office and administrative costs, in the Company’s
consolidated Statements of Comprehensive Loss (December 31, 2012 - $6,792; December 31, 2011 - $241,564).



| | (iv) | Interest income
| | ---- | ---------------

Interest income
from financial assets is recognized when it is probable that the economic benefits will flow to the Company and the amount of
income can be measured reliably. Interest income is accrued on the basis of time that has passed, by reference to the principal
outstanding and at the effective interest rate applicable.



| | (v) | Share-based payments
| | --- | --------------------

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. Details regarding the determination of the fair value of equity-settled share-based payment transactions are
set out in Note 10.



The fair value
determined at the grant date of the equity-settled share-based payments is expensed to the consolidated Statement of Comprehensive
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.



Equity-settled
share-based payment transactions with parties other than employees, if any, are measured at the fair value of the goods or services
received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.



| | (vi) | Income Taxes and Deferred
                                         Taxes
| | ---- | ------------------------------------------------------------------------

The income
tax expense or benefit for the period consists of two components: current and deferred. Income tax expense or benefit is recognized
in the consolidated Statements of Comprehensive Loss except to the extent it relates to a business combination or items recognized
directly in equity.



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 Loss because of items of income
or expense 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 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.



Page | 14







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



Deferred tax
assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business
combination) of other 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 subsidiary, 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
and interests 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 into equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly
in equity respectively.



| | (vii) | 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.
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 timethat 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 use in
determining technical feasibility and commercial viability of the Gahcho Kué Project are demonstrable are the following;

| | • | completion
                                         of a feasibility study;
| | - | ---------------------------------------------------------------------------

Page | 15







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | • | obtaining
                                         required permitting to construct the Gahcho Kué Project;
| | - | -----------------------------------------------------------------------------------------------------------

| | • | completion
                                         of an evaluation of the financial resources required to construct the Gahcho Kué
                                         Project ;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | availability
                                         of financial resources necessary to commence development activities to construct the
                                         Gahcho Kué Project;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | 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. These assets are recognized at fair value, or relative fair
value if applicable. Acquired capitalized exploration and evaluation consists of:

| | • | interest
                                         in exploration properties,
| | - | ----------------------------------------------------------------------------

| | • | amounts
                                         paid for acquired rights associated with exploration properties, and
| | - | ---------------------------------------------------------------------------------------------------------------------

| | • | amounts
                                         paid in connection with sunk cost repayments (Note 8).
| | - | -------------------------------------------------------------------------------------------------------



| | (viii) | Property and equipment
| | ------ | ----------------------

Property 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 write off 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 it is 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.



|Office
    furniture          | five
    years, straight line       
|----------------------------- | ------------------------------------
|Vehicles                      | five years, straight
    line       
|Production equipment          | five years, straight
    line       
|Computer equipment            | three years, straight
    line      
|General infrastructure        | ten years, straight
    line        
|Mining & treatment equipment  | ten years, straight
    line        
|Earth moving equipment        | estimated hours                     
|Assets
    under construction | not
    depreciated until production



| | (ix) | Impairment of non-financial
                                         assets
| | ---- | ---------------------------------------------------------------------------

The carrying
value of the Company’s capitalized Mineral Properties and property and equipment is assessed for impairment when indicators
of such impairment exist. If any indication of impairment exists, 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 to sell 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 pre-tax 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.



Page | 16







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



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 Company’s
other group of assets. The Company has determined that it operates one CGU.



If the carrying
amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged immediately to the
consolidated Statements of Comprehensive Loss so as to reduce the carrying amount to its recoverable amount.



An assessment
is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company makes an estimate of the recoverable amount.



A previously
recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset is increased to its
recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined had no impairment loss
been recognized for the asset in prior years. Such reversal is recognized in the consolidated Statements of Comprehensive Loss.



| | (x) | Financial Instruments
| | --- | ---------------------

Financial instruments
are classified into one of the following four categories: loans and receivables; fair value through profit or loss; held-to-maturity;
and available-for-sale. Financial assets are initially measured at fair value. Subsequent measurement and recognition of the changes
in fair value of financial instruments depends upon their initial classifications, as follows:



•             Financial
assets and financial liabilities at fair value through profit and loss include financial assets and financial liabilities that
are held for trading or designated upon initial recognition as at fair value through profit and loss. These financial instruments
are measured at fair value with changes in fair values recognized in the consolidated Statements of Comprehensive Loss.



•             Financial
assets classified as available-for-sale are measured at fair value, with changes in fair values recognized as Other Comprehensive
Income (“OCI”) in the consolidated Statements of Comprehensive Loss, except when there is objective evidence that
the asset is impaired, at which point the cumulative loss that had been previously recognized in OCI is recognized within the
consolidated Statements of Comprehensive Loss.



•             Financial
assets classified as held-to-maturity and loans and receivables are measured subsequent to initial recognition at amortized cost
using the effective interest method.



•             Financial
liabilities, other than financial liabilities classified as fair value through profit and loss, are measured in subsequent periods
at amortized cost using 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 short period, to the net carrying
amount on initial recognition.



Page | 17







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



The Company
has classified its financial instruments as follows:



|Asset/Liability                          |  | Classification                     |  | Measurement   
|---------------------------------------- |  | ---------------------------------- |  | --------------
|Cash                                     |  | Fair Value through Profit and Loss |  | Fair Value    
|Short-term investments                   |  | Fair Value through Profit and Loss |  | Fair Value    
|Amounts receivable                       |  | Loans and Receivables              |  | Amortized Cost
|Marketable securities                    |  | Available-for-Sale                 |  | Fair Value    
|Accounts payable and accrued liabilities |  | Other liabilities                  |  | Amortized Cost



The Company’s
cash consists of balances with banks. Short-term investments are investments with original maturities of greater than three months
when acquired (see Note 5).



The Company
had no held-to-maturity financial assets at December 31, 2013 and December 31, 2012.



The market
values of marketable securities are determined based on the closing prices reported on recognized securities exchanges and over-the-counter
markets. Such individual market values do not necessarily represent the realizable value of the total holding of any security,
which may be more or less than that indicated by market quotations.



The fair values
of the Company's amounts receivable, advances and accounts payable and accrued liabilities approximate their carrying values because
of the immediate or short-term to maturity of these financial instruments.



Derivative
financial liabilities

Derivative
instruments, including embedded derivatives, are recorded at their fair value on the date the derivative contract is entered into.
They are subsequently remeasured at their fair value at each consolidated Balance Sheet date, and the changes in the fair value
are recognized in the consolidated Statements of Comprehensive Loss. Fair values for derivative instruments are determined using
valuation techniques, including assumptions based on market conditions existing at the date of the consolidated Balance Sheets.



