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Firestone Diamonds plc

 Placing to raise £14.7 million, Capital Reorganisation and Directorate Changes

LONDON: 15 March 2012

Firestone Diamonds plc, ("Firestone" or the "Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM: FDI), is pleased to announce a financing through Mirabaud Securities LLP to raise £14.7 million before expenses as part of the restructuring of the Company and further development of the Company's Liqhobong Mine, Lesotho.

The Company has provisionally placed 172,900,000 new ordinary shares of 1 pence each in the Company (the "Placing Shares") with institutional and other investors at a price of 8.5 pence per Placing Share raising £14,696,500 before expenses (the "Placing").

The proceeds of the Placing will be used in the ongoing development of the Company's Liqhobong asset in Lesotho, repayment of debt, ongoing costs of BK11 in Botswana and for general working capital purposes.

Capital Reorganisation

As the Company's shares are trading at a price below their par value, the Directors are unable to allot the Placing Shares under the Companies Act 2006. Consequently, the Directors have proposed a reduction in the par value of the Company's issued ordinary shares from 20p per share to 1p per share by way of a sub-division and re-classification of its existing issued share capital (the "Capital Reorganisation").

Share Option Schemes

The Company's current share option schemes have now terminated and there are 13,330,000 options to acquire ordinary shares outstanding.

The Board wishes to incentivise employees, executive Directors and key individuals by granting them options over ordinary shares. The Company proposes adopting two new share option schemes - one for employees and executive Directors and the other for non-executive Directors and consultants (the "Share Option Schemes"). The key terms relating to the Share Option Schemes are set out in a circular to shareholders to be posted today.

The Placing, the Capital Reorganisation and the adoption of the Share Option Schemes are conditional upon the approval of Firestone's shareholders at a general meeting.

Director Changes

The Company wishes to announce the resignation of Mr Michael Hampton and William Douglas Baxter from the Board of Directors with immediate effect.

Notice of General Meeting

A circular giving details of the proposals and incorporating a notice convening the General Meeting will be posted to shareholders today. The General Meeting will be held at the offices of Lawrence Graham LLP, 4 More London, Riverside, London SE1 2AU at 11 a.m. on 2 April 2012.

Extracts from the circular appear below and should be read in conjunction with the full text of the circular which is available to view on the Company's website at www.firestonediamonds.com with effect from close of business today. References to 'this document' shall be taken to mean the circular. Capitalised terms will have the same meaning as defined in the circular.

Tim Wilkes, CEO of Firestone Diamonds, commented: "Today's proposed financing concludes a strategic review of Firestone's operations. We are very pleased with the support from new and existing institutional shareholders in the Placing which was oversubscribed and demonstrates the strong support for the Company's flagship Liqhobong project in Lesotho. Following the review and financing, Firestone is well positioned to continue the plant modifications at Liqhobong and complete the Definitive Feasibility Study in June 2012, a precursor to development of the Main Treatment Plant which should enable Firestone to become a 1 million carat per annum producer by 2015. The Company wishes to thank Mr Hampton and Mr Douglas Baxter for their support and commitment to the Company over the years and wishes them well in their future endeavours."

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 currently operates the Liqhobong Mine in Lesotho and 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.

Extracts from the Circular

Background and reasons for the Placing

The Company conducted a strategic review of its operations during January and February 2012 in order to address concerns relating to its operational performance. The review identified the future development of the Liqhobong main treatment plant as the Company's primary value driver. A definitive feasibility study ("DFS") of the main treatment plant will be completed by mid-2012 to be followed by detailed front end engineering and financing during the latter half of calendar year 2012. A summary of the schedule for the proposed future development is set out below. This renewed focus is expected to transform the Company from an early stage development and exploration business to a circa 1 million carat per annum producer by 2015.

Development Schedule

The cost of completing the DFS study is approximately £1.6 million. The main treatment plant is being designed by DRA's dedicated diamond plant design team who have extensive experience of building diamond plants in Lesotho and elsewhere in Africa. A further £1.9 million is required to increase the height of the tailings dam wall in order to allow for continued production from the pilot plant for the remainder of the calendar year 2012.

The pilot plant at Liqhobong is an interim measure that has to date contributed significantly to ore body knowledge and will continue to contribute operational revenue over the medium term. The focus of the pilot plant is to generate positive operational cash flow through improved diamond value management. To this end, approximately £1.2 million will be invested in the pilot plant to increase capacity from 80 tph to approximately 120 tph, reduce bottle-necks and plant inefficiencies and to reduce diamond breakage especially of larger diamonds. These improvements are expected to reduce operating costs per ton and increase the average $/carat revenue achieved. The pilot plant will be discontinued once the main treatment plant reaches its target capacity.

