FDI.L Regulatory News (FDI)

Firestone Diamonds plc

Operations update

LONDON: 30 March, 2011

Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), is pleased to provide an update on the Company's mining operations in Lesotho and Botswana.

HIGHLIGHTS

Liqhobong Mine, Lesotho

BK11 Mine, Botswana

Diamond Sales

Financing

Tim Wilkes, CEO of Firestone Diamonds, commented: "We are pleased with the continued progress that we have made at Liqhobong, which we believe has the potential to be a highly profitable mining operation. The recovery of three large diamonds is particularly encouraging at this early stage given we have yet to commence mining at the high grade K5 and K6 units. While diamond recovery at the BK11 plant has been below target, we expect this to be resolved shortly and remain confident of meeting our 2011 production targets. We believe that Firestone is now very well positioned to become a significant diamond producer in 2011 and to reach its target of producing 1 million carats per annum by 2014."

Liqhobong Mine, Lesotho

Very good progress has been made at Firestone's 75% owned Liqhobong Mine in Lesotho, which the Company considers to be one of the most attractive undeveloped kimberlites in the world. Production commenced ahead of schedule in February 2011 and grades from initial production have been in line with expectations. Plans to triple the capacity of Plant 1 by the end of 2011 are on schedule, and the Company now plans to accelerate the development decision for the 4.2 million tonnes per annum ("tpa") Plant 2 to the end of 2011.

Mining

The current Liqhobong mine plan provides for the mining of approximately 60 million tonnes of kimberlite from the Main Pipe over a period of approximately 17 years and the production of an estimated 19 million carats. Mining operations for the first two years will be primarily focused on the K5 and K6 kimberlite units, which are the highest grade units in the Main Pipe and are considered, based on recoveries from previous mining operations, to have the highest potential to yield large, high value diamonds.

Following the appointment of a mining contractor in January 2011, earthmoving equipment arrived on site at the beginning of February 2011. Mining operations commenced in mid February. The K2 and K4 units are currently being mined while the K5 and K6 units are being dewatered. Material from K5 and K6 is expected to be available for treatment in Q2 2011.

Production

Wet commissioning of Plant 1, which had been on care and maintenance since Q4 2008, was completed in January 2011, and production commenced in mid February. During the first six weeks of operation the plant has successfully achieved its name plate capacity of 0.4 million tpa. A number of problems have been identified during this period with blockages occurring in the recovery section and at the thickener. These problems are currently being addressed and are expected to be resolved in Q2 2011.

Plans to expand the capacity of Plant 1 to 0.65 million tpa are at an advanced stage, and the expansion is expected to be completed on schedule in Q2 2011. The further capacity expansion to 1.3 million tpa is on schedule for Q4 2011, at which point Plant 1 is expected to generate revenue of $43 million per annum, based on the average price achieved in December 2010 for Liqhobong diamonds of $98/carat.

Processing of material from K2 and K4 has resulted in recovered grades of 28 carats per hundred tonnes ("cpht") and 30 cpht, respectively, which compares well with the resource grades of 24 cpht and 31 cpht for these units. A high quality 15 carat white gem stone, which is a fragment of a larger stone, and two yellow gem stones, of 45 carats and 14 carats, respectively, have been recovered in the first six weeks of operation, which is very encouraging.

Mine infrastructure

Approximately 200,000 tonnes of kimberlite is being mined from the Satellite Pipe in order to provide sufficient water storage to supply Plant 1 during the drier months in Lesotho. The Satellite Pipe material is being stockpiled and will be used as necessary for blending with material from the Main Pipe. Mining of the Satellite Pit is expected to be completed in 2-3 months, following which the earth moving equipment will commence construction of a new intermediate tailings dam. The intermediate tailings dam will provide sufficient tailings capacity for the operation of Plant 1 until it is replaced by the planned 4.2 mtpa Plant 2, for which a larger capacity tailings dam is planned.

Significant work has been undertaken on the access road to Liqhobong. The road is now greatly improved, and can facilitate access for the large trucks that will be required to transport equipment for the Plant 1 expansion to site.

Grid power supply

The government of Lesotho has awarded the contract to extend the grid power supply from Ha Lejone to the Kao and Liqhobong kimberlites. Detailed surveys for the cable towers have been completed and long lead items have been ordered. Current plans indicate that grid power will be available at Liqhobong in Q1 2012, which will result in both lower costs and improved availability for the Liqhobong production plant.

