Stellar Diamonds Regulatory News (STEL)

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14 September 2017

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

Completion of Placing

Open Offer to raise up to £200,000

Further to the announcement dated 11 September 2017 Stellar Diamonds plc, the London listed diamond development company focused on West Africa, announces the completion of the Placing to raise gross proceeds of £330,000 through the issue of 10,153,847 new Ordinary Shares of the Company at an issue price of 3.25 pence per share and issue of the 1,978,437 new Ordinary Shares to Directors and senior management in lieu of accrued fees, salary, expenses and benefits. The Company also today provides further details of the Open Offer to raise up to an additional £200,000 through the issue of up to 6,153,846 Open Offer Shares.

A circular (the "Circular") setting out full details of the proposed Open Offer will be sent to Shareholders tomorrow (other than to those who have elected to receive Shareholder communications via electronic communication) and will be available on the Company's website www.stellar-diamonds.com. Further information is also set out below.

Total voting rights

Following the issue of the Placing Shares and Fee Shares today, the Company's current issued share capital comprises 54,853,902 Ordinary Shares of 1 pence each. This figure may be used by Shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules. This figure excludes any new Ordinary Shares which may be issued pursuant to the Open Offer.

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) diamond development company focused on the 4.5 million carat high-grade and high value Tongo-Tonguma kimberlite diamond project in the world famous diamond fields of eastern Sierra Leone. An independently generated mine plan, based on over 66,000m of drilling that has been completed to date, envisages the production of over 4 million carats, generating gross revenues of more than US$1.2 billion, over a 21 year life of mine. Initial production at Tongo-Tonguma is scheduled to occur in the first year of development, building up to over 200,000 carats per annum, with a weighted average modelled diamond value of $229 per carat. The Tongo-Tonguma mine is estimated to give Stellar an attributable a Post-tax NPV(8) of US$109 million and IRR of 30%.

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

FURTHER DETAILS OF THE OPEN OFFER

Expected Timetable of Principal Events

Each of the times and dates set out below and mentioned elsewhere in this announcement may be adjusted by the Company, in which event details of the new times and dates will be notified to a Regulatory Information Service. References to a time of day are to London time.

Introduction to the Open Offer

The Company announced on 11 September 2017 that it raised £330,000 through a placing of new Ordinary Shares at 3.25 pence per share to provide ongoing funding whilst the Company progresses its project equity and debt financing to bring the high grade and high value 4.5 million carat Tongo-Tonguma mine project into production. The Company entered into a binding conditional tribute mining agreement and revenue share agreement (together the "Agreements") with Octea Mining Ltd in relation to Octea's kimberlite diamond Tonguma Project as announced on 28 April 2017 and since this date has been progressing project financing in order that the financing conditions of the Agreements can be satisfied. In particular, the Company is required to raise sufficient funds to finance the Front End Engineering Design (FEED) stage of the Mine Plan in order to complete the Agreements. Further details of the Tonguma and Tongo projects and the Agreements are set out in paragraphs 2 to 4 of the circular.

To provide Shareholders who have not taken part in the Placing (which was not conditional on the Open Offer) with an opportunity to participate in the proposed issue of new Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for an aggregate of up to 6,153,846 Open Offer Shares, to raise up to approximately £200,000 (before costs and expenses), on the basis of 1 Open Offer Share for every 8.914 Existing Ordinary Shares held on the Record Date, at 3.25 pence per share. Investors who participated in the Placing are Qualifying Shareholders for the purpose of the Open Offer. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

The net proceeds of the Placing together with the net proceeds of amounts raised from the Open Offer, will prioritise payment of the Tongo environmental licence and renewal of the Tonguma environmental licence (estimated $250,000 in aggregate for both licences). Following payment of the Tongo environmental licence, it is anticipated that the Tongo mining licence will be issued and its fiscal terms may then be negotiated and ratified via the Sierra Leone Government and Parliament respectively. Furthermore, funds will be allocated to ongoing costs related to the Tongo-Tonguma project in Sierra Leone, general working capital, and the payment of certain existing creditors.

The Company has been informed that the Tongo mining licence has been approved by the Minerals Advisory Board of Sierra Leone subject to the payment of the environmental licence. The Company and the Environmental Protection Agency of Sierra Leone have been involved in a protracted discussion as to an appropriate fee for the environmental licence but have now reached agreement in this regard. Therefore the Company believes that having signed the Tongo-Tonguma Tribute Mining Agreement it is in the interests of shareholders to pay the required environmental licence fee and have the Tongo mining licence issued.