Warrants denominated
or exercisable in a foreign currency different from the functional currency of the Company meet the definition of a derivative
financial liability and are fair valued at each consolidated Balance Sheet date using the Black-Scholes option pricing model,
with changes in the fair value recognized in the consolidated Statements of Comprehensive Loss. There are no derivative financial
liabilities as at December 31, 2013 or 2012.



| | (xi) | 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 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, 2013 other than the provision for decommissioning and restoration associated with the Mineral Properties.



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.

Page | 18







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



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 as part of exploration and evaluation expenditures if no asset exists. Over time, the discounted
liability is increased for the change in present value. The periodic unwinding of the discount is recognized in the consolidated
Statement of Comprehensive 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
(or a charge against exploration and evaluation expense), and a reduction of the decommissioning and restoration liability. For
closed sites, changes to estimated costs are recognized immediately in the consolidated Statement of Comprehensive Loss.



| | (xii) | Loss 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 period.



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 and warrants. The denominator is increased by the total number of additional common
shares that would have been issued by the Company assuming exercise of all stock options and warrants with exercise prices below
the average market price for the year.



| | (xiii) | New accounting policies
| | ------ | -----------------------

The Company
adopted the following new standards and interpretations issued by the IASB or International Financial Reporting Standards Interpretation
Committee (“IFRIC”) as of January 1, 2013.



IFRS
10 Consolidated Financial Statements

IFRS 10 requires
an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. IFRS 10 replaces SIC-12 Consolidation –
Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. The adoption of IFRS 10
did not have a material effect on our consolidated financial statements.



IFRS
11 Joint Arrangements

IFRS 11 requires
a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures are accounted
for using the equity method of accounting whereas for a joint operation, the venturer recognizes its share of each of the assets,
liabilities, revenue and expenses of the joint operation. IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13
Jointly Controlled Entities – Non-monetary Contributions by Venturers. The Company has determined that its interest
in its Gahcho Kué Project through its joint arrangement, is a joint operation under IFRS 11 and, accordingly have recorded
the assets, liabilities, revenues and expenses in relation to its interest in the joint operation. The adoption of IFRS 11 did
not have a material effect on our consolidated financial statements.



IFRS
13 Fair Value Measurement

IFRS 13 is
a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS statements. The new standard
clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly
transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement.
The disclosures required under IFRS 13 for the consolidated financial statements have been included in Note 5.



Page | 19







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



IFRIC
20 – Stripping Costs in the Production Phase of a Surface Mine

IFRIC
20 clarifies the requirements for accounting for the costs of stripping activity in the production phase when stripping improves
access to further quantities of material that will be mined in future periods. The adoption of IFRS 11 did not have a material
effect on our consolidated financial statements.



IAS 28
Investments in Associates and Joint Ventures

IAS 28 was
amended as a consequence of the issuance of IFRS 11. In addition to prescribing the accounting for investments in associates,
it also addresses joint ventures that are to be accounted for by the equity method. The application of the equity method has not
changed as a result of the amendment. The adoption of the amended standard did not have a material effect on the consolidated
financial statements.



| | (xiv) | Standards, amendments
                                         and interpretations to existing standards that are not yet effective and have not been
                                         adopted early by the Company
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At the date
of authorization of these financial statements, certain new standards, amendments and interpretations 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 pronouncements will be adopted in the Company’s accounting policy for the first period
beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are
expected to be relevant to the Company’s financial statements is provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on the Company’s financial statements and are therefore
not discussed below.



IFRS
9 – Financial Instruments

The IASB issued
IFRS 9 “Financial Instruments” (“IFRS 9”) which proposes to replace IAS 39 “Financial Instruments:
recognition and measurement”. The replacement standard has the following significant components: establishes two primary
measurement categories for financial assets — amortized cost and fair value; establishes criteria for classification of
financial assets within the measurement category based on business model and cash flow characteristics; and eliminates existing
held to maturity, available-for-sale, and loans and receivable categories.



In November
2013, the IASB issued an amendment to IFRS 9 which includes a new hedge model that aligns accounting more closely with risk management,
as well as enhancements to the disclosures about hedge accounting and risk management. Additionally as the impairment guidance
in IFRS 9, as well as certain limited amendments to the classification and measurement requirements of IFRS 9 is not yet complete,
the previously mandated effective date of IFRS 9 of January 1, 2015, has been removed. Entities may apply IFRS 9 before the IASB
completes the amendments, but are not required to. The Company has not yet determined the impact of adoption of IFRS 9 and will
evaluate the impact of the change to its financial statements based on the characteristics of its financial instruments at the
time of adoption.



IFRIC
21 - Levies

IFRIC 21 Levies
(“IFRIC 21”) was issued in May 2013 and is an interpretation of IAS 37 – Provisions, Contingent Liabilities
and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments. IAS 37 sets out criteria for
the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past
event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy
is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual
periods commencing on or after January 1, 2014. The Company is assessing the impact of this new standard, if any, on the consolidated
financial statements.



Page | 20







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



IAS 32
– Offsetting Financial Assets and Liabilities

IAS
32 was amended to clarify that an entity currently has a legally enforceable right to set-off if that right is not contingent
on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy
of the entity and all counterparties. This amendment also clarifies when a settlement mechanism provides for net settlement or
gross settlement that is equivalent to net settlement. Amendments to IAS 32 are effective for annual periods beginning on or after
January 1, 2014. The Company intends to adopt the amendments to IAS 32 in its consolidated financial statements for the annual
period beginning January 1, 2014. The Company does not expect the amendments to have a material impact on the consolidated financial
statements.



| | 4. | SIGNIFICANT
                                         ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
| | -- | ----------------------------------------------------------------------------------------------------



The preparation
of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions 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. Actual outcomes could differ from these estimates. These consolidated financial statements include
estimates, which, by their nature, are uncertain and may require accounting adjustments based on future occurrences. Revisions
to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects
both current and future periods. These estimates are based on historical experience, current and future economic conditions, and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.



i)            Significant
judgments in applying accounting policies

The
areas which require management to make significant judgments in applying the Company’s accounting policies in determining
carrying values include, but are not limited to:



a)           Mineral
reserves

The
information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments
to interpret the data. Changes in the proven mineral reserves or measured and indicated and inferred mineral estimates may impact
the carrying value of the properties.



b)           Impairment
analysis – mineral properties

As
required under IFRS 6 – Exploration for and evaluation of mineral resources and IAS 36 – Impairment of assets (“IAS
36”), the Company reviewed its mineral properties 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 is that as at December 31, 2013, no impairment in the carrying
value of its mineral properties had occurred.



c)           Determination
of development phase

The
Company applies significant judgment when determining and assessing its criteria used to determine technical feasibility and commercial
viability is demonstrable. The Company determined that the Gahcho Kué Project has met the key factors used by management
and, accordingly, that all costs of development activities will be capitalized to mineral properties.



