DCP.L Regulatory News (DCP)

7 November 2016

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")

Corporate AND OPERATIONAL UPDATE

The Board of Directors of DiamondCorp, the Southern African diamond mining, development and exploration company, announces the following statement with respect to corporate activities and financing initiatives as well as mining operations at the Lace diamond mine.

Termination of Formal Sale Process

DiamondCorp announced on 18 October 2016 that it was launching a strategic review in response to initial expressions of interest from potential acquirers, to explore opportunities such as a merger with or offer for the Group or a sale of the Group's businesses, in parallel with its discussions to secure additional funding. As such, the Company commenced a "formal sale process" in accordance with Note 2 on Rule 2.6 of The City Code on Takeovers and Mergers (the "Code"), as the most appropriate framework under which to conduct its strategic review.

The Company has now conducted a review of various strategic options and has entered into discussions with a number of third parties and received certain indicative proposals and/or approaches, including in relation to the acquisition of DiamondCorp and various financing options. In particular, the Company successfully concluded the financing facility with Rasmala plc totalling £700,000 to satisfy the Company's immediate funding requirements, as announced on 20 October 2016.

Such approaches included an early stage non-binding indicative cash proposal at a substantial premium to the share price at the time, which remained subject to, inter alia, amendment and due diligence.

The Board considers that the approaches it has received from third parties are opportunistic in nature and significantly undervalues the Company as well as unable to be completed in a sufficient period of time in light of the Company's financing objectives. The Board notes that the Lace asset, irrespective of start up delays, still contains an estimated 9.39 million carats of diamonds with an in-ground value in excess of $1.5 billion based on the $164/ct base case and grade and tonnage estimates contained in the independent resource statement announced in March 2016. The Board further notes that the various interested parties with underground mining experience who have reviewed the Company's technical data and visited the Lace mine all recognised the Company's technical strength evident from the Lace mine underground mine development and surface recovery plant.

As a result, the Board has decided to terminate the "formal sale process" with immediate effect. The Board will continue to examine alternative means of enhancing shareholder value in the normal course of business.

As a result of the termination of the formal sale process, the Company is no longer in an offer period under the Code and, accordingly, the requirement to make disclosures under Rule 8 of the Code has now ceased.

In accordance with Rule 26.1 of the Code, a copy of this announcement will be published, subject to certain restrictions relating to persons in any restricted jurisdiction, at www.diamondcorp.plc.uk.

Operational update

The Board and management are pleased to report that despite the four day Section 54 shutdown, announced on 13 October, mining activities in October operated close to plan. Pleasingly, ground conditions on the 310m level are improving as trough blasting moves away from old workings. Diamond recoveries were also close to plan and the next diamond sale in excess of 5000 carats is expected to be completed at the end of November.

With the continuing ramp up in production tonnage, the Board and management anticipate the Lace mine to reach commercial production in the early part of 2017.

Board changes and major shareholder support

Concurrent with obtaining the financing facility ("Facility") with the Company's major shareholder, Rasmala plc ("Rasmala") (announced on 20 October), a number of board changes were instituted aimed at strengthening corporate governance and providing the Company's executive management team with additional support and financial management experience required to successfully implement its mine development plan. This included the appointment of Interim Non-Executive Chairman Chris Ellis and Rasmala's finance director, Neil McDougall as Non-Executive Director. Over the coming period the Board will consider the additional appointment of an independent non-executive director with specific financial and operational mining experience.

Financing

On 28 October, the Board posted a circular to shareholders convening a General Meeting of the Company to take place on 16 November 2016, with the purpose of granting the Directors of the Company the necessary authority to issue such new shares to Rasmala should they opt, pursuant to the terms of the Facility, to convert the outstanding principal amounts under the Facility, as well as increase the general authorities to issue further equity securities in addition to those required for the purposes of the Facility.

As previously announced, these authorities are necessary to assist the Company in raising sufficient additional capital in the near term to cover the anticipated cash required to fund operations through to commercial production. The Company has engaged PWC to assist with the review and development of the Company's financial projections in this regard.

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 216 1300

Chris Ellis, Interim Non-Executive Chairman

Tel: +44 (0) 20 3151 0970

UK Broker & Nomad

Panmure Gordon (UK) Limited

Adam James/ Atholl Tweedie

Tel: +44 20 7886 2500

JSE Designated Advisor

Sasfin Capital (a division of Sasfin Bank Limited)Megan Young

Tel: +27 11 445 8068

SA Corporate Advisor

Qinisele Resources Proprietary Limited

Dennis Tucker/Andrew Brady

Tel: +27 11 883 6358

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR").