Stellar Diamonds Regulatory News (STEL)

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8 May 2014

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

ISSUE OF EQUITY TO RAISE £1.85 MILLION

Stellar Diamonds plc, the AIM quoted (AIM: STEL) diamond mining and exploration company focused on West Africa, announces that the Company has conditionally raised approximately £1.85 million (before expenses) through the issue of 148,179,476 new ordinary shares of 1p each (the "New Ordinary Shares") at 1.25p per share ("Placing Price") to new and existing private and institutional investors (the "Fundraising"). The proceeds of the Fundraising will be used predominantly on advancing the Company's Baoulé kimberlite project in Guinea towards trial mining, as well as continuation of the bulk sampling at Tongo Dyke-1 in Sierra Leone, settlement of outstanding fees and for general working capital.

Stellar's right to earn into the Baoulé project at the diamondiferous Baoulé kimberlite pipe, which is located in the prolific diamond region of Aredor in southeast Guinea were granted under a joint venture agreement in December 2013. Using an extensive historical database as reference, Stellar has modelled a target resource of over 22 million tonnes to a depth of 300m. Bulk sampling by previous owners has yielded diamond grades of between 13 and 40 carats per hundred tonnes ("cpht"). Taking the lower grade of 13cpht, Stellar is targeting a diamond resource of 3 million carats. In 2000, a 500 carat parcel sold for US$157 per carat which the Company estimates would yield over US$200 per carat in the current diamond market.

The Company intends to allocate funds to accelerate Baoulé to trial mining and is already in the process of relocating its assets from Droujba and Mandala to Baoulé, particularly its MB 100 dense media separation ("DMS") plant which is capable of processing large tonnages and recovering large, high value diamonds for which the Aredor area is renowned. The Company is scheduling commissioning of the plant in August 2014 with trial mine processing commencing in September 2014.

Stellar intends to acquire its 75% interest in the Baoulé project, as per the joint venture agreement, through a combination of past and future expenditure and vending in of various plant and machinery assets before the commencement of the trial mining.

At the Tongo project in Sierra Leone, on-going bulk sampling of the 1.1 million carat Dyke-1 resource continues to yield very high diamond grades with exceptional quality diamonds. Stellar recently reported recovery of 551 carats at an average bulk sample grade of 126cpht which is in excess of the modelled resource grade of 120cpht. Stellar will continue with the bulk sampling programme into July 2014, in order to achieve at least a 1,000 carat diamond parcel for the valuation and diamond value modelling that is required for the definitive feasibility study.

Given the tough market conditions for small mineral resources companies, the directors believe that the acceleration of Baoulé to trial mining is the correct strategy to deliver shareholder value as Baoulé has the potential to generate cash flow for the Company during the second half of 2014. The work at Tongo will continue through the bulk sampling exercise, although completion of the full definitive feasibility study will now be targeted for the first half of 2015.

The cost of the 2014 work programme is estimated at £1.0 million for Baoulé and £0.3 million for Tongo. The Company will use the remaining £0.55 million raised for corporate, in country and general working capital purposes.

Information on the Fundraising

The Company has today entered into a placing agreement with Daniel Stewart & Company plc ("Daniel Stewart"), pursuant to which Daniel Stewart has agreed, subject to the terms and conditions of the Placing Agreement, to use its reasonable endeavours to procure subscribers for certain of the New Ordinary Shares. The Placing Agreement contains customary warranties and indemnities given by the Company to Daniel Stewart as to matters relating to the Company and its business. Daniel Stewart is entitled to terminate the Placing Agreement in certain limited circumstances prior to Admission, including circumstances where any of the warranties are found to be untrue or inaccurate or misleading in any material respect or upon the occurrence of certain force majeure events. The Placing Agreement is subject to the satisfaction or waiver of certain conditions by 22 May 2014 (or such later date as the Company and Daniel Stewart may agree, being not later than 30 May 2014), including the admission of the New Ordinary Shares to trading on AIM ("Admission"). Application has been made for Admission which is expected to occur, and trading to commence at 8.00a.m. on 22 May 2014.

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing ordinary shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.

Total voting rights

Following Admission, the Company's total issued share capital will comprise of 696,607,642 Ordinary Shares ("Issued Share Capital"). 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 following Admission.

Substantial Shareholdings

Foradex Invest SRL ("Foradex"), the Company's largest shareholder is subscribing for 47,619,044 of the New Ordinary Shares. Following Admission, Foradex will hold 161,811,134 Ordinary Shares representing 23.18 per cent. of the Company's Issued Share Capital. Foradex also holds 64,935,000 warrants in the Company, exercisable at 2p per share. If Foradex was to exercise these warrants, and no other equity was issued by the Company, then Foradex would hold 226,746,134 Ordinary shares, which would represent 29.72% of the thusly enlarged issued share capital.

Director Participation

All of the directors of the Company have participated in the Fundraising either by converting certain salaries owed to them into equity in the Company at the Placing Price or by subscription of new monies. Details of their participation and changes in holdings in the Company are set out in the table below.

Related Party Transaction

As Foradex is a substantial shareholder in the Company, the Subscription by Foradex (the "Transaction") constitutes a related party transaction under the AIM Rules. Having consulted with the Company's nominated adviser, Daniel Stewart, the Directors consider that the terms of the Transaction are fair and reasonable in so far as the Company's shareholders are concerned.

Further information about the Company can be found at www.stellar-diamonds.com

Enquiries:

Stellar Diamonds plc

Karl Smithson, Chief Executive Tel: +44 (0) 20 7010 7686

Daniel Stewart & Company plc

(Nominated Advisor and Broker)

Antony Legge, Ciaran Walsh, Martin Lampshire Tel: +44 (0) 20 7776 6550

St Brides Media & Finance plc

(Financial Public Relations)

Lottie Brocklehurst, Hugo de Salis Tel: +44 (0) 20 7236 1177