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:



Page | 21







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



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 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.



b)           Impairment
analysis - mineral properties

As
required under IFRS 6 – Exploration for and evaluation of mineral resources and IAS 36 – Impairment of assets (“IAS
36”), the Company reviewed its mineral properties 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. Upon the Company’s determination of
technical feasibility and commercial viability an impairment test of the capitalized costs related to the Gahcho Kué Project
was completed. IAS 36 requires the Company to make certain estimates in respect of recoverability of the asset, including estimated
development costs, life of mine, discount rates and diamond prices. The Company’s assessment is that there is no impairment
in the carrying value of its mineral properties.



d)           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.



e)           Stock
options

The
stock option pricing model requires the input of highly subjective assumptions including the expected life and volatility. Changes
in the subjective input assumptions can materially affect the fair value estimate.



f)           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, it is probable that they
will be realized. The Company has not recorded the benefit of any tax losses or deductible temporary
differences.



| | 5. | FAIR
                                         VALUE MEASUREMENT
| | -- | ---------------------------------------------------------------



For financial
instruments recorded at fair value, 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).

Page | 22









|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



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



The Company’s
financial assets as at December 31, 2013 and December 31, 2012 measured at fair value are summarized in the following table:



|                       |  | December
    31, 2013 |           
|---------------------- |  | --------------------- | ----------
|                       |  | Level
    1           |           
|Cash                   |  | $                     | 11,344,472
|Short-term investments |  |                       | -         
|Marketable securities  |  |                       | 3,590     



|                       |  | December
    31, 2012 |                                                 
|---------------------- |  | --------------------- | ------------------------------------------------
|                       |  |                       | Level
                                         1
|Cash                   |  | $                     | 274,696                                         
|Short-term investments |  |                       | -                                               
|Marketable securities  |  |                       | 9,521                                           



Short-term
investments at December 31, 2013 and December 31, 2012 are cashable guaranteed investment certificates (“GICs”) held
with a major Canadian financial institution. GICs are measured using a discounted cash flow model, the future value of the GIC
is discounted to the reporting period using the market interest rate.



The quoted
market value of marketable securities at December 31, 2013 and December 31, 2012 was $3,590 and $9,521, respectively. The original
cost of these marketable securities at December 31, 2013 and December 31, 2012 was $4,632 for both periods.



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 carrying amounts by classification
are:

|                                                 |  | Balance as at |            
|------------------------------------------------ |  | ------------- | -----------
|                                                 |  | December 31,  |            
|                                                 |  | 2013          |            
|Financial assets                                 |  |               |            
|Fair Value Through Profit or Loss                |  |               |            
|Cash                                             |  | $             | 11,344,472 
|Short-term investments                           |  |               | 24,343,222 
|                                                 |  |               |            
|Loans and Receivables                            |  |               |            
|Amounts receivable                               |  |               | 614,609    
|                                                 |  |               |            
|Available-for-Sale                               |  |               |            
|Marketable securities                            |  |               | 3,590      
|                                                 |  |               |            
|Financial liabilities                            |  |               |            
|Financial liabilities measured at amortized cost |  |               |            
|Accounts payable and accrued
    liabilities     |  |               | (13,949,350



Page | 23







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



The Company
had no transactions with marketable securities classified as available-for-sale during the year ended December 31, 2013 or the
year ended December 31, 2012.



Financial
Instruments Risks

The Company
has examined the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks.
These risks may 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 maximum exposure to credit risk for its amounts receivable is summarized as follows:



|                  |  | December 31, |         |  | December 31, |  
|----------------- |  | ------------ | ------- |  | ------------ | -
|                  |  | 2013         |         |  | 2012         |  
|0-30 days         |  | $            | 572,551 |  |              | $
|30 to 90 days     |  |              | -       |  |              |  
|More than 90 days |  |              | 42,058  |  |              |  
|Total             |  | $            | 614,609 |  |              | $







On December
31, 2013 and December 31, 2012, 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 short-term investments are held with a major Canadian financial institution and thus the exposure to
credit risk is considered insignificant. The short-term investments are in the form of guaranteed investment certificates (“GICs”)
and are cashable in whole or in part, with interest, at any time to maturity. 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 $572,551 (December 31, 2012 – approximately $153,500).



The Company’s
current policy is to invest excess cash in GICs. It periodically monitors the investments 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 has a
planning and budgeting process in place by which it anticipates and determines the funds required to support its operating requirements.
The Company coordinates this planning and budgeting process with its financing activities through its capital management process
(see Note 1). The Company’s financial liabilities comprise its accounts payable and accrued liabilities, all of which are
due within the next 12 month period. Other than minimal office space rental commitments, there are no other operating lease commitments.



Market risk

The Company’s
marketable securities are classified as available-for-sale, and are subject to changes in the market prices. They are recorded
at fair value in the Company’s financial statements, based on the closing market value at the end of the period for each
security included. The original cost of the marketable securities is $4,632. The Company’s exposure to market risk is not
considered to be material.



Page | 24







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



Foreign
currency sensitivity

The
Company is exposed to foreign currency risk at the balance sheet date through its U.S. denominated accounts payable and cash.
A 10% depreciation or appreciation of the U.S. dollar against the Canadian dollar would result in an approximate $3,400 (December
31, 2012 - $8,000) decrease or increase, respectively, in both net and comprehensive loss. The Company currently has only limited
exposure to fluctuations in exchange rates between the Canadian and U.S. dollar. Accordingly, the Company has not employed any
currency hedging programs during the current period.



Interest
rate sensitivity

The Company
has no significant exposure at December 31, 2013, 2012 or 2011 to interest rate risk through its financial instruments. The short-term
investments are at fixed rates of interest that do not fluctuate during the remaining term. The Company has no interest-bearing
debt.



| | 6. | ADVANCES, PREPAID EXPENSES,
                                         AND SUPPLIES
| | -- | ---------------------------------------------------------------------------------



|                    |  | December 31, |            |  | December 31, |  
|------------------- |  | ------------ | ---------- |  | ------------ | -
|                    |  | 2013         |            |  | 2012         |  
|Advances            |  | $            | -          |  |              | $
|Prepaid expenses    |  |              | 6,749,843  |  |              |  
|Supplies            |  |              | 488,411    |  |              |  
|Reclamation deposit |  |              | 5,538,571  |  |              |  
|                    |  | $            | 12,776,825 |  |              | $





Supplies consist of $304,607 of
diesel fuel and $183,804 of spare parts as at December 31, 2013.