The first stage of the mine development for the Tongo-Tonguma will comprise the detailed FEED and detailed near surface drilling of the three kimberlite resources to be exploited according to the PPM/SRK generated mine plan. This drilling should significantly reduce the geological risk for the early mining phase and will in essence guide the decline and stope developments on the first two mining levels. Furthermore, during the FEED phase, the Company intends to relocate the 50tph DMS production plant that is expected to be acquired for a nominal fee from Octea and which should enable the Company to have its production facility upgraded and available for processing of ore during the first year of mine development. The Company, with its consultants PPM/SRK, have established that these three key work streams, the FEED, drilling and relocation of the processing plant, will require in the region of up to US$3 million to complete.

The purpose of the circular is to provide information on the Company's trading position so that Shareholders may decide whether to subscribe for Open Offer Shares. Shareholders should also refer to the Company's regulatory announcements. Open Offer Shares subscribed for will be issued pursuant to the Company's existing share authorities. Accordingly the Open Offer is not subject to Shareholder approval nor has it been underwritten.

Shareholders should note, that the Company's working capital position will remain constrained following completion of the Open Offer. The Company is in the process of raising the required project development funding and whilst good progress has been made and the Directors believe that this will be possible, the timing, quantum, structure and pricing of this funding are uncertain. In addition, the Company is progressing completion of the sale of its Guinea assets (with exclusivity for the sale having recently been extended to 30 September 2017) however completion and the final quantum of consideration payable for the disposal remains subject to finalisation of due diligence, audit and tax affairs. The Company is also dependent on Octea's willingness to continue to extend the long stop date of the Agreements by which certain conditions must be satisfied in order to complete the Agreements. Whilst Octea have remained very supportive to date, and it is in the interests of both Octea and Stellar to do so, there can be no guarantee that they will continue to do so.

Details of the open offer

The Company is proposing to raise up to £200,000 (before expenses) pursuant to the Open Offer. The proposed issue price of 3.25 pence per Open Offer Share is the same price as the Issue Price at which Placing Shares were issued pursuant to the Placing.

Qualifying Shareholders may subscribe for Open Offer Shares in proportion to their holding of Existing Ordinary Shares held on the Record Date. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares as an Excess Entitlement, up to the total number of Open Offer Shares available to Qualifying Shareholders under the Open Offer.

The Open Offer is conditional, amongst other things, on admission of the Open Offer Shares to trading on AIM becoming effective on or before 8.00 a.m. on 3 October 2017 (or such later date and/or time as the Company and Peterhouse may agree, being no later than 13 October 2017).

In the event that the Open Offer does not become unconditional by 8.00 a.m. on 3 October 2017 (or such later time and date as the Company may decide being no later than 8.00 a.m. on 13 October 2017), the Open Offer will lapse and application monies will be returned by post to the Applicant(s) at the Applicant's risk and without interest, to the address set out in the Application Form, within 14 days thereafter.

The Open Offer Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission.

Basic Entitlement

Subject to the fulfilment of the conditions set out below and in Part IV of the circular, Qualifying Shareholders are being given the opportunity to subscribe for Open Offer Shares under the Open Offer at the Issue Price, payable in full on application and free of all expenses, pro rata to their existing shareholdings on the following basis:

1 Open Offer Share for every 8.914 Existing Ordinary Shares

held by Qualifying Shareholders and registered in their name at the Record Date.

Open Offer Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated and will be disregarded. Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Basic Entitlement.

If you have sold or otherwise transferred all of your Existing Ordinary Shares after the ex-entitlement Date, you are not entitled to participate in the Open Offer.

The Open Offer is not a rights issue. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should be aware that under the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer.

Application has been made for the Open Offer Entitlements of Qualifying CREST Shareholders to be admitted to CREST. It is expected that such Open Offer Entitlements will be admitted to CREST on 18 September 2017. The Open Offer Entitlements will also be enabled for settlement in CREST on 18 September 2017 to satisfy bona fide market claims only. Applications through the CREST system may only be made by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment, are contained in Part IV of the circular and for Qualifying Non-CREST Shareholders on the Application Form. To be valid, Application Forms (duly completed) and payment in full for the Open Offer Shares applied for must be received by Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland by no later than 11 a.m. on 2 October 2017.

Qualifying Non-CREST Shareholders will receive an Application Form which sets out their maximum entitlement to Open Offer Shares as shown by the number of Basic Entitlements allocated to them.

The Open Offer is restricted to Qualifying Shareholders in order to enable the Company to benefit from exemptions from securities law requirements in certain jurisdictions outside the United Kingdom.

