Stellar Diamonds Regulatory News (STEL)

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28 November 2014

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

Significant Increase in Resource & Diamond Grade at Tongo Kimberlite Dyke Project

Stellar Diamonds plc, the London quoted (AIM: STEL) diamond development company focused on West Africa, is pleased to announce an updated resource estimate for its 100% owned high grade Tongo kimberlite Dyke-1 project in eastern Sierra Leone.

Highlights:

· 35% increase in JORC compliant inferred resource to 1,447,000 carats for Dyke-1

· Bulk sampling results have led to a 37% increase in average diamond grade to 165 carats per hundred tonnes

· Grade and resource increase underpins expected excellent project economics

· Diamond price models of US$145 and US$270 per carat

· In-situ kimberlite value estimated at between US$239 and US$324 per tonne

· In-situ resource value of US$214 million to US$290 million

· Surface and underground mining study to be announced in the near future

· Additional value potential from further dykes within the project

Chief Executive Karl Smithson commented:

"The combination of high grades and high diamond values make this kimberlite one of the highest value kimberlites in the world in terms of in-situ value of dollar per tonne. The significant increase in the diamond grade and resource for Dyke-1 to 1.45 million carats is an extremely positive step in the development of this high grade and high value per tonne diamond asset.

"Importantly further resource potential exists from three parallel kimberlite dykes which form part of the Tongo dyke swarm. This includes the 1km long Dyke-4 which has previously been bulk sampled and returned a diamond grade estimate of 110cpht and an estimated average diamond value of US$140 per carat.

"Consistent with our focused strategy of accelerating our key kimberlite projects through the development pipeline and into production, as evidenced by the recent commencement of trial mining at our Guinean Baoulé project, a study into surface and underground mine development at Tongo is being finalised. In line with this we are currently re-calculating our financial model to reflect the resource upgrade and mine plan and I look forward to updating shareholders with our progress in the near future."

Updated Resource Statement

Independent consultant CAE Mining has updated the maiden JORC compliant resource statement based on the recently completed bulk sampling and diamond grade and value modelling. The volume and tonnage of the previously announced resource statement (3 December 2012) remain at 321,000m3 and 895,000 tonnes respectively, to a depth of 300m. No additional drilling or microdiamond sampling was conducted during this phase of work and all previous data and models, including the bulk sampling from 2012, were used to complement the new data.

The following new bulk sampling and valuation data were utilised in calculating the revised resource:

· 2014 bulk sampling of 645 dry tonnes of kimberlite which yielded 1,182 carats at a 1mm cut-off

· Four independent valuations of the 1,182 carats of diamonds that were exported to Antwerp were used in the revised diamond modelling exercise

· Sieving analysis and diamond valuations were all incorporated into new diamond grade and value models

Diamond Size Distribution and Grade Model

Two diamond grade models have been established based on log-probability graphs using the available microdiamond and bulk sampling data. The microdiamond modelling (2012) suggests an average grade of 120cpht (in undiluted kimberlite), whereas the combined bulk sampling data (2012 and 2014) suggests an increased average grade of 165cpht (in undiluted kimberlite), which is consistent with the actual higher average grade yielded in 2014 of 183cpht. However, the higher grade model is also the result of a higher proportion of smaller diamonds recovered when compared to that expected using the microdiamond grade model. The disparity between the two models is due to a lower than expected number of stones between 2 and 10 carats based from the two phases of bulk sampling versus the microdiamond grade model. This could be natural stone size distribution or more probably a result of the sample size being too small to recover the expected larger stones. However, the microdiamond size distribution model suggests that the larger stones should be present in the diamond population yielded by the bulk sampling and therefore a coarser size distribution is to be expected.

Diamond Value Estimation

The diamond value was modelled using the 1,182 carats produced from the bulk sampling (1,168 carats after acid cleaning). Four independent diamond marketing groups valued the diamond parcel. One group seems to have undervalued the smaller diamonds relative to the other three groups. Diamond values of up to US$3,200 per carat were given for a single stone of 6.7 carats in size. Most valuations per sieve size were higher for the 2014 data compared to the 2012 data, as would be expected for both the valuations and the subsequent modelled diamond values.

These four diamond valuations were combined and modelled to simulate the likely diamond value in a full production parcel. Two price-size models were calculated along with the two size distribution (grade) models.

The diamond value model for the higher 165cpht grade has a modelled diamond value of US$145 per carat as expected by a finer diamond size distribution. However, the coarser diamond size distribution as calculated by the microdiamond model suggests a diamond value of US$270 per carat. If the "missing" larger stones, as indicated from the diamond grade model, do appear in the run of mine production, then there is considerable upside in diamond content and average price if the diamond size distribution turns out to be coarser than suggested by bulk sampling, and the higher bulk sample grades are sustained.

A summary of the updated inferred resource at a +1.0mm cut off is given in Table 1 below, both as a lower grade and higher grade model and is reported according to JORC (2012):

Future Resource Potential

The Directors believe there is additional resource potential from Dyke-1 and other kimberlites in the licence area, as follows:

· Deeper drilling of Dyke-1, to depths of up to 700m in line with kimberlite dykes mined in South Africa;

· Resource drilling of the 1km long Dyke-4, which has a bulk sampled grade of 110cpht and diamond value of US$140 per carat. However, the diamond parcel amounts to 91 carats, which is not a representative size;

· Resource drilling of the 800m long Dyke-2 and 500m long Dyke-3. Kimberlite samples of 200kg each have previously been processed for the recovery of microdiamonds. These samples yielded abundant diamonds which suggested modelled +1mm diamond grades of 140cpht and 185cpht for Dykes-2 and 3 respectively.

The Tongo resource statement report will be lodged on the Company's website at www.stellar-diamonds.com.

This announcement has been reviewed by Karl Smithson, Chief Executive of Stellar, a qualified geologist and Fellow of the Institute of Materials, Metals, Mining, with 26 years' experience.

Ebola Update

The Company is encouraged by the support given to Sierra Leone by the British Government and the various NGO's who are tackling the Ebola virus on a daily basis. Although the number of cases is increasing in the west of the country it is encouraging to note that there have been no new cases in the Kenema and Tongo areas for over one month, which would suggest that the virus is now contained and under control in the project area. The Company believes that as the capacity to treat the affected increases so the virus will be contained throughout the country and eventually eradicated.

About Stellar Diamonds plc

Stellar is an AIM quoted (AIM: STEL) West African focused diamond development company which has commenced trial mining of its Baoulé kimberlite in Guinea, and is progressing the 1.5 million carat Tongo Dyke-1 resource in Sierra Leone through a definitive feasibility study. In addition, Stellar holds the 3 million carat Droujba project in Guinea and continues to pursue diplomatic channels to ensure the proper reinstatement of its Kono licences in Sierra Leone.

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