Reclamation deposit is made for
the Gahcho Kué Project for the short-term.



| | 7. | PROPERTY AND EQUIPMENT
| | -- | ----------------------



The Company’s property and
equipment as at December 31, 2013 and December 31, 2012 are as follows:



|                         |  | Office    |         |   |          |   |         | Production |  |   | Computer  |   |  | General        |        |   | Earthmoving |   |          | Mining & Treatment |  |   | Assets under |   |  |       |        
|------------------------ |  | --------- | ------- | - | -------- | - | ------- | ---------- |  | - | --------- | - |  | -------------- | ------ | - | ----------- | - | -------- | ------------------ |  | - | ------------ | - |  | ----- | -------
|                         |  | furniture |         |   | Vehicles |   |         | equipment  |  |   | equipment |   |  | infrastructure |        |   | equipment   |   |          | equipment          |  |   | construction |   |  | Total |        
|Cost                     |  |           |         |   |          |   |         |            |  |   |           |   |  |                |        |   |             |   |          |                    |  |   |              |   |  |       |        
|At January 1, 2012       |  | $         | -       |   |          | $ | 58,155  |            |  | $ | 7,473     |   |  | $              | 1,206  |   |             | $ | -        |                    |  | $ | -            |   |  | $     | -      
|Additions                |  |           | 32,996  |   |          |   | 1,837   |            |  |   | (1,838    | ) |  |                | 6,616  |   |             |   | 7,326    |                    |  |   | -            |   |  |       | -      
|At December 31, 2012     |  |           | 32,996  |   |          |   | 59,992  |            |  |   | 5,635     |   |  |                | 7,822  |   |             |   | 7,326    |                    |  |   | -            |   |  |       | -      
|Additions                |  |           | 5,881   |   |          |   | 668,271 |            |  |   | 57,171    |   |  |                | 952    |   |             |   | 985,837  |                    |  |   | 1,773,510    |   |  |       | 105,450
|At December 31, 2013     |  | $         | 38,877  |   |          | $ | 728,263 |            |  | $ | 62,806    |   |  | $              | 8,774  |   |             | $ | 993,163  |                    |  | $ | 1,773,510    |   |  | $     | 105,450
|                         |  |           |         |   |          |   |         |            |  |   |           |   |  |                |        |   |             |   |          |                    |  |   |              |   |  |       |        
|Accumulated depreciation |  |           |         |   |          |   |         |            |  |   |           |   |  |                |        |   |             |   |          |                    |  |   |              |   |  |       |        
|At January 1, 2012       |  | $         | -       |   |          | $ | (22,220 | )          |  | $ | (1,121    | ) |  | $              | (268   | ) |             | $ | -        |                    |  | $ | -            |   |  | $     | -      
|Depreciation             |  |           | (6,049  | ) |          |   | (12,274 | )          |  |   | (851      | ) |  |                | (1,950 | ) |             |   | (122     | )                  |  |   | -            |   |  |       | -      
|At December 31, 2012     |  |           | (6,049  | ) |          |   | (34,494 | )          |  |   | (1,972    | ) |  |                | (2,218 | ) |             |   | (122     | )                  |  |   | -            |   |  |       |        
|Depreciation             |  |           | (8,070  | ) |          |   | (53,225 | )          |  |   | (10,873   | ) |  |                | (3,560 | ) |             |   | (145,431 | )                  |  |   | (37,287      | ) |  |       | (888   
|At December 31, 2013     |  | $         | (14,119 | ) |          | $ | (87,719 | )          |  | $ | (12,845   | ) |  | $              | (5,778 | ) |             | $ | (145,553 | )                  |  | $ | (37,287      | ) |  | $     | (888   
|                         |  |           |         |   |          |   |         |            |  |   |           |   |  |                |        |   |             |   |          |                    |  |   |              |   |  |       |        
|Carrying amounts         |  |           |         |   |          |   |         |            |  |   |           |   |  |                |        |   |             |   |          |                    |  |   |              |   |  |       |        
|At December 31, 2012     |  | $         | 26,947  |   |          | $ | 25,498  |            |  | $ | 3,663     |   |  | $              | 5,604  |   |             | $ | 7,204    |                    |  | $ | -            |   |  | $     | -      
|At December 31, 2013     |  | $         | 24,758  |   |          | $ | 640,544 |            |  | $ | 49,961    |   |  | $              | 2,996  |   |             | $ | 847,610  |                    |  | $ | 1,736,223    |   |  | $     | 104,562



Page | 25







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



During the
year ended December 31, 2013, the Company through its 49% share in the Gahcho Kué Project capitalized assets under construction
totaling $12,204,208. Included in this amount is construction equipment which was brought to site for future construction use.



| | 8. | MINERAL
                                         PROPERTIES
| | -- | -----------------------------------------------------------



The Company
holds a 49% interest in the Gahcho Kué Project located in the Northwest Territories, Canada, and De Beers Canada holds
the remaining 51% interest. The arrangement between the Company and De Beers Canada is governed by an agreement entered into on
July 3, 2009 (the “2009 Agreement”). The Company considers that the operator of the Gahcho Kué Project is a
related party under IAS 24 – Related Parties.



The 2009 Agreement’s
provision for consensus decision-making for material strategic and operating decisions provides the Company with joint control
for the Gahcho Kué Project with De Beers Canada, and represents a joint arrangement in accordance with IFRS 11. The arrangement
is not structured through a legal entity or vehicle separate from the Company and De Beers Canada and accounts for the Project
as a joint operation in accordance with IFRS 11. The Company has determined its proportionate share (49%) of the assets, liabilities,
revenues and expenses of the joint operation, and recorded them in its consolidated financial statements.



Under a previous
agreement (the “2002 Agreement”) in effect until July 3, 2009, De Beers Canada carried all costs incurred by the Project,
and De Beers Canada had no recourse to the Company for repayment of funds until, and unless, the Project was built, in production,
and generating net cash flows.



On July 3, 2009, the Company entered
the 2009 Agreement with De Beers Canada (jointly, the “Participants”) under which:

| | (a) | The
                                         Participants’ continuing interests in the Gahcho Kué Project will be Mountain
                                         Province 49% and De Beers Canada 51%, with the Company’s interest no longer subject
                                         to the dilution provisions in the 2002 Agreement except for normal dilution provisions
                                         which are applicable to both Participants;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Each
                                         Participant will market their own proportionate share of diamond production in accordance
                                         with their participating interest;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Each
                                         Participant will contribute their proportionate share to the future project development
                                         costs;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Material
                                         strategic and operating decisions will be made by consensus of the Participants as long
                                         as each Participant has a participating interest of 40% or more;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | The
                                         Participants have agreed that the sunk historic costs to the period ending on December
                                         31, 2008 will be reduced and limited to $120,000,000;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | The
                                         Company will repay De Beers Canada $59 million (representing 49% of an agreed sum of
                                         $120,000,000) plus interest compounded on the outstanding amounts in settlement of the
                                         Company’s share of the agreed historic sunk costs on the following schedule:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $200,000
                                         on execution of the 2009 Agreement (the Company’s contribution to the 2009 Joint
                                         Arrangement expenses to date of execution of the 2009 Agreement – paid and expensed);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Up
                                         to $5.1 million in respect of De Beers Canada’s share of the costs of the feasibility
                                         study; (paid - $4,417,421 to December 31, 2012, included in “Mineral Properties”;
                                         no further payments are expected);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million upon the completion of a feasibility study with at least a 15% IRR and approval
                                         of the necessary development work for a mine (as defined in the 2009 Agreement) (paid
                                         March 15, 2011, included in “Mineral Properties”);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million following the issuance of the construction and operating permits;
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | $10
                                         million following the commencement of commercial production; and
| | - | -------------------------------------------------------------------------------------------------------------

| | · | The
                                         balance of approximately $24.4 million plus accumulated interest within 18 months following
                                         commencement of commercial production.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page | 26







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



Mountain Province
has agreed that the marketing rights provided to the Company in the 2009 Agreement will be diluted if the Company defaults on
certain of the repayments described above.



