Stellar Diamonds Regulatory News (STEL)

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23 February 2017

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

 Placing to raise £324,500

Open Offer to raise up to £250,000

Proposed Issue of Shares to Directors and proposed Subscription

 Appointment of Joint Broker and Proposed issue of Warrants

Suspension Update

Stellar Diamonds plc, the London listed diamond development company focused on West Africa, announces that it has conditionally raised, through Peterhouse Corporate Finance Limited ("Peterhouse"), approximately £324,500 through the issue of 5,900,000 new Ordinary Shares of the Company at an issue price of 5.5 pence per share ("Placing Shares") (the "Placing"). The Placing was scaled back so as not to exceed the Company's existing share authorities. In order to provide all Shareholders with an opportunity to participate in the proposed issue of new ordinary shares of the Company, the Company is providing Qualifying Shareholders with the opportunity to subscribe for new Ordinary Shares, to raise up to approximately £250,000 (before expenses), at 5.5 pence each through an open offer ("Open Offer"). Subject to completion of the Placing, investors participating in the Placing will be Qualifying Shareholders for the purpose of the Open Offer. Capitalised terms used in this announcement are defined below unless otherwise stated. Further key terms and conditions of the Placing and Open Offer are described below.

Highlights:

· Placing of 5,900,000 Placing Shares at 5.5 pence per Ordinary Share to raise gross proceeds of £324,500

· Proposed resumption of trading on AIM on completion of Placing

· Open Offer to raise up to approximately £250,000 at 5.5 pence per Open Offer Share

· Proceeds of the Placing and Open Offer to be used to progress the recently announced proposed tribute mining agreement for the Tonguma project, to repay creditors, to provide working capital for the Company and, subject to the level of uptake of the Open Offer, pay the Tongo environmental licence fee

· The Open Offer is subject to approval by Shareholders at the Annual General Meeting

· Appointment of Peterhouse Corporate Finance Limited as Joint Broker conditional on completion of the Placing

Completion of the Placing is expected to occur on or around 27 February 2017 subject to, inter alia, resumption of trading of the Company's ordinary shares on AIM and admission of the Placing Shares to trading on AIM. Completion of the Open Offer is subject to, inter alia, Shareholder approval, which will be sought at the Company's Annual General Meeting to be held in March 2017.

A circular providing full details of the Open Offer and incorporating the notice of Annual General Meeting will be posted to Shareholders shortly.

Terms and Conditions of the Placing

The Company has conditionally placed 5,900,000 Placing Shares at 5.5 pence per Placing Share to raise £324,500 (before expenses). The Placing is not being underwritten. Issue of the Placing Shares by the Company is conditional on inter alia:

· receipt of the gross funds in respect of the Placing Shares of £324,500; and

· admission of the Placing Shares to trading on AIM ("Placing Shares Admission") together with resumption of trading on AIM.

Application for the Placing Shares Admission has been made and it is expected that the issue and admission of the Placing Shares will occur on or around 27 February 2017, with the resumption of trading of the Company's shares on AIM expected to occur on the same date.

Terms and Conditions of the Open Offer

Following the Placing, the Company is proposing to raise a further amount of up to approximately £250,000 (before expenses) pursuant to the Open Offer at 5.5 pence each per share, being the same price as the price at which the Placing Shares are being issued pursuant to the Placing.

A further announcement will be made shortly in relation to the terms and conditions of the Open Offer and the Open Offer timetable, however, Qualifying Shareholders will be able to 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 will also be able to 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. Full details of this will be set out in the Open Offer circular.

The Open Offer will be conditional, amongst other things, on the following:

i. the passing of certain resolutions at the Annual General Meeting to grant the Directors the authority to issue Open Offer Shares ("Resolutions");

ii. admission of the Open Offer Shares to trading on AIM.

Whilst neither the Placing or the Open Offer have been underwritten, 1,381,818 Open Offer Shares have been conditionally placed with Peterhouse investors at the Issue Price (the "Conditional Placing") ("Conditional Placing Shares") subject to clawback to satisfy valid applications under the Open Offer i.e. if at least 1,381,818 Open Offer Shares are subscribed for by Qualifying Shareholders, the Conditional Placing Shares will be clawed back in full and the Conditional Placing will not proceed. Like the Open Offer, the Conditional Placing is conditional on the passing of certain resolutions and admission of the Conditional Placing Shares to trading on AIM.