Excess Application Facility

The Excess Application Facility will enable Qualifying Shareholders, provided that they take up their Basic Entitlements in full, to apply for Excess Entitlements to the extent that if a Qualifying Shareholder has taken up its Basic Entitlements in full and applies for and is allocated the maximum Excess Entitlements it will suffer no dilution as a result of the Placing and Open Offer. Qualifying Non-CREST Shareholders who wish to apply to acquire more than their Basic Entitlements should complete the relevant sections on the Application Form. Qualifying CREST Shareholders will have Excess Entitlements credited to their stock account in CREST and should refer to paragraph 3(ii) of Part IV of the circular for information on how to apply for Excess Entitlements pursuant to the Excess Application Facility. Applications for Excess Entitlements will be satisfied only and to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their Basic Entitlements and may be scaled back at the Company's absolute discretion.

Once subscriptions by Qualifying Shareholders under their Basic Entitlements have been satisfied, the Company shall, in its absolute discretion, determine whether or not to meet any applications for Excess Entitlements in full or in part and no assurance can be given that applications by Qualifying Shareholders under the Excess Application Facility will be met in full, in part or at all. Application will be made for the Basic Entitlements and Excess Entitlements in respect of Qualifying CREST Shareholders to be admitted to CREST. It is expected that Open Offer Shares issued pursuant to subscriptions by Qualifying Shareholders exercising their Basic Entitlements and Excess Entitlements will be admitted to CREST at 8.00 a.m. on 3 October 2017. Such Open Offer Shares will also be enabled for settlement in CREST at 8.00 a.m. on 3 October 2017. Applications through the means of the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. Qualifying NonCREST Shareholders will receive an Application Form which sets out their entitlement to Open Offer Shares as shown by the number of Basic Entitlements allocated to them. Qualifying NonCREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded.

Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Basic Entitlements on 18 September 2017. Qualifying CREST Shareholders should note that although the Basic Entitlements and Excess Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of their Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. If applications are made for less than all of the Open Offer Shares available, then the lower number of Open Offer Shares will be issued and any outstanding Basic Entitlements will lapse.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part IV of the circular. For Qualifying Non-CREST Shareholders, completed Application Forms, accompanied by full payment, should be returned by post, or by hand (during normal business hours only), Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland so as to arrive as soon as possible and in any event so as to be received no later than 11.00 a.m. on 2 October 2017. For Qualifying CREST Shareholders the relevant CREST instructions must have been settled as explained in the circular by no later than 11.00 a.m. on 2 October 2017.

Action to be taken in respect of the Open Offer

If you are a Qualifying Non-CREST Shareholder you will be sent an Application Form which gives details of your Basic Entitlement (i.e. the number of Open Offer Shares available to you). If you wish to apply for Open Offer Shares under the Open Offer, you should complete the Application Form in accordance with the procedure set out at paragraph 3 of Part IV of the circular and on the Application Form itself and post it, or return it by hand (during normal business hours only), together with payment in full in respect of the number of Open Offer Shares applied for to Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland so as to arrive as soon as possible and in any event so as to be received no later than 11 a.m. on 2 October 2017, having first read carefully Part IV of the circular and the contents of the Application Form.

If you are a Qualifying CREST Shareholder, no Application Form will be sent to you. As a Qualifying CREST Shareholder you will receive a credit to your appropriate stock account in CREST in respect of your Basic Entitlement. You should refer to the procedure set out at paragraph 2 of Part IV of the circular and paragraphs 3(ii) and 4(ii) of Part IV.

The latest time for applications to be received under the Open Offer is 11.00 a.m. on 2 October 2017. The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your Basic Entitlement or your Basic Entitlement has been credited to your stock account in CREST. The procedures for application and payment are set out in Part IV of the circular. Further details also appear on the Application Form which has been sent to Qualifying Shareholders. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with the circular and the Open Offer.

If you are in any doubt as to the procedure for acceptance, please contact Computershare Investor Services on 01 247 5693 from within the UK or +353 01 247 5693 if calling from outside the UK. The helpline is open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Computershare Investor Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

If you are in any doubt as to the contents of the circular and/or the action you should take, you are recommended to seek your own personal financial advice from an independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) if you are in the UK or, if you are outside the UK, from an appropriately authorised independent financial adviser, without delay.

Action to be taken in respect of the Open Offer is set out in paragraphs 7 and 10 of Part I of the Circular and also in Part VI of the Circular. If you are a Qualifying Non-CREST Shareholder, an Application Form will be posted for completion by Qualifying Shareholders who wish to participate in the Open Offer. If you are a Qualifying CREST Shareholder, no Application Form will be sent to you. As a Qualifying CREST Shareholder you will receive a credit to your appropriate stock account in CREST in respect of your Basic Entitlement. You should refer to the procedure set out at paragraph 3(ii) of Part IV of the Circular.

DEFINITIONS

The following words and expressions shall have the following meanings in the circular, unless the context otherwise requires: