Stellar Diamonds Regulatory News (STEL)

NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION TO US NEWS WIRE SERVICES.

24 February 2017

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

 Amendments to Convertible Loan Notes

Stellar Diamonds plc, the London listed diamond development company focused on West Africa, announces that it has successfully renegotiated certain terms of its two outstanding Convertible Loan Notes and their related warrants as referred to in the announcement dated 20 February 2017.

Chief Executive Karl Smithson commented:

"We are delighted that the Convertible Loan Noteholders have shown their continued support for the Company by agreeing to amend the terms of the loans. The amendments enable the Company to work towards finalisation of the Tribute Mining Agreement with Octea Mining for the combined mine development of the initial 4.5 million carat high grade and high value kimberlite diamond resource of the Tongo-Tonguma project in Sierra Leone. As recently announced, the Tribute Mining Agreement should result in improved economics for Stellar compared to the previously envisaged transaction. Subject to the Tribute Mining Agreement being entered into, Stellar has estimated its post-tax NPV(8) arising from the Tongo-Tonguma mine could be approximately US$104 million and IRR of 31%, based on gross revenues of US$1,518 million. These modeled economics exclude the significant potential to extend the initial life of mine and production levels by bringing into resource additional high grade kimberlites that have been drilled and tested on both the Tongo and Tonguma licences.

"I would like to thank the Noteholders for their continued support and look forward to updating shareholders on the progress of Tribute Mining Agreement and related project funding in due course."

First Convertible Loan Note and related warrants

In November 2015 the Company entered into a $1.65 million Convertible Loan Note ("the first CLN) with Deutsche Balaton. The terms of this loan were set out in the announcement dated 2 November 2015. Subsequently in October 2016 the terms of the first CLN and related warrants were amended primarily to remove the ability of the noteholder to convert the first CLN and exercise the related warrants at a subsidiary company level as this could potentially provide a barrier to successfully completing the then contemplated Tonguma transaction ("Acquisition"). The details of these amendments were announced on 6 October 2016 (the "CLN Announcement"), with the majority of amendments being conditional on completion of the Acquisition. Further to the announcement dated 20 February 2017 in which the Company announced the termination of discussions over the acquisition of Tonguma and signing of a Heads of Terms with Octea over a Tribute Mining Agreement, Stellar has concluded negotiations with the noteholder, Deutsche Balaton, to further amend the terms of the first CLN and related warrants to take into account the proposed Tribute Mining Agreement and anticipated timing of its completion. To that end the Company and Deutsche Balaton have agreed the following amendments to the first CLN and related warrants as previously amended:

i. the definition of "Transaction", (as previously defined in the CLN Announcement as "Potential Transaction"), be amended to take into account the Tribute Mining Agreement and the definition of "Completion" to be the date on which Stellar has raised a minimum initial funding of US$10 million having entered into the Tribute Mining Agreement

ii. A change in the definition of Issue Price, as previously defined in the CLN Announcement, to be the weighted average price of the first US$10 million raised from 1 February 2017 onwards

iii. Extension of the Long Stop date by which the Transaction must be completed to 30 April 2017

iv. Extension of the maturity date of the warrants attached to the first CLN to 30 June 2019

For the avoidance of doubt, other than as set out in this announcement, other terms, set out in the CLN Announcement, remain inforce.

Second Convertible Loan Note and related warrants

In October 2016 the Company entered into a $1.24 million Convertible Loan Note ("the second CLN) with Deutsche Balaton, Creditforce Limited and Steven Poulton a non-Executive Director of the Company ("the Noteholders"). The terms of this loan were set out in the CLN Announcement. Further to the announcement dated 20 February 2017 in which the Company announced the termination of discussions over the acquisition of Tonguma and signing of Heads of Terms with Octea over a Tribute Mining Agreement, Stellar has concluded negotiations with the Noteholders to amend the terms of the second CLN and related warrants to take into account the new Tribute Mining Agreement and anticipated timing of its completion. To that end the Company and the noteholders have agreed the following amendments to the second CLN and related warrants:

i. the definition of "Transaction", (as previously defined in the CLN Announcement), be amended to take into account the Tribute Mining Agreement and the definition of "Completion" of the Transaction to be the date on which Stellar has raised a minimum initial funding of US$10 million having entered into the Tribute Mining Agreement

ii. the Subscription Price (as previously defined in the CLN Announcement) be amended to 70% of the weighted average price of the first US$10 million raised between 1 February 2017 and 30 May 2017

iii. extension of the Long Stop date by which the Potential Transaction must be completed to 30 May 2017, after which the Subscription Price becomes the Alternative Subscription Price (as described in the CLN Announcement)

iv. the Warrants to be issued to the Noteholders, conditional on the Company obtaining shareholder authorities, will be exercisable for 24 months commencing from the later of the date of the fundraise undertaken by the Company with which no less than US$10 million is raised in total, and the date of obtaining the required corporate authorisation pursuant to the Company's Articles and Association and applicable law to issue shares in relation to the exercise of the warrant.

v. The exercise price of the Warrants be 6 pence for the first 12 months, thereafter rising to 7 pence for the next twelve months ("Exercise Price").

vi. The exercise price of the Warrants in the event that the Potential Transaction is not completed, be amended to the lower of 6.0 pence or the 3 day or 45 day VWAP prior to the notice of exercise ("Default Exercise Price").

By virtue of Deutsche Balaton being a substantial shareholder of the Company and Steven Poulton being a non-executive Director of the Company, the amendments above constitute related party transactions under the AIM Rules for Companies. The Directors who are independent of the convertible loan notes and associated warrants consider, having consulted with the Company's Nominated Adviser, that the amended terms of the loan notes and warrants are fair and reasonable in so far as the Company's shareholders are concerned.

 ** ENDS **

For further information contact the following or visit the Company's website at www.stellar-diamonds.com.

About Stellar Diamonds plc

Stellar is an AIM listed (AIM: STEL) West African focused diamond company with projects at the trial mining and mine development stages in Guinea and Sierra Leone.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

A number of factors could cause actual results to differ materially from the results discussed in the forward looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.