On 28 February 2012 the Board of Directors announced that BK11 was placed on temporary care and maintenance. Though the Company remains fully committed to its projects in Botswana, the temporary suspension of operations was to avoid further negative cash flows as a result of technical challenges experienced at the mine exacerbated by lower diamond prices. During the calendar year 2012, the Company will also repay a substantial portion of its £3.8 million total interest bearing loans and borrowings. These payments together with costs relating to the recent corporate restructuring are estimated to total £4.6 million.

The Company also announced that it is in the process of reviewing its strategic options in relation to its exploration portfolio in Botswana with a view to unlock value from these assets. Further guidance on this matter will be announced in due course.

Finally, various Board changes were introduced during the past three months to ensure that the Company has the necessary skills to execute its new strategy. Further additions to the Board and management team are imminent as the Company continues its transformation process.

The Board of Directors have concluded that a capital raising of £14,696,500 would be required to implement the above strategic objectives and to provide the Company with sufficient working capital.

Use of Proceeds

The proposed Placing is conditional upon, inter alia, the passing of Resolutions 1, 4 and 5 by the Company's Shareholders. The proceeds of the Placing will be used as follows:

Details of the Placing

The Company has conditionally raised £14,696,500, before expenses, by way of a conditional placing of 172,900,000 New Ordinary Shares at the Placing Price byMirabaud as agents for the Company. The Placing Shares will represent 31.69 per cent. of the enlarged issued share capital of the Company at Admission. The Placing Shares will, when issued, rank pari passu in all respects with the other New Ordinary Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following their Admission. The Placing Shares have been conditionally placed by Mirabaud as agent of the Company with institutional and other investors in the UK.

Pursuant to the Placing Agreement, the Placing of the Placing Shares is conditional upon, inter alia, (i) the passing of resolutions at the General Meeting, to authorise and facilitate the Capital Reorganisation and to give the Directors the authorities to allot New Ordinary Shares and disapply statutory pre-emption rights for the Placing and (ii) Admission occurring on 3 April 2012 (or such later date as the Company and Mirabaud may agree, not being later than 10 April 2012).

The Placing Agreement contains warranties from the Company in favour of Mirabaud in relation inter alia, to the Company and its business. In addition, the Company has agreed to indemnify Mirabaud in relation to certain liabilities that they may incur in undertaking the Placing. Mirabaud have the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event that there has been inter alia a material breach of any of the warranties or for force majeure.

Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that trading in the Placing Shares will commence on 3 April 2012.

The Placing is conditional upon the passing of certain Resolutions at the forthcoming General Meeting. If Resolutions 1, 4 and 5 are not passed at the General Meeting, the Company will be unable to complete the Placing, which could have a material impact on the Company's working capital position and the potential value of its shares.

Director Dealings

Should Resolutions 1, 4 and 5 be approved at the General Meeting:

Braam Jonker, who has agreed to subscribe for 2,255,215 New Ordinary Shares pursuant to the Placing, will be interested in 2,255,215 New Ordinary Shares in the Company representing an interest of 0.41 per cent. of the total voting rights of the Company.

Lucio Genovese, who has agreed to subscribe for 3,758,692 New Ordinary Shares pursuant to the Placing, will be interested in 5,721,095 New Ordinary Shares in the Company representing an interest of 1.05 per cent. of the total voting rights of the Company.

Tim Wilkes, who has agreed to subscribe for 350,000 New Ordinary Shares pursuant to the Placing, will be interested in 1,028,000 New Ordinary Shares in the Company representing an interest of 0.19 per cent. of the total voting rights of the Company. In addition, Tim Wilkes is interested in 1,650,000 options over New Ordinary Shares in the Company as follows:

Options Held Option Exercise Price Expiry Date

650,000 £0.20 29/05/2015

1,000,000 N/A (Long term 25/10/2016 incentive shares)

Share Option Schemes

The Company's current share option schemes, which were approved by the Company in August 1998 and on 11 July 2001 respectively (the ''Old Schemes''), have now terminated. There are 13,330,000 options to acquire ordinary shares in the capital of the Company outstanding under the Old Schemes.

The Board wishes to incentivise employees, executive directors and Key Individuals by granting them options over New Ordinary Shares. The Company proposes adopting, subject to Shareholder consent, two new share option schemes, one for employees and executive Directors (the Company's ''Unapproved Executive Share Option Scheme'') and the other for non-executive Directors and consultants (the Company's ''Unapproved Share Option Scheme''). The key terms relating to the Share Option Schemes are set out in the Appendix to this document.

To the extent necessary to grant options under the Share Option Schemes, the Directors are also seeking authority, pursuant to the Act, to grant options up to a nominal amount of £150,000 and also corresponding disapplication of pre-emption rights under the Act up to a nominal amount of £150,000. The Company envisages that the number of New Ordinary Shares which may be issued under both of the Share Option Schemes shall not in aggregate exceed 10 per cent. of the Company's issued share capital at all times.