Since these
payments are contingent on certain events occurring, and/or work being completed, they will be recorded as the payments become
due or are made. As these contingent payments are made, they are being capitalized to Mineral Properties as “acquired exploration
and evaluation”.



The continuity of the Mineral Properties
is as follows:



|Balance, January 1, 2011                                       |  | $ | 35,901,973 |  
|-------------------------------------------------------------- |  | - | ---------- | -
|Change in expected decommissioning and restoration liability   |  |   | 410,593    |  
|Amounts capitalized for sunk cost repayments
    in the year   |  |   | 10,237,929 |  
|Balance, December 31, 2011                                     |  | $ | 46,550,495 |  
|Change in expected decommissioning and restoration liability   |  |   | 78,965     |  
|Amounts capitalized for sunk cost repayments
    in the year   |  |   | 51,059     |  
|Balance, December 31, 2012                                     |  | $ | 46,680,519 |  
|Change in expected decommissioning and restoration liability   |  |   | (1,083,990 | )
|Amounts capitalized for sunk cost repayments
    in the period |  |   | -          |  
|Balance, December 31, 2013                                     |  | $ | 45,596,529 |  





The Company’s
proportional interest (49%) of commitments made by the operator of the Gahcho Kué Project is $31,609,307 at December 31,
2013.



The total commitments
are as follows:



|                                          |  | 2014 |            |  | 2015 |   |           | 2016 |  |   | Total   | 
|----------------------------------------- |  | ---- | ---------- |  | ---- | - | --------- | ---- |  | - | ------- | 
|Future Gahcho
    Kué Project commitments |  | $    | 25,296,426 |  |      | $ | 6,164,608 |      |  | $ | 148,273 | 



| | 9. | DECOMMISSIONING
                                         AND RESTORATION LIABILITY
| | -- | ----------------------------------------------------------------------------------



The Gahcho
Kué Project decommissioning and restoration liability was calculated using the following assumptions as at December 31,
2013 and 2012:



|                                 |  | December 31, |                                                                |   | December 31, |  
|-------------------------------- |  | ------------ | -------------------------------------------------------------- | - | ------------ | -
|                                 |  | 2013         |                                                                |   | 2012         |  
|Expected undiscounted cash flows |  | $            | 13,849,717                                                     |   |              | $
|Discount rate                    |  |              | 4.10                                                           | % |              |  
|Periods                          |  |              | between
                                         2015 and 2028 |   |              |  
|With probabilities between       |  |              | 10%
                                         and 70%           |   |              |  





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



Page | 27







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



The continuity
of the decommissioning and restoration liability at December 31, 2013 is follows:



|                                                         |  | Year ended   |            |   | Year ended   |   |           | Year ended   | 
|-------------------------------------------------------- |  | ------------ | ---------- | - | ------------ | - | --------- | ------------ | 
|                                                         |  | December 31, |            |   | December 31, |   |           | December 31, | 
|                                                         |  | 2013         |            |   | 2012         |   |           | 2011         | 
|Balance, beginning of year                               |  | $            | 6,284,770  |   |              | $ | 6,178,004 |              | 
|Change in estimate of discounted cash flows for the year |  |              | (1,083,990 | ) |              |   | 78,965    |              | 
|Accretion recorded during the year                       |  |              | 23,882     |   |              |   | 27,801    |              | 
|Balance, end of the year                                 |  | $            | 5,224,662  |   |              | $ | 6,284,770 |              | 



| | 10. | 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, 2013 is 100,501,351. There are no shares issued but not fully paid.



On
November 27, 2013,the Company closed a non-brokered private placement of common shares for gross proceeds of $29,446,000.
The Company issued 5,889,200 common shares at a price of $5.00 per share. Transaction costs in the amount of $567,330 were paid
in relation to the private placement and share issuance costs of $71,169 were incurred in connection with the private placement.The shares are subject to a four month hold period,
expiring on March 26, 2014.



On November
28, 2012, the Company closed a Rights Offering for gross proceeds of approximately $47.1 million. Under the Rights Offering, each
registered holder of common shares of the Company as of the record date established as October 30, 2012, received one right (a
“Right”) for each share held. Six (6) Rights plus the sum of $3.50 (the “Subscription Price”) were required
to subscribe for one share (“Rights Share”). The Rights expired on November 28, 2012 (the “Expiry Date”)
with unexercised Rights becoming void and without value. The Rights were listed on the TSX until their expiry.



The Company
entered into a stand-by agreement with Bottin (International) Investments Ltd. (“Bottin”) under which Bottin undertook
to fully subscribe for those Rights Shares not otherwise subscribed for on the Expiry Date.



A total of
65,100,414 Rights were exercised by shareholders for 10,850,069 shares, and Bottin subscribed to an additional 2,602,524 Rights
Shares for the Rights not otherwise subscribed for on the Expiry Date, under the stand-by agreement. Fees charged by Bottin in
connection with the stand-by agreement have been recorded as share issuance costs (Note 13).



In 2011, the
remaining 2,658,866 warrants outstanding were exercised before expiry for gross proceeds of $7,242,471 (2010 – 558,124 warrants
for gross proceeds of $1,251,928). The warrants issued August 4, 2009 were exercisable for either $2.00 Canadian or $1.73 US.
As they could be exercised in a foreign currency different than the functional currency of the Company, they met the definition
of a financial liability. They were revalued at fair value at each period using the Black-Scholes option pricing model. The reevaluation
of these warrants generated an accounting gain of $489,481 in the year ended December 31, 2011.



