June 5, 2017

Agreement to Sell Guinea Assets for US$2 million Receipt of US$250,000 Exclusivity Fee

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

5 June 2017

AIM: STEL

Stellar Diamonds plc

(“Stellar” or the “Company”)

Agreement to Sell Guinea Assets for US$2 million

Receipt of US$250,000 Exclusivity Fee

Stellar Diamonds plc, the diamond development company focused on West Africa, announces that it has entered into a conditional binding Term Sheet with BDG Capital Limited (“BDG”) in relation to the proposed sale of Stellar’s assets in the Republic of Guinea.

Highlights:

  • US$2,000,000 cash consideration price for Guinea assets
  • US$250,000 cash has been received (part of the consideration price) as an exclusivity fee (“Exclusivity Fee”)
  • Exclusivity period of two months for due diligence and completion of documentation
  • Joint Venture Agreement over Baoulé and Liberia with Citigate terminated
  • Proceeds will be used to advance the development of the Company’s flagship Tongo-Tonguma mine development in Sierra Leone

Chief Executive Karl Smithson commented:

“Subject to BDG satisfactorily completing its due diligence, this binding terms sheet should see Stellar realise some US$2 million in cash for its non-core projects in Guinea, representing approximately two thirds of our current market capitalisation.

“The proceeds will be used to advance the development of our flagship Tongo-Tonguma kimberlite project in Sierra Leone; a project that has an estimated post-tax NPV(8) of US$104 million attributable to Stellar.

“The proposed Tongo-Tonguma mine has a low capex requirement of US$32 million and the potential to be the second largest kimberlite diamond mine in West Africa – with forecast production levels of 200,000 carats per annum, generating revenues of over US$45 million per annum over a minimum life of mine of 21 years.

“The proposed disposal of our Guinea assets allows management to focus on the Tongo – Tonguma mine development in Sierra Leone. It also allows for BDG to take the projects forward which is in the interests of Guinea and local stakeholders.

“We look forward to unlocking the significant value that we believe is inherent in the Tongo-Tonguma development as we advance the Company towards sustained commercial production.”

The disposal comprises certain plant and equipment as well as the shares in subsidiary companies Ressources Tassiliman Baoulé (75% interest in the Baoulé project), Ressources Mandala Guinee (100% interest in the Mandala project) and West African Diamonds (100% interest in the Droujba project), collectively termed “the Guinea Projects”. Further detail on these assets is set out in the competent person’s report which was announced on 31 October 2016 and which is available on the Company’s website. Segmental information regarding the results and net book value of these assets is available in the Company’s announcement of its interim results made on 31 March 2017.

Terms Sheet

The terms sheet with BDG Capital Limited, which is binding subject to BDG completing its due diligence satisfactorily, allows for a two month due diligence period during which time it is anticipated (although there can be no guarantee) the necessary share purchase agreements transferring Stellar’s shares in its Guinea Projects to BDG will be completed. The final consideration price has been agreed at US$2,000,000 of which US$250,000 has been advanced to Stellar to ensure exclusivity for BDG to complete its due diligence. Should Stellar withdraw from the proposed agreement and if the agreed terms are materially the same, then the exclusivity fee will be reimbursed to BDG in either cash or Stellar’s shares at a price to be determined. However, BDG if proposes to materially amend the terms following due diligence and Stellar as a consequence withdraws then the exclusivity fee shall not be reimbursed. In the event that BDG decides not to continue with the transaction, the exclusivity fee of US$250,000 is not refundable to BDG.

Termination of Joint Venture Agreements with Citigate Commodities Trading (Citigate)

When the joint venture agreements (JVA’s) were signed between Stellar and Citigate in November 2016 various warranties were made by Citigate to Stellar, including that Citigate had the necessary funding and authorisations to enter into the JVA’s. This included a contractual payment to Stellar of US$150,000 as a management fee as a condition precedent to completion of the JVA’s. To this date neither the project funding nor the management fee have been received from Citigate. Stellar has accepted such material breach as repudiatory and terminated the JVA’s.

Review by Competent Person

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 28 years’ experience.

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”, “expect”, ”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, but not limited to, Completion of the Tongo-Tonguma transaction not occurring, the Tribute Mining Agreements being terminated before the end of the Project mine life, recoverability of diamonds not being as expected, 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) focussed on developing the high-grade and high value Tongo-Tonguma project in Sierra Leone.

About BDG Capital Limited

Banque de Developpement de Guinea Limited is a subsidiary of the BDG Group of Companies with principle offices in Hong Kong and Conakry. BDG is a principle investment bank in Guinea with a mandate to support that country’s development through finance development and infrastructure projects in order to modernise and uplift the infrastructure and economy of Guinea. Recently BDG established a support programme for local gold miners in the Kankan region of Guinea to provide them with equipment to improve their gold recovery and production.

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

Karl Smithson, CEO

Philip Knowles, CFO

Stellar Diamonds plc

Stellar Diamonds plc

Tel: +44 (0) 20 7010 7686

Tel: +44 (0) 20 7010 7686

Emma Earl

Sandy Jamieson

Cairn Financial Advisers (Nominated Adviser) Tel: +44 (0) 20 7213 0880
Gavin Burnell Beaufort Securities Limited (Joint Broker) Tel: +44 (0) 20 7382 8300
Martin Lampshire

Rory Scott

Peterhouse Corporate Finance (Joint Broker)

Mirabaud Securities (Financial Advisers)

Tel: +44 (0) 20 7469 0930

Tel: +44 (0) 20 7878 3360

Tim Blythe

Nick Elwes

Blytheweigh

(Financial PR)

Tel: +44 (0) 20 7138 3204

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