October 9, 2014

First Diamonds from Trial Mining at Baoulé Kimberlite Pipe in Guinea

AIM: STEL

Stellar Diamonds plc

(“Stellar” or the “Company”)

9 October 2014

First Diamonds from Trial Mining at Baoulé Kimberlite Pipe in Guinea

 Stellar Diamonds plc, the London listed (AIM: STEL) diamond development company focused on West Africa, announces that first diamonds have been recovered from the commissioning of the mine plant at the Baoulé kimberlite pipe in Guinea.

Highlights:

  • 100tph treatment plant commissioned on schedule in September 2014
  • First limited ore processed has yielded over 50 carats, including stones of 3.76cts and 1.37cts
  • Plan to move in to full scale trial mining once plant optimisation complete
  • Objective to process at least 100,000 tonnes for diamond grade and value estimation

Stellar Diamonds Chief Executive Karl Smithson commented from the Baoulé project:

“I am delighted to be on site to witness the first recovery of diamonds from our Baoulé pipe which is a key milestone for Stellar. Our team has done an excellent job to get the project up and running in a short space of time and under challenging conditions during the rainy season. Our next objective is to optimise the commissioning of the plant before increasing the volume throughput of kimberlite ore, which could take a few weeks further. Whilst this large scale bulk sampling, or trial mining, is expected to establish the diamond grade and value of the kimberlite pipe to a high degree of confidence, it is also expected to provide cash flow to the Company over the next twelve months.”

Operational Progress

Stripping of the eastern lobe of the 5 hectare Baoulé pipe has been underway since early September and has now exposed highly decomposed kimberlite underlying a laterite cap and mixture of saprolitic kimberlite and laterite that has been extensively dug by local artisanal miners. This material has been stockpiled separately from cleaner and less contaminated kimberlite. The kimberlite has been collected from a controlled bulk sample measuring 24m x 16m x 3m and weighing approximately 2,200 wet tonnes. Measurements for specific gravity, bulk density and water content are currently being undertaken in order that the diamond grade can be established during processing.

Whilst the pipe stripping was on-going the construction of the 100 tonne per hour dense media separation (“DMS”) processing plant was completed and tested to establish its optimum operational parameters. Commissioning began in mid-September with the processing of the mixed decomposed kimberlite and laterite stockpile. Once the plant was deemed to be operating efficiently in terms of diamond recoveries, processing of the decomposed kimberlite stockpile commenced.

All samples processed have yielded diamonds with some 54 carats having been recovered from the limited processing to date. These include a gem diamond of 1.37 carats as well as a 3.76 carat lower quality stone. Grades will be calculated once the representative density and moisture content have been measured and significantly more volume has been processed.

Baoulé Pipe Summary

The Baoulé kimberlite pipe was discovered in 1999 and was subject to drilling and initial bulk sampling by earlier operators. A geological database is available on the project which shows that the pipe was delineated to 5 hectares in size and drilled to a maximum depth of 190m, but remains open at depth. Microdiamond analysis returned modelled macrodiamond grades of between 20 to 40 carats per hundred tonnes (‘cpht’) though bulk sampling yielded lower grades (+1mm) of 7cpht and 13cpht using pan plant and DMS technology respectively.

In-house modelling of previous drilling over the pipe suggests a target of over 22 million tonnes to a depth of 300m, which, at the DMS generated grade of 13cpht, would suggest a target of 3 million carats; increasing to 6.5 million carats using the average microdiamond grade of 30cpht. However, investors should note that this is not an independent resource estimate or in accordance with the JORC Code.

In 2000, a parcel of 509 carats produced by the pan plant, which did not contain any large stones, was sold for US$157 per carat. The Company believes that there may be considerable upside on this diamond price and the same parcel could realistically be expected to achieve prices in excess of US$200 per carat in the current market.

Joint Venture Agreement

As announced on 9 December 2013, Stellar signed a joint venture agreement (“JVA”) with local group Société Tassiliman (“Tassilman”) in relation to a licence to mine an area covering 1km which hosts the Baoulé kimberlite pipe (the “Licence”). Under the terms of the JVA, Stellar was entitled to earn a 75% interest in the JVA project once it had made expenditure of US$5 million. Stellar has now achieved this milestone of a 75% interest through a combination of expenditure by Stellar and vending into the project of plant and machinery. As a result, and in accordance with the JVA, a new joint venture company has now been created (“JV Co”) and the Licence is being transferred from Tassiliman to JV Co. Stellar has the option to purchase the remaining 25% of JV Co at fair market value and with the agreement of the joint venture partners.

Ebola Update

Operations are continuing but under monitored conditions at Baoulé which is located in an area that has not yet had a case of the Ebola virus. The Company has been at the forefront of elevating awareness amongst the workforce and the surrounding local communities and civic leaders of the threat of Ebola and its prevention. Increased levels of sanitation and health screening have been established at the camp and project sites and will be rolled out to the homes of the Company’s employees. Restrictions on staff travel are also implemented and a total ban on travel to the epicenters of the Ebola virus in Guinea is in place. The Company continues to monitor the situation very closely to ensure the continued well-being of all employees and that of the local communities.

About Stellar Diamonds plc:

Stellar is an AIM quoted (AIM: STEL) West African focused diamond development company which is advancing its diamondiferous Baoulé kimberlite in Guinea towards trial mining, as well as progressing the 1.1 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 both diplomatic and legal channels to ensure the proper reinstatement of its Kono licences in Sierra Leone.

** ENDS **

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

Antony Legge

Colin Rowbury

Daniel Stewart & Company plc (Nomad)

Daniel Stewart & Company plc (Broker)

Tel: +44 (0) 20 7776 6550

Tel: +44 (0) 20 7776 6550

Hugo de Salis St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177
Lottie Brocklehurst St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177