Plant 2 Development

Work is continuing on the specifications and design for Plant 2 and these are expected to be finalised later in 2011 using data from the operation of Plant 1. With grid power now expected to be available at Liqhobong area sooner than expected, the Company is considering accelerating the completion of the feasibility study for Plant 2 in order to allow a development decision to be made by the end of 2011. Plant 2 is expected to commence operation in 2013, and to generate revenue of $140 million per annum at full production.

BK11 Mine

Mining operations at the Company's 90% owned BK11 Mine in Botswana have progressed well, although problems were encountered with operation of the production plant during Q1 2011. Despite these problems, the Company is confident that 2011 production targets will still be achieved.

Mining

Under the current BK11 mine plan approximately 11.5 million tonnes of kimberlite is expected to be mined at an average grade of 8.5 cpht, giving total production of approximately 1 million carats over a 10 year mine life at an average value of $155/carat. In the KW area, where the current mining pit is located, an average diamond value of $175/carat is expected.

Pre-stripping of overburden and near-surface low grade kimberlite was completed in Q4 2010, which resulted in the first kimberlite targeted for mining becoming available for treatment. Mining has progressed well and the pit has now been deepened to a depth of approximately 30 metres. The mine now has an earth moving capacity of approximately 30,000 tonnes per day, which will allow stripping to keep pace with the mine plan.

Production

Both Phase 1 and Phase 2 of the production plant were operational in Q1 2011. While throughput reached 90% of the target capacity of 1.5 million tpa during the quarter, a number of problems have been encountered with the crushing and scrubbing circuits at the plant, the principal problem being insufficient diamond liberation.

Phases 1 and 2 of the production plant were designed to maximize throughput and diamond liberation from the relatively soft kimberlite sediments that comprise the BK11 resource by utilising primary crushing and aggressive scrubbing. A minimum diamond liberation of 80% was expected, but samples of oversize material from the production plant that have been tested through the pilot plant indicate that liberation has been consistently lower, in the region of 20-30%. This is principally due to the near-surface K1 kimberlite that has been mined to date being much harder than anticipated, and is reflected in a recovered grade of 2.5 cpht during Q1 2011. A sample of run of mine K1 kimberlite has been processed through the pilot plant and produced a grade of 6.5 cpht. This is in line with the resource grade for K1, and confirms the diamond liberation problem.

Plans to improve diamond liberation are now advanced. Construction of Phase 3 of the production plant, which comprises a recrush circuit, has been accelerated and is expected to be operational by the end of Q2 2011. In the meantime, a series of mobile crushing units are being secured and are expected to commence processing the oversize stockpile, which is estimated at 100,000 tonnes, by the end of April 2011.

The quality of the diamonds produced is consistent with previous production. Under the current mine plan, an average head feed grade of 9-10 cpht is expected to be achieved in 2011, and the Company is confident that its 2011 production targets will still be achieved.

Mine infrastructure

Upgrading of the access road that connects BK11 to the tarred road near Letlhakane is almost complete. This work is being undertaken in cooperation with Lucara Diamonds, which is developing a new mining operation at the AK6 kimberlite, which is located 5 kilometres from BK11.

Grid power supply

The Botswana Power Corporation is at an advanced stage with work on the new power line that will connect BK11 to the national grid. It is expected that grid power will be available at BK11 in Q3 2011, which will result in both lower costs and improved availability for the BK11 production plant.

Diamond Sales

A tender will be held at the Company's diamond sales office at the Diamond Technology Park in Gaborone, Botswana from 4th to 14th April. Approximately 5,000 carats from Liqhobong and 2,200 carats from BK11 will be available for sale.

Financing

The Company has agreed terms with Standard Chartered Bank of Botswana for a $6 million, 3 year, 6.5% fixed rate credit facility. This facility will give the Company greater flexibility in planning and financing its activities in Botswana and in Lesotho. Documentation for the facility is currently being finalised, and it is expected to be available for draw down in April 2011. Discussions with a number of banks in respect of a debt facility to finance the construction of Plant 2 at Liqhobong have commenced.

For further information, visit the Company's web site at www.firestonediamonds.com or contact:

Background information on Firestone Diamonds:

Firestone Diamonds plc is an international diamond mining and exploration company with operations focused on Lesotho and Botswana. Firestone operates the Liqhobong Mine in Lesotho and the BK11 Mine in Botswana. Firestone is also the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling approximately 10,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. In addition to Liqhobong and BK11, Firestone has 108 kimberlites in its portfolio, of which 30 have been proven to be diamondiferous.

Lesotho is emerging as one of Africa's significant new diamond producers, and hosts Gem Diamonds' Letseng Mine, Firestone's Liqhobong Mine as well as the Kao and Mothae development projects. Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over $2.5 billion, and is considered to be one of the most prospective countries in the world to explore for diamonds.