Page | 28







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | iii. | Stock Options and Share-based Payments
                                         Reserve
| | ---- | ---------------------------------------------------------------------------------------



The Company,
through its Board of Directors and shareholders, adopted a stock option 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
awards within the limits identified in the Plan, which includes provisions limiting the issuance of options to insiders and significant
shareholders to maximums identified in the Plan. The aggregate maximum number of shares pursuant to options granted under the
Plan will not exceed 10,050,135 shares, and as at December 31, 2013, there were 8,850,135 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, 2013     |           |   | December 31,
    2012                   |   |      | December 31,
    2011 | 
|---------------------------------------------- |  | ------------------------- | --------- | - | --------------------------------------- | - | ---- | --------------------- | 
|                                               |  | Number
    of
    options |           |   | Weighted
    average
    exercise price |   |      | Number of
    options | 
|Balance at beginning of year                   |  |                           | 794,000   |   |                                         | $ | 2.12 |                       | 
|Granted during the year                        |  |                           | 850,000   |   |                                         |   | 4.89 |                       | 
|Exercised during the year                      |  |                           | (444,000  | ) |                                         |   | 1.26 |                       | 
|Balance at end of the year                     |  |                           | 1,200,000 |   |                                         | $ | 5.04 |                       | 
|Options exercisable at the
    end of the year |  |                           | 1,100,000 |   |                                         |   |      |                       | 



The fair value
of the 850,000 stock options granted during the year ended December 31, 2013 has been estimated on the date of the 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. 200,000 stock options were granted
in the year ended December 31, 2012 and valued using the assumptions below and 150,000 stock options were granted in the year
ended December 31, 2011 and valued using the assumptions below.



|                             |  | Year ended   |                                                            |   | Year ended   |   |                                                     | Year ended   | 
|---------------------------- |  | ------------ | ---------------------------------------------------------- | - | ------------ | - | --------------------------------------------------- | ------------ | 
|                             |  | December 31, |                                                            |   | December 31, |   |                                                     | December 31, | 
|                             |  | 2013         |                                                            |   | 2012         |   |                                                     | 2011         | 
|Exercise price               |  | $            | 4.06
                                         - $5.28      |   |              | $ | 4.84                                                |              | 
|Expected volatility          |  |              | 42.17%
                                         - 44.04%   |   |              |   | 66.29                                               | %            | 
|Expected option life         |  |              | 3.00
                                         - 3.50 years |   |              |   | 3.50
                                         years |              | 
|Expected forfeiture          |  |              | none                                                       |   |              |   | none                                                |              | 
|Expected option cancellation |  |              | none                                                       |   |              |   | none                                                |              | 
|Expected dividend yield      |  |              | 0                                                          | % |              |   | 0                                                   | %            | 
|Risk-free interest rate      |  |              | 1.14%
                                         - 1.77%     |   |              |   | 1.50%                                               |              | 





During the
year ended December 31, 2013, 444,000 stock options were exercised for gross proceeds of $559,440 (December 31, 2011 – 270,635
stock options were exercised for gross proceeds of $665,000; December 31, 2011 – 270,635 stock options were exercised for
gross proceeds of $665,000). The market price of stock options exercised during the year ended December 31, 2013 was $2,261,240
(December 31, 2012 - $1,826,200; December 31, 2011 - $1,543,610).



Page | 29







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



The following
tables reflect the Black-Scholes values (share-based payments reserve amounts), the number of stock options outstanding, the weighted
average of options outstanding, and the exercise price of stock options outstanding at December 31, 2013 and December 31, 2012.



At
December 31, 2013



|                 |  | Black-Scholes |           |  | Number of |  |           | Exercise | 
|---------------- |  | ------------- | --------- |  | --------- |  | --------- | -------- | 
|Expiry Date      |  | Value         |           |  | Options   |  |           | Price    | 
|January 9, 2016  |  |               | 487,085   |  |           |  | 150,000   |          | 
|March 8, 2017    |  |               | 463,500   |  |           |  | 200,000   |          | 
|January 31, 2018 |  |               | 133,700   |  |           |  | 100,000   |          | 
|March 10, 2018   |  |               | 129,300   |  |           |  | 100,000   |          | 
|March 17, 2018   |  |               | 64,250    |  |           |  | 50,000    |          | 
|May 13, 2018     |  |               | 156,700   |  |           |  | 100,000   |          | 
|July 2, 2018     |  |               | 802,500   |  |           |  | 500,000   |          | 
|                 |  | $             | 2,237,035 |  |           |  | 1,200,000 |          | 



At
December 31, 2012







|                  |  | Black-Scholes |           |  | Number of |  |         | Exercise | 
|----------------- |  | ------------- | --------- |  | --------- |  | ------- | -------- | 
|Expiry Date       |  | Value         |           |  | Options   |  |         | Price    | 
|November 23, 2013 |  | $             | 283,272   |  |           |  | 444,000 |          | 
|January 9, 2016   |  |               | 487,085   |  |           |  | 150,000 |          | 
|March 8, 2017     |  |               | 463,500   |  |           |  | 200,000 |          | 
|                  |  | $             | 1,233,857 |  |           |  | 794,000 |          | 





The weighted
average remaining contractual life of the options outstanding at December 31, 2013 is 3.89 years (December 31, 2012 - 2.12 years).



The share-based payments recognized
as an expense for each year are:



|                               |  | Year ended   |           |  | Year ended   |   |         | Year ended   | 
|------------------------------ |  | ------------ | --------- |  | ------------ | - | ------- | ------------ | 
|                               |  | December 31, |           |  | December 31, |   |         | December 31, | 
|                               |  | 2013         |           |  | 2012         |   |         | 2011         | 
|Expense recognized in the year |  |              |           |  |              |   |         |              | 
|for share-based payments       |  | $            | 1,240,821 |  |              | $ | 463,500 |              | 





The share-based
payments expense for the years ended December 31, 2013, 2012 and 2011 is recorded in consulting fees.



Subsequent
to the year-end, as detailed in the table below, stock options were granted by the Board of Directors. The fair value of the stock
options has been estimated on the date of the grant using the Black-Scholes option pricing model, using the assumptions below,
and total $274,600. The expected volatility is calculated by reference to the weekly closing price of the Company’s publicly
traded shares for a period that reflects the expected life of the options.

Page | 30







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



|Date of grant                |  |   | February
                                         14, 2014 |  
|---------------------------- |  | - | ---------------------------------------------------------- | -
|Number of options granted    |  |   | 200,000                                                    |  
|Fair Value per option        |  | $ | 1.373                                                      |  
|Fair Value total for grant   |  | $ | 274,600                                                    |  
|Term of option               |  |   | 5
                                         years           |  
|Vesting                      |  |   | immediate                                                  |  
|Assumptions:                 |  |   |                                                            |  
|Exercise price               |  | $ | 5.29                                                       |  
|Expected volatility          |  |   | 38.19                                                      | %
|Expected option life (years) |  |   | 3                                                          |  
|Expected forfeiture          |  |   | none                                                       |  
|Expected option cancellation |  |   | none                                                       |  
|Expected dividend yield      |  |   | 0                                                          | %
|Risk-free interest rate      |  |   | 1.21                                                       | %