Capital Reorganisation

As a result of the current share price of the Existing Ordinary Shares, the Company is unable to issue any further ordinary shares (including the Placing Shares) due to provisions of the Act which prevents a company from issuing shares at less than their nominal value which, in the case of the Existing Ordinary Shares, is 20 pence. Accordingly, in order to complete the Placing, the Company proposes to implement the Capital Reorganisation. Save for the dilution which will result from the issue of the Placing Shares the interests of existing Shareholders (both in terms of their economic interest and voting rights) will not be diluted by the implementation of the Capital Reorganisation.

At present, there are 372,613,111 Existing Ordinary Shares in issue. In order to implement the Capital Reorganisation a resolution will be proposed at the General Meeting, to take effect from 6:00 p.m. on 2 April 2012 (or such other date as the board of directors of the Company may determine), whereby each Existing Ordinary Share will be divided into:

(i) 1 New Ordinary Share of 1p; and

(ii) 19 Deferred Shares of 1p.

The New Ordinary Shares will have the same rights and benefits as the Existing Ordinary Shares. The number of New Ordinary Shares in issue following the Capital Reorganisation will be unchanged from the number of Existing Ordinary Shares in issue immediately prior to the Capital Reorganisation.

The Deferred Shares, which will not be listed, will be effectively valueless, non-transferable and have no effect on the economic interest of the Shareholders. No share certificates will be issued for the Deferred Shares. Instead it is intended that, in due course, all the Deferred Shares will be repurchased by the Company for an aggregate consideration of £1 and cancelled.

Application will be made for the New Ordinary Shares to be admitted to trading on AIM. Dealings in the Existing Ordinary Shares will cease at the close of business on the date of the General Meeting and dealings in the New Ordinary Shares are expected to commence on the following day (3 April 2012). The ISIN and SEDOL number of the New Ordinary Shares will be the same as the Existing Ordinary Shares and any share certificates for the Existing Ordinary Shares will remain valid for the New Ordinary Shares. 

Following the Capital Reorganisation, the Company will have in issue, and Shareholders' individual holdings will be for, the same number of New Ordinary Shares as the number of Existing Ordinary Shares immediately prior to the General Meeting. 

Following the Capital Reorganisation, the New Ordinary Shares of the Company will have a nominal value of 1 pence and the Company will therefore be in a position to issue the Placing Shares without breaching the provisions of the Act.

Director's general authorities to issue securities and disapply pre-emption rights

The Directors are seeking additional authority to allot up to 180,019,300 New Ordinary Shares (representing approximately 33 per cent. of the enlarged issued share capital of the Company post the Placing) together with an authority to disapply pre-emption rights in respect of an allotment of up to 27,275,700 New Ordinary Shares (representing approximately 5 per cent. of the enlarged issued share capital of the Company post the Placing) subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems relating to such an allotment.

General Meeting

Set out at the end of this document is a notice convening a General Meeting to be held at 11.00 a.m. on 2 April 2012 at the offices of Lawrence Graham LLP, 4 More London Riverside, London SE1 2AU. The resolutions which will be put to the General Meeting are:

(i) to authorise and facilitate the Capital Reorganisation;

(ii) to approve the rules of the Unapproved Share Option Scheme;

(iii) to approve the rules of the Unapproved Executive Share Option Scheme;

(iv) to give the Directors the authorities to allot New Ordinary Shares and disapply statutory pre-emption rights for the Placing and in relation to the grant of options pursuant to the Unapproved Share Option Scheme; and

(v) to give the Directors general authorities to allot New Ordinary Shares and disapply statutory pre-emption rights.

Whether or not you intend to attend the General Meeting, Shareholders are requested to complete and return the enclosed Form of Proxy in accordance with the instructions printed thereon as soon as possible and in any event so as to be received by Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 48 hours before the General Meeting. The completion and return of a Form of Proxy will not prevent a Shareholder from attending the General Meeting and voting in person if he/she wishes to do so.

Recommendation and voting intentions

The Board considers that the proposals described in this letter are in the best interests of the Company and of Shareholders as a whole. Accordingly, the Board recommends that Shareholders should vote in favour of the Resolutions to be proposed at the General Meeting. The Directors intend to vote in favour of the Resolutions in respect of, in aggregate, 2,640,403 Existing Ordinary Shares (representing 0.7 per cent. of the Existing Ordinary Shares).

In accordance with the Act, Resolutions 1 and 5 require the approval of (i) on a show of hands, not less than 75 per cent. of members present and voting or (ii) on a poll, members holding not less than 75 per cent. of the total voting rights. A failure to obtain the requisite support of Shareholders at the General Meeting would prevent the Company from proceeding with the Placing. Accordingly, the Board strongly urges all Shareholders to return their Form of Proxy and/or attend the General Meeting.

The Placing is conditional upon the passing of certain Resolutions at the forthcoming General Meeting. If Resolutions 1, 4 and 5 are not passed at the General Meeting, the Company will be unable to complete the Placing, which could have a material impact on the Company's working capital position and the potential value of its shares.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

SUBSCRIPTION AND PLACING STATISTICS