Stellar Diamonds Regulatory News (STEL)

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24 July 2013

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

Positive Economic Scoping Studies on Tongo and Droujba Projects

Stellar Diamonds plc, the London listed (AIM: STEL) diamond development company focused on West Africa, is pleased to announce the results of the conceptual economic scoping studies from its Tongo and Droujba kimberlite diamond projects in Sierra Leone and Guinea respectively.

Economic Scoping Studies

Independent consulting company Paradigm Project Management ("PPM") were retained by the Company to conduct preliminary economic scoping studies over the Tongo Dyke-1 and Droujba kimberlite projects. The objective was to define preliminary project economics in order to allow the Company to prioritise the next stages of project development. These independent scoping study reports can be found on the Company's website.

Tongo Dyke-1 Scoping Study

Drilling and bulk sampling at Dyke-1 over the past 12 to 18 months have delivered an inferred resource of 1,074,000 carats at a grade of 120 carats per hundred tonnes ("cpht") and an average modelled diamond value of $248 per carat. At this grade and value, the in-situ kimberlite value is calculated to be $298 per tonne, which is considered to be a very high value for a kimberlite. The resource can be increased with depth and from drilling adjacent diamondiferous kimberlites. Dyke-4 has a grade of 109cpht and diamond value $140/ct, giving an in-situ value of $153/t and Dykes-2 and 3 which have modelled grades of 140cpht and 185cpht respectively.

The Tongo resource has been established over a strike length of 1.9km of the dyke to a depth of 300m.

Outcome of Conceptual Economic Scoping Study

Industry independent consultants Paradigm Project Management ("PPM") were earlier in the year commissioned to conduct the economic scoping study of the Tongo Dyke-1 kimberlite.

The scoping study by PPM focussed on approximately 682,000 carats of the Dyke-1 resource, to a depth of 300m from surface over an initial 13 year life of mine. PPM initially propose a decline access to provide early access to production ore, which would then be followed by the sinking of a shaft to 300 metres to gain access to ore on levels approximately 40m apart. PPM has estimated that the life of mine capital requirement at Tongo would be $21.42 million with the life of mine operating costs estimated at $84 per tonne. PPM has estimated in their report that the aggregate life of mine gross revenues from Tongo are $169.2 million and a net present value attributable to Tongo (assuming a discount rate of 10 per cent,) of $16.2 million. The 13 year life of mine model undertaken by PPM was not inflated for cost or diamond prices.

The Directors have used the base case model produced by PPM and increased the life of mine to 17 years to achieve mining of approximately 1,051,000 carats of the existing inferred resource, which the Directors believe is achievable at Tongo. In addition, the Directors have applied a 4.5 per cent. nominal price inflation to operating costs and diamond prices for the 17 year life of mine. Applying these assumptions to the PPM analysis provides life of mine gross revenues of approximately $412.7 million and a net present value attributable to Tongo (assuming a discount rate of 10 per cent.) of $53.1million.

A comparison of the PPM model and the Director's model is shown below:

Following completion of the economic scoping study on Tongo, the Directors have decided to prioritise the development of the Tongo project and, subject to funding, move it towards commencement of a full feasibility study over the next 6 to 12 months. Discussions are ongoing with interested parties with respect to funding or joint venture options on the Tongo project.

Droujba Pipe Scoping Study

A JORC compliant inferred resource of 2.5 million carats has been defined over the Droujba kimberlite pipe. The surface bulk sample grade has been established at 88cpht and the modelled diamond value is currently estimated at $45 per carat. The adjacent Katcha kimberlite dyke adds to the potential inferred resource base from this area. Drilling over 470 metres of the 5,000 metres strike length of Katcha has already defined 446,000 carats in JORC inferred resource to 150 metre depth, at a grade of 140cpht and a modelled diamond value of $57 per carat.

The economic scoping study undertaken by PPM focussed on the open pit potential of the Droujba pipe. This approach was taken as based on the relatively small surface area and limited near surface tonnes. However, a large stripping ratio would be necessary to mine to any considerable depth, which, in the opinion of PPM, rendered the project uneconomic under current diamond prices. The economic scoping study from PPM, however, outlined a three year life of mine open pit opportunity at a 1:1 stripping ratio to mine over 313,000 carats utilising mainly existing plant and mining infrastructure at potentially economic margins. However, the Company will prioritise the Tongo project for the next 12 months before re-assessing the financial opportunity provided by Droujba.

Chief Executive Karl Smithson commented:

 "The economic scoping study of Tongo Dyke-1 defines a net present value which is many multiples of the Company's current market capitalisation, and the Board believes this can be increased further through additional drilling to increase the existing 1.1 million carat resource base and potential life of mine. The Board has therefore elected to prioritise the development of the Tongo project through the establishment and commencement of a full feasibility study whilst Droujba is placed on temporary care and maintenance.

"In parallel, the Company continues to work towards the reinstatement of its Kono diamond exploration licences through a combination of continued diplomacy and legal remedies.

"I look forward to updating shareholders over the coming months as we continue the development of our priority Tongo project."

About Stellar Diamonds plc

Stellar is a London (AIM: STEL) listed West African focussed diamond mining and exploration company which is advancing the 1 million carat Tongo Dyke-1 resource into feasibility studies and towards a production decision. In addition, the Company holds the Droujba project which has a defined 3 million carat resource. Stellar remains in dispute with the Ministry of Mines in Sierra Leone regarding its two Kono licences and is pursuing both diplomatic and legal channels to ensure the proper reinstatement of these licences.

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

Stellar Diamonds plc

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

Charles Stanley Securities

(Nominated Advisor and Joint Broker)

Mark Taylor, Marc Milmo, Carl Holmes Tel: +44 (0) 20 7149 6000

Daniel Stewart & Company plc

(Joint-Broker)

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