| | i. | Loss Per Share
| | -- | --------------



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



|                                                                         |  | Year ended            |             |   | Year ended        |   |            | Year ended        | 
|------------------------------------------------------------------------ |  | --------------------- | ----------- | - | ----------------- | - | ---------- | ----------------- | 
|                                                                         |  | December
    31, 2013 |             |   | December 31, 2012 |   |            | December 31, 2011 | 
|Numerator                                                                |  |                       |             |   |                   |   |            |                   | 
|Net
    loss for the year                                                |  | $                     | (26,603,938 | ) |                   | $ | (3,337,610 | )                 | 
|                                                                         |  |                       |             |   |                   |   |            |                   | 
|Denominator                                                              |  |                       |             |   |                   |   |            |                   | 
|For basic - weighted average number of shares outstanding                |  |                       | 94,838,537  |   |                   |   | 82,191,626 |                   | 
|Effect
    of dilutive securities                                        |  |                       | -           |   |                   |   | -          |                   | 
|For
    diluted - adjusted weighted average number of shares outstanding |  |                       | 94,838,537  |   |                   |   | 82,191,626 |                   | 
|                                                                         |  |                       |             |   |                   |   |            |                   | 
|Loss Per Share                                                           |  |                       |             |   |                   |   |            |                   | 
|Basic                                                                    |  | $                     | (0.28       | ) |                   | $ | (0.04      | )                 | 
|Diluted                                                                  |  | $                     | (0.28       | ) |                   | $ | (0.04      | )                 | 



For the year
ended December 31, 2013, stock options totaling 1,200,000 (December 31, 2012 – 794,000 stock options; 2011 – 964,000
stock options) are not included in the calculation of diluted earnings per share since to include them would be anti-dilutive.



| | ii. | Shareholder
                                         Rights Plan
| | --- | ----------------------------------------------------------------



On September
7, 2010, the Board of Directors of the Company approved an amended Shareholder Rights Plan (the “Rights Plan”), which
was ratified by the shareholders at the Annual General Meeting on November 18, 2010. The Rights Plan is intended to provide all
shareholders of the Company with adequate time to consider value enhancing alternatives to a take-over bid and to provide adequate
time to properly assess a take-over bid without undue pressure. The Rights Plan is also intended to ensure that the shareholders
of the Company are provided equal treatment under a takeover bid.





Page | 31







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | 11. | 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% (2012 and 2011 – 26.5%):









|                                                              |  | December
    31, 2013 |             |   | December
    31, 2012 |   |            | December
    31, 2011 | 
|------------------------------------------------------------- |  | --------------------- | ----------- | - | --------------------- | - | ---------- | --------------------- | 
|                                                              |  |                       |             |   |                       |   |            |                       | 
|Loss before income taxes                                      |  | $                     | (26,603,938 | ) |                       | $ | (3,337,610 | )                     | 
|                                                              |  |                       | 26.5        | % |                       |   | 26.5       | %                     | 
|Tax recovery calculated using statutory rates                 |  |                       | (7,050,044  | ) |                       |   | (884,467   | )                     | 
|                                                              |  |                       |             |   |                       |   |            |                       | 
|Non-taxable portion of gain on Kennady Diamond asset transfer |  |                       | -           |   |                       |   | (1,420,618 | )                     | 
|                                                              |  |                       |             |   |                       |   |            |                       | 
|(Expenses not deductible) earnings not taxable                |  |                       | 329,796     |   |                       |   | 123,904    |                       | 
|                                                              |  |                       |             |   |                       |   |            |                       | 
|Change in tax benefits not recognized                         |  |                       | 6,720,248   |   |                       |   | 2,181,181  |                       | 
|                                                              |  |                       |             |   |                       |   |            |                       | 
|Income tax expenses (recovery)                                |  |                       | -           |   |                       |   | -          |                       | 





Unrecognized deferred tax
assets

Deductible
temporary differences for which no deferred tax assets have been recognized are attributable to the following:





|                                          |  | December
    31, 2013 |             |  | December
    31, 2012 |  
|----------------------------------------- |  | --------------------- | ----------- |  | --------------------- | -
|Mineral properties                        |  | $                     | 85,636,713  |  |                       | $
|Property and equipment                    |  |                       | 463,248     |  |                       |  
|Decommissioning and restoration liability |  |                       | 5,224,662   |  |                       |  
|Loss carryforwards                        |  |                       | 10,705,056  |  |                       |  
|Share issuance cost                       |  |                       | 1,468,812   |  |                       |  
|                                          |  | $                     | 103,498,491 |  |                       | $





As at December
31, 2013, the Company had the following non-capital losses available for carryforward and certain other tax attributes as follows:





|                                    |  | Amounts |             |  | Expiry
    Date | 
|----------------------------------- |  | ------- | ----------- |  | --------------- | 
|Tax basis of mineral properties     |  | $       | 109,620,000 |  |                 | 
|Tax basis of property and equipment |  | $       | 16,151,000  |  |                 | 
|Loss carryforwards                  |  | $       | 10,705,000  |  |                 | 





| | 12. | OTHER COMMITMENTS
| | --- | -----------------



The total future
minimum lease payments for office space by the Company under non-cancellable operating leases are as follows:

Page | 32







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



|                                  |  | 2014 |         |  | 2015 |   |         | 2016 |  |   | 2017    |  |  | Total |       
|--------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ----- | ------
|Future minimum
    lease payments |  | $    | 142,256 |  |      | $ | 142,256 |      |  | $ | 142,256 |  |  | $     | 11,855



| | 13. | RELATED PARTIES
| | --- | ---------------



The Company’s
related parties include the operator of the Gahcho Kué Project, Bottin, key management and their close family members,
and the Company’s directors. Kennady Diamonds Inc. (“Kennady Diamonds”) is also a related party since the Company
and Kennady Diamonds have common members of key management.



None of the
transactions with related parties incorporate special terms and conditions, and no guarantees were given or received. Related
party transactions are recorded at their exchange amount, being the amount agreed to by the parties. Outstanding balances are
settled in cash.



The Company
had the following transactions and balances with its related parties including key management personnel and the Company’s
directors, Bottin, the operator of the Gahcho Kué Project, and Kennady Diamonds. The transactions with key management personnel
are in the nature of remuneration. The transactions with the operator of the Gahcho Kué Project relate to the funding of
the Company’s interest in the Gahcho Kué Project for the current year’s expenditures and capital additions.
The transactions with Kennady Diamonds are for a monthly management fee charged by the Company and reimbursement of expenses paid
on behalf of Kennady Diamonds.



|                                                  |  |       |        |  | December 31, |   |           | December 31, |  |   | December 31, | 
|------------------------------------------------- |  | ----- | ------ |  | ------------ | - | --------- | ------------ |  | - | ------------ | 
|                                                  |  | Notes |        |  | 2013         |   |           | 2012         |  |   | 2011         | 
|The total of the transactions:                    |  |       |        |  |              |   |           |              |  |   |              | 
|Bottin - Stand-by Fee under Stand-by Agreement    |  |       | 10(ii) |  |              | $ | -         |              |  | $ | 706,261      | 
|Kennady Diamonds                                  |  |       |        |  |              |   | 152,500   |              |  |   | 120,940      | 
|Remuneration                                      |  |       |        |  |              |   | 2,457,759 |              |  |   | 1,477,715    | 
|Payable to the operator of the Gahcho Kué Project |  |       |        |  |              |   | 5,647,892 |              |  |   | 685,290      | 
|Payable to key management personnel               |  |       |        |  |              |   | 357,967   |              |  |   | 30,180       | 





