Stellar Diamonds Regulatory News (STEL)

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

2 May 2012

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

PROPOSED PLACING AND CAPITAL REORGANISATION

Stellar Diamonds plc, the London listed (AIM: STEL) diamond mining and exploration company focused on West Africa, announces that Northland Capital Partners Limited, Daniel Stewart & Company plc and the Company have raised £2 million before expenses through a conditional placing of 66,916,991 New Ordinary Shares of 1p each (the "Placing Shares") with institutional and other investors at a price of 3p per Placing Share (the "Placing").

Highlights

·; Conditional placing to raise £2 million before expenses

·; Funds to be used to advance Droujba and Tongo projects where JORC compliant inferred resources of 3.1 million carats, in aggregate, have been independently established

·; Company continues to engage with Government of Sierra Leone regarding the Kono licence dispute

The objective of the Placing is to raise sufficient capital to advance the Droujba and Tongo projects and increase their aggregate inferred resource base from 3.1 million carats. The Placing Shares will represent approximately 23.6 per cent. of the enlarged issued share capital of the Company.

Karl Smithson, Chief Executive of Stellar, commented:

"We are very pleased with the level of shareholder support that enables us to continue the development of our key projects of Droujba and Tongo. We expect to undertake further drilling and bulk sampling with the objective of increasing the Company's resource base and commence pre-feasibility studies to determine the economic potential of these high grade projects."

"We are continuing dialogue with the Government of Sierra Leone in order to satisfactorily resolve the Kono licence dispute and we will update shareholders as we progress."

Use of proceeds

Subject to the Placing Agreement becoming unconditional and not being terminated in accordance with its terms, the Placing will raise approximately £2 million before the deduction of expenses payable by the Company.

The net proceeds will be applied as follows:

At Tongo, further drilling of Dyke 1 is anticipated to increase the resource base and prepare pre-feasibility type documents to assess the economic potential of the resource. In addition, bulk sampling of Dyke 2 to establish diamond grade and value will be undertaken. Resource drilling of Dykes 2 and 4 may also be undertaken with the objective of further increasing the carat resource for the project as a whole.

At Droujba, further drilling of the Droujba pipe and the adjacent Katcha kimberlite dyke is planned to increase the project resource base. In addition, bulk sampling will continue on the Droujba pipe to increase the current 500 carat diamond parcel to 2,000 carats to establish a more representative parcel for valuation. If a number of gem diamonds in the larger sizes are recovered then this would have a positive impact on the current diamond value of $50 per carat.

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

 Capital Reorganisation - Subdivision of Existing Ordinary Shares

In order to enable the Placing to proceed, it is necessary to sub-divide the Company's share capital to ensure the Placing Shares can be subscribed for at or above their nominal value. Accordingly, the Directors are proposing a subdivision of each existing ordinary share of 5p each (an "Existing Ordinary Share") into one new ordinary share of 1p each (a "New Ordinary Share") and one deferred share of 4p each (a "Deferred Share") (the "Capital Reorganisation"). The Deferred Shares will have rights such that in practical terms they will have no value and will not be listed on any stock exchange.

Notice of General Meeting

The Placing is conditional, inter alia, on the approval of Stellar's shareholders and admission of the New Ordinary Shares to trading on AIM. A circular containing a notice of the General Meeting is today being sent to Stellar's shareholders with details of the Placing and the Capital Reorganisation and seeking the necessary approval of shareholders for the issue of the Placing Shares and the Capital Reorganisation ("Resolutions"). The General Meeting will be held at the offices of Northland Capital Partners Limited, 60 Gresham Street, London EC2V 7BB at 10.00am on Monday 21 May 2012. A copy of the circular will be available on the Company's website; www.stellar-diamonds.com.

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

Application will be made for admission of the Placing Shares and the New Ordinary Shares to trading on AIM ("Admission") and, subject to the requisite shareholder approval for the Placing and the Capital Reorganisation being obtained at the General Meeting, it is expected that Admission will be effective on or around 8.00 am on Tuesday 22 May 2012.

Following the Capital Reorganisation, the Company will have in issue, and Stellar shareholders' individual holdings will be of, the same number of New Ordinary Shares as the number of Existing Ordinary Shares held immediately prior to the General Meeting. 

Directors' participation in the Placing

The following directors of the Company are participating in the Placing at the Placing Price:

In total, the directors and senior management of the Company have subscribed £142,710, representing approximately 7.1 per cent. of the Placing, of which £117,710 represents the conversion of accrued fees, salary and a performance bonus into shares in order to preserve cash and further align the directors' interests with those of other Stellar shareholders.

The issue of Placing Shares to the directors is deemed a related party transaction under the AIM Rules for Companies ("the AIM Rules"). There are no independent directors for the purposes of providing the statement required under Rule 13 of the AIM Rules. Northland Capital Partners Limited, the Company's Nominated Adviser, considers that the terms of the issue of Placing Shares to the directors are fair and reasonable insofar as the shareholders of the Company are concerned.

Irrevocable Undertakings

The Company has received irrevocable undertakings to vote (or procure the vote) in favour of the Resolutions at the General Meeting from the following shareholders:

In total, irrevocable undertakings have been received from shareholders in respect of 40,460,353 Existing Ordinary Shares, representing 18.66 per cent. of the Existing Ordinary Shares.

Total voting rights

Following Admission, the Company's total issued share capital will comprise of 283,693,650 New Ordinary Shares. The Company does not hold any ordinary shares in treasury. Therefore the total number of shares with voting rights in the Company will be 283,693,650. 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.

Enquiries:

Stellar Diamonds plc

Karl Smithson, Chief Executive Tel: +44 (0) 20 7257 2930

Northland Capital Partners Limited

(Nominated Advisor and Broker)

Gavin Burnell, Edward Hutton Tel: +44 (0) 20 7796 8800

Daniel Stewart & Company plc

(Joint Broker)

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

Pelham Bell Pottinger 

James MacFarlane, Joanna Boon Tel: +44 (0) 20 7861 3232