Use of Proceeds, Working Capital Position and Suspension update

As announced on 20 February 2017, the Company currently has limited working capital, therefore it is expected that the Company's shares will remain suspended until completion of the Placing when the Company will request that trading in the Ordinary Shares on AIM to be lifted. In addition to the Placing, as noted above, certain investors have subscribed for such number of Ordinary Shares at 5.5 pence per share as would equal gross proceeds of approximately £76,000 pursuant to the Conditional Placing, such that the total gross amount raised by the Company in relation to the Placing and Open Offer is expected to be not less than approximately £400,000. The Company also expects to receive the management fee of US$175,000 from its joint venture partner, Citigate Commodities Trading by the end of March 2017 ("Management Fee").

The Company also announced on 20 February 2017 that it no longer intends to acquire Tonguma Ltd and instead intends to enter into a Tribute Mining Agreement ("Tribute Agreement") with Octea Mining Ltd ("Octea") which would allow Stellar to mine the Tonguma licence area alongside Stellar's own Tongo project ("Tribute Agreement Announcement") in Sierra Leone. In anticipation of this, Stellar has entered into an exclusive heads of terms with Octea whereby the key terms of the Tribute Agreement have been agreed. Further details of these proposals were included in the Tribute Agreement Announcement. The net proceeds of the Placing (of approximately £308,275), the proceeds from the Open Offer of up to £250,000 and the Management Fee, will be used to advance to conclusion the Tribute Mining Agreement, pay existing creditors of the business and for general working capital. Subject to the final quantum of funds raised in the Open Offer, the Company also intends to pay the fee for the Tongo Environmental Licence of US$150,000 which the Directors believe will result in the issue of the Tongo mining licence.

Shareholders should note, that the Company's working capital position will remain constrained following completion of the Placing and Open Offer. The Company will need to raise further funds to allow implementation of the mine plan should the Tribute Agreement be entered into and, depending on timing of this and the quantum of funds raised in the Open Offer, the Company may need to raise additional funds for working capital and payment of the Tongo environmental licence in the short term. Whilst the Directors believe that this will possible, the timing, quantum, structure and pricing of any future raise are uncertain and may be dependent on the Company's ability to enter into the Tribute Agreement on a timely basis. Shareholders should also note that if the Resolutions are not approved at the Annual General Meeting and/or the Company does not receive the management fees due from Citigate under the Company's joint venture proposals, the Company may not be able to meet its future working capital requirements.

Appointment of Joint Broker and proposed issue of warrants

Conditional on completion of the Placing, the Company has agreed to appoint Peterhouse as joint broker to the Company. The Company has agreed, conditional on the passing of certain resolutions at the Annual General Meeting, to issue Peterhouse 118,182 Ordinary Shares in the Company at a price of 5.5 pence per share in lieu of adviser fees (the "Adviser Shares") and to apply for admission of the Adviser Shares to trading on AIM.

In addition, conditional on completion of the Placing and the Open Offer (together the "Fundraise"), the Company has agreed to grant Peterhouse warrants over such number of Ordinary Shares as equals 5 per cent. of the Fundraise at an exercise price of 7.125 pence per Ordinary Share. The warrants will be valid for a term of two years from the date of completion of completion of the Placing.

Proposed issue of shares to Directors and proposed Subscription

The Directors continue to monitor and manage the Company's working capital very carefully. As announced on 20 February 2017, in order to preserve cash and subject to the required authorities being granted by shareholders at the Annual General Meeting, the Directors of Stellar intend to convert a net total of £72,323 in accrued fees, salary and benefits up to the 31 March 2017 into Ordinary Shares of the Company ("Fee Shares").

In addition to the above, certain Directors intend to subscribe for approximately £20,000 of new Ordinary Shares ("Subscription"). The proposed issue of the Fee Shares and the Subscription will be conditional on the passing of the Resolutions and will each constitute a related party transaction. The details of the Fee Shares and Subscription will be announced separately in due course.

Loan notes

The Company is in discussion with certain convertible loan note holders regarding the changed agreement terms with Octea and will notify the market of any agreed changes to the loan note terms in due course. However it is expected that the terms of existing loan notes in issue with Deutsche Balaton, Creditforce and Steven Poulton, will be extended.

Defined terms used in this announcement

** ENDS **

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

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.

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.