The remuneration
expense of directors and other members of key management personnel for the year ended December 31, 2013, 2012 and 2011 were as
follows:



|                                                                        |  | Year ended  |           |  | Year ended   |   |           | Year ended   | 
|----------------------------------------------------------------------- |  | ----------- | --------- |  | ------------ | - | --------- | ------------ | 
|                                                                        |  | December 31 |           |  | December 31, |   |           | December 31, | 
|                                                                        |  | 2013        |           |  | 2012         |   |           | 2011         | 
|Consulting fees, director fees, bonus and other short-term
    benefits |  | $           | 1,216,938 |  |              | $ | 1,014,215 |              | 
|Share-based payments                                                    |  |             | 1,240,821 |  |              |   | 463,500   |              | 
|                                                                        |  | $           | 2,457,759 |  |              | $ | 1,477,715 |              | 





In accordance
with IAS 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 | 33







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | 14. | EXPLORATION AND EVALUATION
                                         COSTS
| | --- | -------------------------------------------------------------------------



|                                                     |  | December
    31, 2013 |            |  | December 31, 2012 |   |            | December 31, 2011 | 
|---------------------------------------------------- |  | --------------------- | ---------- |  | ----------------- | - | ---------- | ----------------- | 
|Camp support and personnel                           |  | $                     | 1,001,910  |  |                   | $ | 490,166    |                   | 
|Transportation and fuel                              |  |                       | 1,871,771  |  |                   |   | 425,617    |                   | 
|Drilling                                             |  |                       | 990,223    |  |                   |   | 1,915,926  |                   | 
|Permitting                                           |  |                       | 3,469,838  |  |                   |   | 3,862,311  |                   | 
|Safety, health and environmental costs               |  |                       | 44,574     |  |                   |   | 42,818     |                   | 
|De Beers overhead                                    |  |                       | 1,866,632  |  |                   |   | 1,349,607  |                   | 
|Engineering, procurement and construction management |  |                       | 12,483,069 |  |                   |   | 2,191,757  |                   | 
|Other                                                |  |                       | 109,066    |  |                   |   | 373,420    |                   | 
|Total                                                |  | $                     | 21,837,083 |  |                   | $ | 10,651,622 |                   | 



| | 15. | CAPITAL MANAGEMENT
| | --- | ------------------



The Company
considers its capital structure to consist of share capital, share-based payments reserve, and options. 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. 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 Company’s
main property, Gahcho Kué Project, is in the development and permitting stage, and as such the Company is dependent on
external equity financing to fund its activities. In order to carry out the planned management of our properties and pay for administrative
costs, the Company will spend its existing working capital and raise additional amounts as needed.



Management
reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company,
is reasonable.



The Company’s
capital for the reporting periods is summarized as follows:



|                             |  | December 31, |              |   | December 31, |  
|---------------------------- |  | ------------ | ------------ | - | ------------ | -
|                             |  | 2013         |              |   | 2012         |  
|Share capital                |  | $            | 209,820,460  |   |              | $
|Share-based payments reserve |  |              | 2,191,406    |   |              |  
|Deficit                      |  |              | (120,817,633 | ) |              |  
|                             |  | $            | 91,194,233   |   |              | $



There were
no changes in the Company’s approach to capital management during the year ended December 31, 2013. Neither the Company
nor its subsidiaries are subject to externally imposed capital requirements.



| | 16. | SEGMENTED REPORTING
| | --- | -------------------



The Company has determined that
it has only one operating segment.



Page | 34







|MOUNTAIN PROVINCE DIAMONDS
    INC.                     
|--------------------------------------------------------
|Notes to Consolidated Financial Statements              
|As at December 31, 2013 and 2012 and                    
|For the Years Ended December 31, 2013, 2012 and
    2011
|In Canadian
    Dollars                                 



| | 17. | PLAN
                                         OF ARRANGEMENT WITH KENNADY DIAMONDS INC.
| | --- | ---------------------------------------------------------------------------------------



In January
2012, the Company announced that the Board of Directors had approved a proposal to spin-out the Company’s 100%-controlled
Kennady North project into a newly incorporated company, Kennady Diamonds, through a plan of arrangement and subject to regulatory,
court and shareholder approvals.



On March 12,
2012, Kennady Diamonds and Mountain Province entered into an arrangement agreement (the “Arrangement”) pursuant to
which Mountain Province would transfer its interest in the Kennady North Project, including permits, mining claims, rights and
title, in the Northwest Territories in Canada, and $3 million of cash, to Kennady Diamonds in exchange for one common share of
Kennady Diamonds for every five common shares of Mountain Province outstanding. The Arrangement called for the share capital of
Mountain Province to be reorganized into a new class of shares which would be distributed, with the Kennady Diamonds common shares,
to the existing Mountain Province common shareholders.



The Arrangement
was approved by the Board of Directors of Mountain Province and was subject to approval by two-thirds of the votes cast by holders
of Mountain Province common shares, at a special meeting of Mountain Province shareholders held on April 25, 2012. The Mountain
Province shareholders voted 99.57% in favour of the Arrangement. As well, on April 30, 2012, Mountain Province received final
court approval for the Arrangement. Regulatory approval was obtained by the Toronto Stock Exchange and the TSX Venture Exchange.



The various
transactions under the Arrangement were completed on July 6, 2012, the effective date of the Arrangement. The Company transferred
the Kennady North Project and cash of $3 million to Kennady Diamonds in exchange for 16,143,111 shares of Kennady Diamonds which
in turn were distributed to the Mountain Province shareholders on the basis of one Kennady Diamonds’ share for every five
shares of Mountain Province held by the shareholders.



The Company
recorded the fair value of the transaction as a dividend-in-kind of $13.7 million. The fair value was calculated by applying the
simple average of the closing share price for Kennady Diamonds on the TSX Venture Exchange for the first five days of its trading
to the number of shares outstanding. The fair value in excess of the book value of the transferred assets was recorded as a gain
on asset transfer to Kennady Diamonds of $10.7 million in the Company’s Statement of Comprehensive Loss.



| | 18. | SUBSEQUENT
                                         EVENT
| | --- | ---------------------------------------------------------



On March 11,
2014, the Company entered into an agreement with a syndicate of underwriters, under which the underwriters have agreed to buy,
on a bought deal basis by way of private placement, 3,000,000 common shares (the “Common Shares”) of the Company,
at a price of $5.10 per Common Share for gross proceeds of $15,300,000 (“the Offering”).



On March 12,
2014, the Company has increased the size of its Offering to 3,500,000 common shares, at a price of $5.10 per Common Share for
gross proceeds of $17,850,000.



Page | 35