DCP.L Regulatory News (DCP)

17 December 2012

NOT FOR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION

DiamondCorp plc

JSE share code: DMC & AIM share code: DCP

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp", "the Group" or "the Company")

£4.2 million issue of 14% senior secured convertible bonds

The Board of DiamondCorp, the Southern African diamond mine development and exploration company, is delighted to announce that it has conditionally raised £4.2 million through the issue of 14% senior secured convertible bonds.

The issue totals R40 million (approximately £2.8 million) of bonds issued to investors in South Africa (the "SA Bonds") and £1.4 million of bonds issued to investors in the UK (the "UK Bonds"). The net proceeds of the SA Bonds and the UK Bonds (together the "Bonds") plus the US$6 million term loan from Laurelton Diamonds, Inc., a wholly-owned subsidiary of Tiffany & Co. (the "Tiffany Loan"), announced last month, equate to a total of approximately R113 million which finalises the funding required for the 1.2 million tonne per annum 47 Level underground block cave development at the Lace diamond mine in South Africa.

The release of the proceeds of the Bonds from escrow is conditional upon the completion of the Tiffany Loan. Drafting of a binding legal agreement for the Tiffany Loan is progressing well and is expected to be completed before year end.

The proceeds from the Bonds and the Tiffany Loan will allow the Company to meet its initial drawdown condition on the R220 million secured project finance facility signed with the Industrial Development Corporation of South Africa ("IDC") and provide total project funding of R320 million (approximately £22.8 million) for the Lace mine development, including a 33% capital contingency.

The Company's CEO Paul Loudon and Chairman Euan Worthington have each invested £100,000 in the UK Bonds. Loeb Aron & Co. Limited, a company in which DiamondCorp Board Members Paul Loudon and Jonathan Willis-Richards are directors, has invested £60,000 in the UK bonds.

The Bonds are due for repayment at 100% of face value on 31 December 2018 and interest will be paid quarterly in arrears. The first 24 months of interest on the UK Bonds will accumulate and will be added to the principal amount to be repaid. Bondholders can request conversion of the Bonds and outstanding interest at any time after 41 days from issue. Any request for conversion can be settled at the absolute discretion of DiamondCorp with ordinary shares of the Company at 5.81p per share or the cash equivalent of the number of underlying shares multiplied by the share price at the time of conversion. With strong cashflow forecast from mine production due to commence in two year's time, this latter term is intended to minimise dilution for existing shareholders.

The Lace mine funding has been completed without any use of the equity finance facility ("EFF") arranged in October 2012 with Darwin Strategic Limited. Management has no current need to drawdown on the EFF.

Commenting on the Bond issue, DiamondCorp's CEO Paul Loudon said: "We are very pleased to have arranged the funding required for the Lace underground development in a period of extremely challenging capital markets. The Bond issue is the last piece of the funding jigsaw and will allow the company to unlock significant shareholder value from the Lace resource. The loans from IDC and Tiffany & Co. illustrate confidence in Lace, with its above average gem content and potential for fancy lilac stones."

The SA Bonds were arranged by Rand Merchant Bank, which is now working with the Company to list them on the JSE Limited. The UK Bonds were arranged by SP Angel Corporate Finance and will not be listed.

The Lace mine is expected to produce more than 500,000 carats of diamonds per annum at peak production with a potential mine life of 25 years. Using a constant dollar financial model and nominal diamond price of $160/ct, Lace is forecast to generate almost £500 million in after-tax cashflow over the life of the mine. At a 10% discount rate, this after-tax cashflow has a net present value of £106 million, which represents an NPV per share of 29p for DiamondCorp's 74% interest in the mine. DiamondCorp is also due to receive the first £18 million (6.6p per share) plus accumulated interest of free cash from the project in repayment of outstanding shareholder loans.

Paul Loudon said: "I believe the long-term outlook for diamond prices is strong, with future demand forecast to outstrip supply. Lace is one of the few long life diamond resources which will be commencing production in an improving market. On behalf of the shareholders, management will now focus on meeting targets on underground mine development. We also continue to investigate additional diamond development opportunities, as and when they arise, on the condition that they are value accretive to shareholders and meet our strategy of building and operating high-margin diamond mines around our core competency in underground kimberlite mining."

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 212 2308

Euan Worthington, Executive Chairman

Tel: +44 775 3862 097

SP Angel Corporate Finance LLP

AIM Nomad and Broker

Ewan Leggat/Laura Littley

Tel: +44 203 463 2260

Ocean Equities Limited

Guy Wilkes

Tel: +44 207 786 4370

PSG Capital (Pty) Limited

John-Paul Dicks

Tel: +27 21 887 9602

Russell & Associates

Charmane Russell/Marion Brower

Tel: +27 11 880 3924